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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
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 .
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
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