# The UAW's Culpability in the Current Unpleasantness **URL:** \ **Category:** Great Debates\ **Created:** [December 4, 2008, 1:26am UTC](https://boards.straightdope.com/t/the-uaws-culpability-in-the-current-unpleasantness/475605 "2008-12-04T01:26:19Z")\ **Posts on this page:** 10\ **Page:** 4
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [December 16, 2008, 6:30am UTC](https://boards.straightdope.com/t/the-uaws-culpability-in-the-current-unpleasantness/475605/61 "2008-12-16T06:30:04Z")
Is a billion dollars a lot of money? Sure. But GM needs to [cut $24 billion per year in costs](http://www.forbes.com/intelligentinvesting/2008/12/08/intelligent-investing-autos-GM-Ford-panelDec8.html). About $5 billion of that could come from paring down their brand list to 3 - Chevy, Buick (which apparently is popular in China) and Cadillac. Look, I agree that the Detroit 3 need to restructure. But focusing unduly on the UAW seems like wishful thinking: the problems go way deeper. It gets grayer once we discuss work rules. I can’t see how $10 extra per hour in wages and benefits counts as gross overpayment - eliminating the discrepancy would be a small though not trivial part of the solution - but more flexibility in job titles would probably help. They tried to do this in the [early days with Saturn](http://www.nytimes.com/2008/12/04/business/04saturn.html?ref=us), but after Roger Smith retired there was backsliding and the unit was not provided with new models for 5 years. In particular, Michael Bennett, the local UAW leader at the Saturn plant, was committed to restructuring, but found himself undercut by both his union and the GM suits in Detroit. ## Disclaimer: I’m spinning the 2 linked articles and I certainly don’t have extensive knowledge of this topic. But I know that 1 \< 5 \< 24. My opinion: in effect, the big 3 need to go into Chapter 11 bankruptcy, though it would probably be smart not to call it that. The shareholders should be wiped out, debt converted to equity (preferable with a prompt cram down on recalcitrant bond-holders), union contracts ripped up, output and capacity slashed, brands pared to 3, dealerships closed. It will be ugly. But what we don’t want is the big three to take down their suppliers with them – that could cripple Toyota, Honda and Nissan plants in the US and send millions to the unemployment office. So during this financial crisis, some federal loan help is essential, alas. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [December 16, 2008, 6:51am UTC](https://boards.straightdope.com/t/the-uaws-culpability-in-the-current-unpleasantness/475605/62 "2008-12-16T06:51:53Z")
> [@Measure\_for\_Measure](#): > > My opinion: in effect, the big 3 need to go into Chapter 11 bankruptcy, though it would probably be smart not to call it that. The shareholders should be wiped out, debt converted to equity (preferable with a prompt cram down on recalcitrant bond-holders), union contracts ripped up, output and capacity slashed, brands pared to 3, dealerships closed. It will be ugly. But what we don’t want is the big three to take down their suppliers with them – that could cripple Toyota, Honda and Nissan plants in the US and send millions to the unemployment office. So during this financial crisis, some federal loan help is essential, alas. Even though the title of the thread relates to the UAW I don’t think anyone is laying it completely at their feet. The observation that they were overpaid carries with it the understanding that this money wasn’t reinvested into the company so it’s something of a house of cards. One problem feeds into another. Bad management, overpaid employees, lack of research investment etc… It’s not pretty. Can’t say I disagree with your assessment except I don’t understand what you mean by wiping out the shareholders? ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [December 16, 2008, 8:03am UTC](https://boards.straightdope.com/t/the-uaws-culpability-in-the-current-unpleasantness/475605/63 "2008-12-16T08:03:58Z")
> [@Magiver](#): > > Can’t say I disagree with your assessment except I don’t understand what you mean by wiping out the shareholders? During bankruptcy, shareholders can lose everything or get pennies on the dollar - they are behind other creditors. Bond holders may take a haircut, and are granted equity/warrants - in effect, they become the new shareholders. [http://www.investopedia.com/articles/01/120501.asp?viewed=1](http://www.investopedia.com/articles/01/120501.asp?viewed=1) Also, I read of one Congressman who laid the whole problem at the UAWs feet: he said they killed the deal. But check out this [Republican gamesmanship](http://www.mlive.com/us-politics/index.ssf/2008/12/republicans_dont_blame_us_blam.html): > [@](#): > > The GOP strategy, previewed in an “action alert” sent by a Republican lobbyist and outlined by Republican aides, is based on the idea that the best defense is a good offense – and the hope that the taint of the Illinois governor will rub off on organized labor. > > “This is the Democrats’ first opportunity to pay off organized labor after the election . . . a precursor to card check and other items,” said the memo. “Republicans should stand firm and take their first shot against organized labor, instead of taking their first blow from it.” > > Hours after that memo was circulated Wednesday, five GOP senators went before TV cameras to declare their opposition to a $14 billion bailout for GM, Chrysler and Ford. I can understand those who believe in tight purse strings. But it seems as though the Republican leadership is intent merely on sticking it to the unions. [Naked Capitalism](http://www.nakedcapitalism.com/2008/11/ill-considered-problem-of-gm-bankruptcy.html), among others, states why this is a horrible idea: the collapse of GM could destroy their suppliers, which would cripple the remaining auto manufacturers in the US - be they Ford, Toyota, Chrysler or Honda. ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [December 16, 2008, 8:16am UTC](https://boards.straightdope.com/t/the-uaws-culpability-in-the-current-unpleasantness/475605/64 "2008-12-16T08:16:28Z")
Permit me to post something I wrote in July 2008 for another message board: GM deserves the public’s contempt. GM does not deserve the public’s contempt because of exceptionally poor performance: the global auto industry suffers from chronic over-capacity and is propped by various indirect governmental subsidies. GM faces stiff business challenges and their decline has been steady, not precipitous. No, GM deserves the public’s contempt because they have been insufficiently competent (not _incompetent_) stewards of their shareholder’s and stakeholder’s wealth. Mediocrity is unacceptable, when swings in your output have a measurably direct influence on economic growth ([like 0.3%](http://blogs.wsj.com/economics/2007/09/24/gm-strike-impact-on-gdp/), for example). GM currently lacks the leadership necessary to turn the situation around. Here are 2 indicators, to be taken together. 1. Last February, GM CEO Bob Lutz declared, “Global warming is a crock of shit”, though he then hurriedly said he was “…a skeptic, not a denier”. Hm. Saying something is a crock seems to me to be denying. And a technology firm should not take an anti-science stance.\* See [this link](http://delong.typepad.com/sdj/2008/02/gms-failure-to.html) for other gems. 1. Years back, the Economist did a profile of Toyota, perhaps the most impressive company in the world. They noted that in Detroit, all talk is of horsepower and displacement. But on Toyota’s campus, executives speak of… Mrs. Toyota. Mrs. Toyota doesn’t care about engine specs. In computerese, I would say that Mrs. Toyota wants a user-friendly car. From that, Toyota’s focus on reliability, _cost efficiencies_, etc follows. With the electric car, GM wanted to knock the ball out of the park: they were focussed on zero emissions (though they ended up inventing a hybrid prototype by accident or rather for the convenience of the product testers. You see, it was such a bother to have to stop and recharge the battery for 6 hours). If GM thought about Mrs Toyota, (or Mrs. GM) they wouldn’t have been so focussed on a frankly artificial benchmark. [Here’s a very sympathetic article about GM](http://www.theatlantic.com/doc/200807/general-motors)’s attempt to leapfrog ahead of Toyota. Battery technology is currently insufficiently advanced to do everything GM wants it to do, so they will develop it simultaneously with the design of their latest hybrid. Rollout happens in 2010. Sorry GM. Even if you secure a miracle breakthrough, you won’t be able to do so year after year. What you need to do is establish a culture of customer-focus and incremental process improvement. It’s unfortunate when weak managerial guidance wastes such talent and hard work. - Saying that global warming is a hoax is crank-science. Saying that it’s over-rated --and saying _why_ it’s over-rated-- is not. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [December 16, 2008, 8:17am UTC](https://boards.straightdope.com/t/the-uaws-culpability-in-the-current-unpleasantness/475605/65 "2008-12-16T08:17:50Z")
> [@Measure\_for\_Measure](#): > > During bankruptcy, shareholders can lose everything or get pennies on the dollar - they are behind other creditors. Bond holders may take a haircut, and are granted equity/warrants - in effect, they become the new shareholders. [http://www.investopedia.com/articles/01/120501.asp?viewed=1](http://www.investopedia.com/articles/01/120501.asp?viewed=1) Are you saying they HAVE to convert the stock? If the stock is already worthless then it would be better to just sit on it and wait on recovery. > [@Measure\_for\_Measure](#): > > Also, I read of one Congressman who laid the whole problem at the UAWs feet: he said they killed the deal. But check out this [Republican gamesmanship](http://www.mlive.com/us-politics/index.ssf/2008/12/republicans_dont_blame_us_blam.html): I can understand those who believe in tight purse strings. But it seems as though the Republican leadership is intent merely on sticking it to the unions. [Naked Capitalism](http://www.nakedcapitalism.com/2008/11/ill-considered-problem-of-gm-bankruptcy.html), among others, states why this is a horrible idea: the collapse of GM could destroy their suppliers, which would cripple the remaining auto manufacturers in the US - be they Ford, Toyota, Chrysler or Honda. It was my understanding that the union was offering temporary concessions. Could be wrong. They’re getting ready to shut the last GM plant down in my town for good at the end of this month. Really sad. This was a heavy GM town in it’s day with DELCO a major playor (Dayton Engineering Laboratories Co.) ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [December 16, 2008, 9:02am UTC](https://boards.straightdope.com/t/the-uaws-culpability-in-the-current-unpleasantness/475605/66 "2008-12-16T09:02:56Z")
> [@Magiver](#): > > Are you saying they HAVE to convert the stock? If the stock is already worthless then it would be better to just sit on it and wait on recovery. I found this [decent treatment](http://www.sec.gov/investor/pubs/bankrupt.htm) of bankruptcy at the SEC website. Bankruptcy occurs when a business can’t pay its debts. Under chapter 11, a reorganization plan is worked out among creditors - and stockholders are given lowest priority. > [@the SEC](#): > > **In most instances, the company’s plan of reorganization will cancel the existing equity shares.** This happens in bankruptcy cases because secured and unsecured creditors are paid from the company’s assets before common stockholders. And in situations where shareholders do participate in the plan, their shares are usually subject to substantial dilution. > > If the company does come out of bankruptcy, there may be two different types of common stock, with different ticker symbols, trading for the same company. One is the old common stock (the stock that was on the market when the company went into bankruptcy), and the second is the new common stock that the company issued as part of its reorganization plan. > > … During bankruptcy, bondholders will stop receiving interest and principal payments, and stockholders will stop receiving dividends. During reorganization, companies typically receive “Debtor in Possession” financing or DIP. But the DIP market has apparently run dry during the current financial crisis, so if some equivalent to Chapter 11 is to occur, the government will have to provide the bridge loan. And for a company as complex as GM, I’m afraid that the reorganization plan will take more than a couple of weeks to draw up. ---
**Author:** ![ralph124c](https://avatars.discourse-cdn.com/v4/letter/r/8797f3/32.png) [@ralph124c](https://boards.straightdope.com/u/ralph124c)\ **Post date:** [December 16, 2008, 3:18pm UTC](https://boards.straightdope.com/t/the-uaws-culpability-in-the-current-unpleasantness/475605/67 "2008-12-16T15:18:53Z")
the basic problem is: In GM, the line worker WORKS for the UAW, NOT GM. His shop steward dictates what he does, how fast he works, and what jobs he can be trained for. That is a fundamental problem. The union discourages initiative, because working more efficientlymigh deprive a “brother” of income. That is why the UAW doesn’t want cross-training and shared responsibilities. In a non-union plant in the USA (TOYOTA, HONDA), the employee works for the employer. Their success is his success, and he is encouraged to innovate and pass on good ideas. IF a line employee solves a problem, he is rewarded. Unfortunately, the UAW is stuck in the 1950’s, and they don’t see why they are having such a pernicious effect upon GM. maybe bankruptcy is needed? ---
**Author:** ![YogSothoth](https://avatars.discourse-cdn.com/v4/letter/y/8edcca/32.png) [@YogSothoth](https://boards.straightdope.com/u/YogSothoth)\ **Post date:** [December 16, 2008, 9:22pm UTC](https://boards.straightdope.com/t/the-uaws-culpability-in-the-current-unpleasantness/475605/68 "2008-12-16T21:22:28Z")
Its seems to be real ankle-biting when someone talks about how they dont want the government running the Big 3. As if they themselves have done better! These are the companies that gave untenable contracts to its workers, refused to modernize, keeps making crappy cars, and were taken totally by surprise by gas prices. Congress could do better. At the very least, they would not be beholden to stockholders I hope they nationalize the companies. Many companies overseas are already subsidized by their governments. We should not be afraid of change even if the country’s stuck in a backward mode of thinking the feelings anything the government does is automatically bad. Free market, in this case, has failed. Its time to let the government take over. And I find the pathetic obstructionist tactics of the Republicans’ perfectly in sync with their bitter and divisive mantra. Good luck with that when Obama comes into office and the Dems have 58-59 seats. ---
**Author:** ![Keweenaw](https://avatars.discourse-cdn.com/v4/letter/k/da6949/32.png) [@Keweenaw](https://boards.straightdope.com/u/Keweenaw)\ **Post date:** [December 17, 2008, 1:54pm UTC](https://boards.straightdope.com/t/the-uaws-culpability-in-the-current-unpleasantness/475605/69 "2008-12-17T13:54:52Z")
> [@Measure\_for\_Measure](#): > > 1. Last February, GM CEO Bob Lutz declared, “Global warming is a crock of shit”, though he then hurriedly said he was “…a skeptic, not a denier”. > > Hm. Saying something is a crock seems to me to be denying. And a technology firm should not take an anti-science stance.\* Bob Lutz is not the CEO of GM. He was chastised by the actual CEO (Rick Wagoner) and afterwards Lutz made it clear that his personal opinion was not representitive of GM policy. ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [December 18, 2008, 9:12am UTC](https://boards.straightdope.com/t/the-uaws-culpability-in-the-current-unpleasantness/475605/70 "2008-12-18T09:12:06Z")
> [@Keweenaw](#): > > Bob Lutz is not the CEO of GM. He was chastised by the actual CEO (Rick Wagoner) and afterwards Lutz made it clear that his personal opinion was not representative of GM policy. Sorry: Bob Lutz is Vice Chairman of Global Product Development at GM. Some put his salary at $6 million, others peg it at $1.55 million for 2008. [Cite for 2008](http://www.leftlanenews.com/gm-restores-bob-lutz%E2%80%99-salary.html). But I’m not complaining that Lutz is clueless in terms of PR or even that he’s mean not green. I’m saying that his claims -and there were other examples in the link- indicated that he was out of touch with some of the fundamentals of his business. [Previous page](https://boards.straightdope.com/t/the-uaws-culpability-in-the-current-unpleasantness/475605.md?page=3)