Of course the UAW can't expect to maintain the contracts that they had in the 70s. They've already lost them and have been giving incredible amounts of concessions to try to keep GM afloat. The most recent negotiation, ignored by Bank's column, has the UAW going "all-in" by risking one of its pension funds for a 17.5% stake in the company.

The problem isn't that GM's executives flew private jets in troubled times. It's that they flew them at all. When GM can't sell a car without losing money, perhaps they have too many executives. If the same thing were happening at Toyota, the executives would work without pay until the company were back on track.

These guys, like the Nixon-era R.K. Bank, are unhelpful holdovers who are too blinded by their association with businessmen to see that the businesses do not thrive by paying their line workers minimal salaries. Leanness has to start at the top, or it will never be accepted at the bottom level.

amen mr baker. I was thoroughly against many of the wall street and detroit bailouts but the anti-union sentiment, particularly on CNBC and Fox Business, is truly astounding. it's sad that we have such an anti-worker streak in this country, particularly by those who went college and don't work with their hands.

wall street can profit for awhile by denigrating main street and the unions but not forever.

that has been proven by current events.

Maybe, THE WASHINGTON POST deliberately forgot GM kept making huge gas guzzlers and spent $million in advertising these monsters to the middle class working men and woman in our nation while they supplied Europe and South America will small compact vehicles with outstanding gas mileage. I do;t think that I have to mention about the CEO and Corporate perks and outrageous greedy bonuses they awarded themselves and everyone in management's ranks. Michael Zullo, Upper Eastside, Manhattan.

Boy I don't know Dean but it seems to me that the proximate cause of the failure of GM and Chrysler was bad management. Management that failed to put away enough money to cover workers retirement benefits. Management that kept retirement benefits on their own books rather than using an insurance company. Management that signed every UAW agreement and now blames the UAW. Management that choose to sell small cars at a loss rather than paying the fines like BMW and Mercedes Benz. Management that excessive used debt management that never failed to pay itself well.

@by: Michael Zullo
"gas guzzlers" are the only cars that they made money on.

Sure... the Big3 Detroit senior management clowns are incompetent & greedy -- but the BigLabor Bosses are hardly innocent angels.

The UAW is a cartel that raised union wages above competitive levels by restricting the labor supply to Detroit automobile industry.

Those UAW gains came at the expense of consumers, non-union workers, the jobless, taxpayers, and stockholders. Bad management in Detroit over the decades falsely assumed they could just routinely pass those excessive UAW costs to others. Economic reality caught up with them-- BigTime.

The UAW had monopoly power over its industry wages, enforced by special legal privileges & immunities granted by federal/state statutes... and non-enforcement of other laws. These special legal privileges allowed the UAW to restrict others from working for lower competitive wages. Labor-Unions, as a practical matter, are exempt from general American law, enforced on everybody else.

Big labor-unions are ugly & dangerous dinosaurs headed for extinction.

Corporate print media has a "Business" section, but no "Labor" section. The class warfare of the corporate media against working people has a long, sad, bloody history.

Let us all cheer as we watch the print media turn to dust.

Money doesn’t grow on trees for most of America. We sit down at our kitchen tables and write out checks to the phone-company, electric company, credit card-company, mortgage-company, and auto finance company every month. We clip coupons and go to the grocery store every week to put food in the mouths of our children. This is what our parents did before us.

need financial & ECON news? i found this cool site http://is.gd/HGYt lots of interesting lnks

Steel town,

I find your post very confusing. What exactly do you mean when you say that labor unions are exempt from American law? Are you suggesting that the UAW was/is a monopoly and enjoys immunity from anti-trust legislation? I was under the impression that the Clayton Act, as well as the Norris-LaGuardia Act, exempted unions from anti-trust law, at least in most cases. Please, feel free to explain what you mean.

While you may believe unions are exempt from U.S. law for reasons that escape me, there's plenty of evidence that corporations are above the law. Just check out this CEPR study on illegal firings during union representation elections: http://www.cepr.net/documents/publications/unions_2007_01.pdf According to the study, an average of 1 in 5 pro-union workers are fired during every union election, which is clearly illegal. The penalty? A slap on the wrist, if the companies are penalized at all. One of the main reasons we need EFCA, by the way.

Also, I really don't see how the achievements of the UAW during its heyday in terms of wages, benefits, and working conditions caused so much damage to non-union workers, stockholders, etc. The Big 3 were profitable for quite some time. Sure, they responded very poorly to competition from the Japanese but that had little to do with the UAW and a lot to do with management who lacked strategic vision and preferred to hide behind tariff walls rather than actually design a better product.

Further, many would contend that the UAW did a lot to further the interests of non-unionized workers. To this day, Japanese/Korean/German transplant factories in the south pay high wages, more or less equal to union rates, in order to discourage their workers from attempting to organize. To me, that's concrete evidence of the UAW helping, not hurting, unorganized workers.

Finally, as has been pointed out by many people on many occasions on this blog, labor costs for workers on the line only represent 10% of the price of a car, while management's salaries represent 20%. Why, then, is there so much focus on the allegedly abusive practices of the UAW rather than the wastefulness of their management? Further, even counting management, that still leaves another 70% of the price of a car unaccounted for. Is each and every penny of that 70% truly fixed, or is there likely been some waste there as well? Given the facts, I just don't think the blaming of the union for even a small fraction of Detroit's woes is at all justified.

As Dr. Baker points out, the European and Japanese automakers are doing fine with their highly unionized workforces in their respective countries. In my opinion, placing all of the blame on the uaw reflects Washington Post-esque disdain for unions, not thoughtful analysis.

Proudhon summed up capitalist economic theory well when he stated that "Political economy -- that is, proprietary despotism -- can never be in the wrong: it must be the proletariat." (System of Economical Contradictions)

And little has changed since 1846 when it comes to economics "explaining" capitalism's problems (such as the business cycle or unemployment).

I read your article and i got many information.i hope you will write again useful article.
Thanks for great links with nice tips that will be helpful to me thanks again.

Dean,

The NUMMI plant in Cali is not simply run by Toyota. It was actually shut down permanently due to a protracted strike - and the only reason it was reopened was to give Toyota an opportunity to learn about the upstream supplier network in America. Toyota demanded they follow lean in that factory. Those workers have a job because they convinced the UAW to drop 100% of their stupid rules about "one worker, one machine" and so forth. They're UAW in name only.

If that's the best example you have about the UAW, Dean, you have ironically supported disbanding that utter failure of a union.

Industrial engineering is not BS, Dean. Unlike economics, our field has practical applications.

Thank you for your analysis, Dean and you are spot on. I would like to add that the playing field was anything but level due to the exorbitant cost of health insurance, borne by GM. Also, the anti-union corporate culture is at the core of this crisis. Systematic wage suppression driven by the need to produce 15% increase over last year, the industry standard, disallowed for anything but quarterly bottom line management. Toyota, on the other hand, a closely held company can point to a 3% annual increase as acceptable profitability. This allows them the luxury of anticipating such as demand for smaller, more fuel efficient cars.

The post, "Thank you for your..." above was my post.

The CEO's sold out their companies by padding their own pockets and not worrying about company health, sold out their neighbors and employees by sending the manufacturing money to Mexico instead of that UNION WORKER. Everybody loves a Benedict Arnold these dayz, I guess.

Posted by: Unsympathetic | June 1, 2009 9:27 AM

I think Dean Baker's best example was the example of European and Japanese car companies, which have union wages at or beyond our UAW wages, and are profitable. One of them, Fiat Motor Company, is currently buying the bankrupt hulk of Chrysler.

Clearly union wages are not the problem, if foreign car companies with, all things equal, better wages for their workers than we have for ours are buying our bankrupt companies.

As for "no practical application" for economics, as you implied, I'd like to remind you that you are reading Dean Baker's economics blog, not he your "industrial engineering" blog. Furthermore your viewpoint that economics has no practical applications is not widely held - it seems that all the nations on the Earth seem to eagerly seek out economists to do this little thing called "economic management".

How do you rate the argument that US auto industry troubles come from the inability to export cars to other countries because of foreing protectionism?

Great!Thank you!

If you don't know about jewelry knowledge, but want to action you can see jewelry fashion review,then maybe you can save your money!