BUSINESSWEEK CASE: A COMEBACK FOR THE UAW

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BUSINESSWEEK CASE: A COMEBACK FOR THE UAW

Read the BUSINESSWEEK CASE: A COMEBACK FOR THE UAW (POSTED BELOW) Answer the three questions at the end of the case in a 2 page paper. Follow the project guidelines below.

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1.Use the Case Study Template.

2.Complete a 2 page paper not including the title page and reference page

BUSINESSWEEK CASE

A Comeback for the UAW?

As strikes go, Chrysler’s wasn’t all that impressive. When

Chrysler’s unionized workers nationwide left their assembly

line positions in early October 2007 to protest the

holdup in securing a new four-year labor contract, the media

reported “the second major UAW walkout in a

month”—but it seemed more like a long lunch with picketing

during dessert. By nightfall the parties had come to

an agreement, and the next morning the newspapers chorused

such headlines as “It’s a New Day in Detroit” and

“Detroit’s 3 Finally on Track.”

CHAPTER 14 Collective Bargaining and Labor Relations 429

430 PART 5 Meeting Other HR Goals

Really? It seems to me we’ve read those headlines a

hundred times in the past 25 years. And each time they’re

wrong.

Many observers seem to believe that the Big Three’s

woes are all tied to union wages and the benefits its bluecollar

workforce receives. But those are not their biggest

problems. While the new agreements with the UAW could

help, cutting labor costs won’t cure what ails Detroit. In

fact, just the opposite could happen.

General Motors has cried loudest about the “unfair”

wage advantage the Japanese automakers enjoy. It has bemoaned

what it sees as a $1,500 to $1,900 price disadvantage

(owing to active and retiree health care costs) on

every product it sells. Detroit spends approximately $78

an hour in blue-collar wages and benefits, while Toyota

Motor spends less than $50. But a plant’s productivity

may be more important than actual wages paid there.

Auto executives know real labor costs aren’t framed just

by the per-hour pay but are measured by how many vehicles

the fewest workers can build in one shift. And consider

Ford’s last minivan attempt. No matter what Ford

spent to develop or build a new minivan, it was DOA at

Ford and Lincoln-Mercury dealerships. When a new vehicle

comes to market and fails, the manufacturer loses

hundreds of millions—if not billions—no matter what its

labor costs are.

Much has been made of the fact that Detroit already

spent much more than Japanese automakers in the United

States for health insurance. Yet GM admitted something

important after the union contracts were signed: Fully

56,000 of its remaining 74,500 blue-collar workers will be

eligible for retirement by 2011. So the average age of GM’s

factory workers will be coming down rapidly in the near

future. Theoretically this would lower costs associated

with health care per employee.

At first glance, this looks to be a huge financial win for

General Motors, and in the near term it is. However, it

could all too easily bring the United Auto Workers roaring

back to life.

Here’s how it is likely to backfire. First, retired autoworkers

don’t get to vote on new contracts. Second, up to

56,000 of GM’s 74,500 workers might be replaced either

by the time of the next union negotiations or by the 2015

negotiations at the latest. Do you think the new and

younger workers, paid less and getting fewer benefits, will

fight to keep the retirees’ benefits? A younger worker

might well feel cheated and resentful.

This time around, the UAW could sign up the American

workforce of foreign car companies for the same reason.

The Detroit News reported that a secret internal Toyota

report written by Seiichi Sudo, president of Toyota Engineering

& Manufacturing for America, suggests that Toyota

needs to get its labor costs down to whatever the prevailing

wages are in the region where the factories are located. If

Toyota can move more quickly to cut its labor costs because

its $25 hourly wage is high compared to GM’s possible

$14 in some positions, then GM is putting downward

pressure on Japanese wages. So the Japanese could use

GM’s lower wages to put downward pressure on some of

their employees—and those earning Japanese wages might

start to think that union representation isn’t a bad idea.

SOURCE : Excerpted from Ed Wallace, “A Comeback for the UAW?”

BusinessWeek, November 6, 2007, downloaded from General Reference

Center Gold, http://find.galegroup.com .

Question

1. Why does this business writer believe union membership

might become more attractive to workers at

auto companies in the future? Do you agree? Why or

why not?

2. Besides compensation costs, what HRM challenges

do auto companies face? Which of these challenges

involve labor relations?

3. Suppose GM or Toyota (choose one) hired you to advise

the company about its strategy for working with

or fighting the UAW. What issues would you advise

the company to emphasize? What tactics would you

recommend?