GM and the War on Labor
You can learn a lot about the state of class warfare in America just by reviewing the reaction to General Motors' recent announcement that it will lay off 30,000 workers and shutter a dozen plants in North America.
While E.J Dionne at the Washington Post offered a thoughtful piece on the political responses to the impact of globalization and spiraling health care costs on manufacturing giants such as GM, Rich Lowry of the conservative National Review does what the right does best: blame the victim.
In Lowry's view, the demise of GM and the staggering loss of union jobs is the fault of the United Auto Workers itself. Bloated union benefits, arcane work rules and overpaid workers, Lowry argues, made General Motors uncompetitive:
"The union has done so well at the bargaining table that it has priced its workers out of jobs. According to the Bureau of Labor Statistics, the average hourly manufacturing wage is roughly $16. Autoworkers for the Big Three, in contrast, earn more than $25 an hour…On top of the wages are cushy benefits that mean it costs automakers roughly $65 an hour to employ its workers...If an enemy conspirator had infiltrated the U.S. auto industry with the mission of undermining it from within, he couldn't have come up with a worse system." In Lowry's morality play, American workers should not expect to participate in the American dream of middle class life styles with ever-improving social mobility within and between generations. Burdened by the unbearable costs of health care costs (up to $1500 a car) and worker pensions plans (up to $2500 a car), Lowry argues that GM, Ford and Daimler-Chrysler can't compete with foreign automakers, even on American soil. "Unencumbered by the legacy costs of the Big Three, free of the drag of unionization, highly flexible and efficient," he insists, "Japanese and other, smaller foreign car companies are thriving in the South." Lowry's answer for the American auto industry is apparently "the Three No's" of the "right to work" southern states - no unions, no health care and no pensions.
Lowry's jihad against American workers not withstanding, the primary culprit in GM's woes is a perfect storm of bad products, bad management and out-of-control health care costs. Combined with accounting scandals and issues at Delphi (its leading parts supplier), these factors have driven GM stock down 40% just since July.
Put bluntly, GM continues to make vehicles Americans don't want. GM's once-dominant U.S. market share, which topped 43% in 1980, has plummeted from 35% in 1990 to just 26% today. With competing brands, out-of-fashion styles and lagging product quality, General Motors in 2004 lost $4.8 billion on net sales of $28.6 billion.
Magnifying the company's problems is its vehicle mix in the face of rising gas prices. SUVs and pick-up trucks have constituted GM's only profitable product lines in recent years, leaving the company vulnerable as fuel costs have sky-rocketed. As consumers move to smaller, fuel-efficient models (especially hybrids), GM is an increasingly untenable competitive posture.
Health care costs for workers and families have staggered GM as well. Reaching $1500 a vehicle, health care expenses continue to plague GM even after the UAW agreed to benefits cuts earlier this year trimming the automaker's $5.6 billion annual medical by over a billion dollars. (As Dionne points out, the issue of the drag of health care costs on both American companies and American families could be ripe for the taking by Democrats.)
At the end of the day, the result is a devastated UAW and a moribund private sector union movement in the United States. A once-proud GM now employs only 185,000 people. In 1970, the UAW boasted over 1.6 million members; today the number hovers around 625,000. Overall, union membership among American workers has been halved since 1973, dropping from 24% to about 13% by 2003.
While the GM implosion has come to symbolize the plight of manufacturing workers, another group of Americans is doing quite well, thank you. The CEOs of America's 500 largest firms saw their compensation rise by 54% in 2004. Even as American workers face a third decade of stagnant wages and benefits give-backs, CEO pay exploded from 50 times of that for the average workers in 1980 to a ratio topping 400 times in 2004. (Only the decrease in executive stock options following the 2001 Enron, Worldcom and other corporate corruption scandals slowed the process.) By last year, the CEO of a major American company earned on average $9.84 million (a 12% increase over 2003), while non-supervisory workers barely budged to $27,500.
For the Republican Party and its fellow travelers like Rich Lowry, that kind of talk constitutes "class warfare." Except, of course, when it comes to the war on labor.
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