I Support the UAW, Up to a Point

I support what the UAW wants to achieve in the current labor negotiations with the Detroit Three, which is to improve the standard of living for its members. But union President Shawn Fain is demanding that GM, Ford and Stellantis bring back the kind of legacy costs that helped bankrupt two of them and brought Ford to the brink. He’d better be careful that he doesn’t kill the Golden Goose.

I don’t think anyone would argue that auto workers have seen their income flatline over the past couple of decades, while the top executives have seen their incomes increase impressively. I believe it’s time to help the hourly workforce get off the bottom rungs of the ladder.

Let’s put some historical perspective on this. In 1913 the Ford Motor Company started paying its employees $5 a day. It was an unprecedented amount of money at the time, and it made headlines all around the world. When I was in grade school, our history books bragged about how America paid its workers better than anyone else. We don’t brag about that anymore. In fact, if you adjust that $5 a day into today’s money it works out to about $19 an hour. In other words, automakers are now paying their temporary and entry-level employees less money than they did over a century ago.

Here’s another historical perspective, and this one is personal. I worked my way through college. The thought of borrowing money to pay for tuition never even occurred to me. So, I went out and got summer jobs to earn the money I needed to pay for a college education. One summer I worked at the Ford Rouge plant as a member of UAW Local 600 and the next summer I worked at Ford’s Livonia Transmission plant as a member of UAW Local 182. That was back in the early 1970s. Inflation-adjusted to today, I was making $62 an hour, not including any benefits. So, if anyone wonders if working-class people have fallen behind, there’s your answer. They sure have.

Unfortunately for the UAW, it doesn’t have a very good public perception, especially since so many top officials, including two previous presidents, ended up in prison on corruption charges. But I can tell you from personal experience that the vast majority of UAW workers are good people who take a lot of pride in the work they do.

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And yet they showed up to work. Every single day. That’s loyalty.

That’s why I think they deserve double-digit raises. And protection from inflation. And more profit sharing. And it shouldn’t take eight years to transition from temporary worker to full-time employee.

One thing that’s working in the union’s favor is the labor shortage. GM Ultium just agreed to bump the pay for its battery workers from $16.50 an hour to over $20 an hour. Want to know why? Because you can’t hire people at $16.50 to work in factories. They can make that kind of money at McDonald’s. GM was facing horrific turnover because people were quitting almost as fast as they were hired.

Last year Ford converted 3,000 of its temporary employees to full-time status. Why? Because turnover was 50%. It takes a lot of time and effort and money to hire people and train them, and Ford found it was cheaper to make them full-time and pay full wages because that stopped all the turnover. By the way, that’s exactly the reason why Ford started the $5 day in 1913 – because people were quitting their jobs by the thousands. But they couldn’t walk away from making $5 a day. As an aside, that $5 per day wage also allowed autoworkers to buy the vehicles they were building, which would be a wise investment of company funds.

Even though I believe that UAW workers deserve good raises, I think Shawn Fain is unrealistically raising expectations. He’s publicly demanding things that the Detroit Three can’t possibly agree to. He wants full pensions, retiree health care and a return of the Jobs Bank.

If the automakers agreed to that, Wall Street would immediately advise investors to dump their stock and the credit agencies would immediately downgrade their credit ratings. You would see tens of billions of market capitalization vaporize overnight. Borrowing costs would skyrocket and the automakers would be back to where they were just before the Great Recession. It would put Detroit’s automakers at a competitive disadvantage to all the nonunion car companies in the U.S., and that would end up threatening tens of thousands of UAW jobs.

Fain also wants a 32-hour work week and cost-of-living (COLA) allowances that get baked into base wage rates, driving them higher every year. He says that when auto execs talk about the need to be competitive, it’s just a code for a race to the bottom. But let me tell you what: Not being competitive means you’re in a race to go out of business.

What I’d rather hear from the union are creative proposals that would cut labor costs at the same time they give hourly workers more money. Back in 2015 the union actually came up with an excellent idea. It proposed that GM, Ford and what’s now Stellantis drop their individual company health care plans and combine them into a giant cooperative that would have massive negotiating power with health care providers to get much lower costs. In fact, the UAW’s idea was to include white-collar workers as part of the co-op. That means about 1 million people would be enrolled, giving it tremendous clout.

Right now, the Detroit Three pay about $23,000 a year per UAW worker in health care costs. Most workers don’t pay any monthly premiums or co-pays. Do you know anyone else who has that kind of coverage? I sure don’t. Shawn Fain complains a lot about the richest 1%, but when it comes to health care, it’s UAW workers who are in the 1%. They have platinum-plated coverage – and good for them. But the costs are sky high.

I don’t know why the idea for an industry co-op went nowhere. But I’d love to see it revived during this year’s negotiations. It could cut costs dramatically. The savings could be used to put more money into hourly paychecks, and maybe the union could even agree to give the automakers a little bit of the savings to make them more competitive. After all, if you make them more competitive, they’re going to make more profits.

And that brings me to another suggestion: how to give union workers a bigger share of the profits. Right now, each one gets between $10,000 to $14,000 a year in profit sharing. That is a lot of precious cash for the companies to give away, about $1.8 billion combined, which is why they are reluctant to increase the formula.

But what if they could sweeten the formula by paying part of the profit sharing with shares of stock? After all, the automakers can’t print money, but they surely can print shares. Why not give another $1,000 in profit sharing in shares? Maybe $2,000?

The UAW has never liked the idea of its members getting stock because it’s worried that the workers would then become keenly interested in the financial health of the company and its share price. But my idea would be to pay out a specific cash amount of shares. So, you’d get $1,000 worth of stock no matter what the price was on the day it was issued. It wouldn’t matter if the price was up or the price was down. You’d get $1,000 worth, or $2,000 or whatever. And the union could encourage its members to sell it the day they got it, if it’s worried they’d turn into capitalist shareholders.

So, here’s my bottom line: UAW workers deserve to make more money. But Shawn Fain has to be honest with his people. He can’t tell them he’s going to force the automakers to bring back the legacy costs that practically put them out of business. That’s unrealistic. Like the title of this article says, I support the UAW but only to a point.

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John McElroy (pictured, left) is the President of Blue Sky Productions, which produces “Autoline Daily” and “Autoline After Hours” on www.Autoline.tv and the Autoline Network on YouTube. The podcast “The Industry” is available on most podcast platforms.