Detroit was a boomtown whose economy depended upon a single industry. When that industry faltered, the city began to fail. The combination of civil unrest and years of internal corruption caused more businesses to close and the White middle class to flee.
As years passed, the primary industry continued to lose ground in the market and no other businesses came to the area to replace it. People continued to flee the city (this time both the White and the minority middle classes) and the tax base began to plummet. More corruption and scandals rocked the political leadership and the city’s population became a third of its 1950s height.
While unions didn’t “help” the auto industry (by preventing poor performers from being fired and threatening strikes when the industry was already weak,etc) to claim that it is solely responsible for the fate of Detroit is both inaccurate and logically fallacious.
If we are just talking auto industry and not City of Detroit, we come directly to the Ford Motors example. Ford has done fine. Chrysler has been on the edge since the early 70s, but GM was the world’s biggest corporation for many years. GM had the same union and the same union contract as Ford in the same geographic location.
What GM had that Ford did not was colossally lousy management. A huge bureaucracy that thought developing OnStar and then sitting on those thin laurels was facing the future. The Volt, which I’ve driven was a decade in development and should have been brought to market much earlier. There is much to criticize that GM does not have the reliability reputation of Honda and Toyota. They have the resources to put out such reliable vehicles.
Blaming unions for the long term choices of management makes no sense. I like to go on about the recent Hostess bankruptcy and liquidation. How in Rockefeller’s name do you go bankrupt selling the most popular brand of snack cakes to Americans when your union has already given you a much less costly deal than it has given any of your competitor’s? Unions? They all had unions and Hostess had already extracted a much reduced wage package than Lil’ Debbie.
The fact of the matter is that management can be really bad, which I gather is a fact not taught in Economics Departments and Business Schools. Running a company, even selling popular snack cakes to Americans, requires discipline and planning and correct decision making and execution. Unions, health care, regulation, etc. are market conditions every competitor must face. If a company is failing, the people being rewarded for making it succeed are the ones to blame. The top management gets paid more because all those obstacles are difficult and require intelligence, social skills and drive that are hard to come by. And drive. Lots of drive.
If a company goes belly up, it is the fault of the management unless there is no more demand for that type of product in the market. Buggy whip manufacturers went out of business because cars became demanded. Hostess went out of business because of shitty management. GM went belly up due to shitty management.
Chrysler went belly up (at least twice) because of what happened to the American auto industry. The Profit Improvement Programs of the 60s and 70s championed by an idiot named Lee Iaccoca. Instead of improving the quality of vehicles, he and his cohorts championed cheapening the product to increase profits at the direct expense of reliability, safety and long term reputation. The German and Japanese managers did the opposite.
Studies of the costs going into building an American vs. Japanese car are basically the same in terms of materials, labor, construction costs, etc. The big difference is management overhead. Detroit has significantly larger management costs than the Japanese. It has gotten so bad that the pension funding costs for management is overtaking the pension costs for union workers, despite the latter being a vastly larger group.
Detroit automakers screwed up themselves. Blaming unions is nonsense. Pure propaganda to divert attention from the real problem.
Unions have helped America achieve the basic concepts of labor rights that we expect. 40 hour work week, paid vacation, medical benefits, pensions, etc.
There are corrupt union leaders and such. But that is not the fault of the union concept itself. It’s like suggesting we get rid of all police just because of the corrupt ones.
If WalMart, for example, were to unionize, the Walton family wouldn’t have to cut back on their lifestyle one bit. They can’t spend their current wealth fast enough. OTOH, if their workers got a livable wage, the boost to the economy would float all boats.
We live in a consumer driven economy. The more income the lowest end consumers have, the better it is for everyone.
I’ll never understand why American businesses aren’t 100% in favor of de-coupling health care from employment, either through modest acts like the ACA or more universal government provided benefits. Hell, my small firm could save a huge amount of money (and happily pay a big chunk of that in extra taxes) if we didn’t have to pay $10,000 per employee per year for heath care.
[I know we don’t “have to.” But given the current set up, it seems unethical not to.]
Because the taxes will be something they’ll have no choice but to pay, whereas the choice to pay health benefits can be adjusted in any number of cost-effective ways.
There are two issues at the core of the problem, IMO. Uncertainty and unpredictability.
The uncertainty is in the sense that what an automaker can or can’t afford is not an obvious and agreed upon fact. It’s an unknown to some extent, and the union and their workers will always feel that the company can afford more than the people who run the company will. Point being that while the union people obviously appreciate that it’s not in their interests to run the company into bancrupty by forcing it to give compensation that it can’t afford, they will tend be biased in favor of a rather generous view of what the company “can afford”, and given too much power, will tend to drive the company into the ground.
The unpredictibility has to do with the fact that even the varying viewpoints of the management and unions are not held by them to be fact. No one - not management and not unions - can claim to know with any certainty what the future holds for the company and by extension what they can afford to pay. Maybe the new line of cars will be popular best sellers and maybe they will be busts. You hope for the best and you project confidence but you never know.
The problem is that the unions shutting down the company is a definite. You don’t know whether your new line will sell well, but you absolutely know that if the union shuts down the company (and note that even a strike by a subgroup of parts makers can shut down the entire company) you will definitely lose money. So if you have a choice of definitely losing money in a strike, or paying out high compensation that will very possibly be unaffordable but will be bearable if everything else goes well, you will incline to pick the first option.
Add up the two issues above and you have a destructive situation. Unions willing to go to the mat, and management picking possible destruction over certain destruction.
Today, the UAW accepted significant concessions as part of a bancruptcy deal. As Omar Little noted above, if you have lower labor costs you can afford to spend more on quality control.
What you seem to be suggesting is that the lower labor costs are not connected to the recovery of the industry and just happened to coincidently happen at a time when the companies got their acts together on unrelated matters. This is not logical.
I read an article about that VW factory in the NYTimes. The article made a couple of interesting points. First, that VW is not opposed to the union. Outside agitators are. VW is used to dealing with unions. Second, auto workers in Germany were making an astonishing $70-$80 an hour. An unrelated article in their Sunday magazine mentioned that some employers had discovered that labor turnover is very expensive to them, even if the labor is cheap. Better to have a dedicated work force that you pay double minimum wage to than a minimum wage force that doesn’t give a shit. The winner of the race to the bottom finds themselves … at the bottom.
When I was buying my first car (in the 60s) I read Consumer Reports carefully. When they reviewed the Big Three, they invariably remarked the high number of model defects. I was not interested in fighting with the dealer to get my new car finished and bought a Volvo. Then a second one. When I was ready for the third, in 1990, I read CU again and ended up buying a Honda. When that was rusting out in 2007, I bought a second one. Not everyone is like me, but enough are. In a sense it is just a disruptive technology.
I’m a retired UAW worker from a parts plant that was once part of General Motors. The UAW begged for many years to get a role in quality control. We knew intimately about the substandard parts management insisted on approving. We all knew the refrain, "We have 20 skids of this defect, so we’ll let it go this time, but don’t let it happen again.
Over the decades, the UAW negotiated splendid health care insurance for us, but we also lobbied congress to work toward universal health care, as every other nation had. General Motors spent more money lobbying against it. Ironically, universal health care would have kept GenMot from going broke.
When auto makers from Japan and Germany opened plants in the US, their biggest advantage was not non-union wages. It was the fact that they did not have two generations of pensioners to pay.
General Motors is making higher quality cars and trucks than they did a few years ago, but it had to go through a trial by fire to learn it.
One point I forgot to include in my earlier post was that the unions and automakers had an asymetrical perspective on the situation. In the sense that while the management of each automaker was responsible for their company alone, and viewed the others as competition, the same unions represented workers at all three automakers. As a result, the unions had a higher tolerance for the possibility of failure at each individual automaker than the management did, because they had to balance the risk to one company against the risks to workers at all three companies.
As a practical matter, in advance of every round of negotiations the unions would pick one company and decide this one would be the template for the others - negotiations would be done with this company first, and then the unions would insist that the others more-or-less match the same terms. I don’t know how they decided which company was to serve as the template in a given round, but if you suggested that they probably picked the one that they thought was most advantageous to them I would not argue with you.
Actually it worked both ways: The union picked the strike target that offered the best terms. The companies wanted to be the strike target - strikes were generally symbolic, and if they could tailor a agreement that met their needs, more so than a competitor, that was a good thing!! The last big strike was in 1970, that went 67 days. It came down to 5c per hour, and after 67 days, the union declared victory!!! They didn’t get the 5c.
On the other hand, the union did not want to set a pattern that the weakest ( Ford or Chrysler) could not afford.
I was in QC for GM for 22 years. Then my job didn’t change, but I was put into engineering. Plants really don’t have QC departments anymore.
As far as the defective parts, I think it was because the plant management was not paid for quality. The evaluation was entirely financial performance to a budget, and meeting production schedules. Once the management was evaluated on quality, as in it could cost them money, or their birthday, they got serious. In the engine plant I worked in, we found that 95% of the engines went out “green” - never having any online repair. Our lines had repair bays and seperate repair lines. 5% were repaired before they left the plant. That 5% accounted for 95% of our customer defects. It took years, but they finally simply stopped repairing engines. During changeover that year, they torched off all the repair lines and junked all the equipment. I didn’t believe they would really do it, until I saw racks of engines being thrown away! After that, warranty ran down to very little. So much so that the dealers complained - they had made a lot of money fixing things.
All the major recalls I saw were primarily financial in nature. People cut corners in testing, evaluating new designs, or suppliers. It wasn’t helped by the practice of moving management every 3 years. By the time something was in production, a lot of the decision makers were working on something else…
I’d lay the blame on management and engineers before the unions. AMC was the only company that saw gas mileage and economy as a selling point before Gas Crisis I. Then, the Big 3, especially Ford and GM, rushed out with a huge load of crapmobiles the next year, rather than waiting for R&D to produce a quality small car.
There should have been economical engines planned before OPAC had the US in its pincers. There should have been better QC. The huge old Impalas and Galaxies had a lot of steel and didn’t flex so much that bolts loosened easily. Some of the oldest V8s had many years to perfect their performance. It took the US industry too many years to fix its issues. If something had been done before Gas Crisis II happened, market wouldn’t have irretrievably lost.
Part of the last couple decades happened because they got two reprieves that they didn’t really take advantage of.
The first was when they started making money hand-over fist as a financial company.( GMAC, Chystler Financial) The making of cars became incidental to them just being a large expensive widget that they could get people to take a loan on. Making a profit on the price of the car didn’t matter when huge numbers of people found the car they wanted then walked into the little office, never considering they could shop for a loan. But when those very profitable divisions seperated to be their own companies, they were unable to make a profit building and selling cars.
The second reprieve was the SUV craze of 95+. It took off so fast, and foreign car makers just weren’t in position to bring that many SUV to the showroom. So people were paying MSRP of 5k-10k over cost on every one of the 100s of 1000s of Canyonero for years, supporting a loss on most cars.
But the world caught up and started making lots of good SUVs of their own, combined with worldwide recession and people caring about gas millage, and afraid to get a loan for 45k for an SUV, the numbers dropped off enough to throw the balance sheet into the toilet.
I remember back in the 70’s when Japanese cars were making solid inroads. Incompetent Management screamed hard and heavy for Protectionism! out of one side of their mouths, while steadfastly refusing to change a thing because “Our Marketing* shows that Americans want to buy our cars!”
Fat, bloated, incompetent yes men marketing departments that cost far too much damned money and were actively hurting the companies through this kind of crap.
Even as young and stupid as I was, I could see that both things couldn’t possibly be true. Americans wanted more fuel efficient cars that lasted longer, and Detroit wasn’t willing to give us either one until it was damn near too late.
As actual autoworkers are noting, they didn’t spend any more on quality control. They just starting thinking seriously about why they were turning out such unreliable products. Yes, it was basically an unrelated phenomenon; I strongly suspect it has to do with the exchange of information during the DaimlerChrysler merger (which, not incidentally, led to 10 years of shitty build quality at Mercedes.)
Daimler-Chrysler was basically a match made in Hell from Day 1. There was a major culture clash between the Americans & Germans. And it didn’t help that Daimler basically committed fraud: they promised up, down, sideways, and slantways that it was going to be a “merger of equals.” Then the moment the check cleared the bank they put Mercedes guys in charge of everything.
At least with Fiat-Chrysler, everybody knows what the score is.
General Motors, at its height, was one of the most profitable corporations in the world. The unions did the only sensible thing and negotiate a larger chuck of that for the employees on the manufacturing floor, rather than the stockholders sitting in their offices.
The company had a system that brought in buckets of money. They didn’t want to mess with that and did not innovate fast enough. The company took so long to go bankrupt, because it had huge amounts of cash on hand to cushion annual losses. Early innovation could have failed as well, but so did waiting as long as they did.
