Courting the Unions, Courting Bankruptcy

The unions of this country might be finally forced to face the music. What is the tune being played? “You are overpaid, over benefitted, and parasitically bankrupting the companies of which you are a beneficiary.”

Some major developments this last week, and these last few months, are coming to a head, and the unions may very well not be able to “strike” their way into a forced ‘agreement’ which mostly benefits their entitlement ridden masses. The futures of Chrysler and GM, which I will discuss later, are now slowly turning against the favor of the unions. In fact, the threat of bankruptcy courts and overall company failure might be the one thing that after all these years finally forces the pig at the trough to back away from the slop.

Some Necessary Perspectives

I want to start with some premises that I don’t know are widely understood by many out there (non union) who see these issues from a distance.

1. Unions do not allow companies in free markets to compete in a manner that allows for and furthers the company’s success. Wages and benefits are bloated to levels that over time appear more like inheritances from rich uncles than a fair wage for a job.
2. In a ever expanding global market, this is becoming painfully apparent, as the union members now, in some cases, have to compete with lower wage earners abroad. This forces all companies without technological monopolies who service a global market to utilize this inexpensive workforce in order to remain viable in the long term.
3. Unions generally only can exist and survive/thrive where they have the ability to monopolize power over the workforce, AND the service that workforce provides CANNOT be done readily elsewhere, more efficiently.

Let me quickly give you an example of these principles.

The UAW (United Auto Workers) has been around a long time. Since 1935 it has represented manufacturing workers in many fields of vehicle manufacturing, including some aerospace. Their membership has been dwindling.

The SEIU (Service Employees International Union) is the fastest GROWING union in North America. Their members include: nurses, LPNs, doctors, lab technicians, nursing home workers, home care workers, janitors, security officers, superintendents, maintenance workers, window cleaners, and doormen and women, more than 1 million local and state government workers, public school employees, bus drivers, and child care providers, etc…

What is the difference? Why is one growing, and one dwindling?

The answer is simple. The SEIU jobs CANNOT be exported, as they must be point of service jobs. A chinese worker who lives in China cannot clean your office building at night; someone in Mexico cannot drive your child’s school bus tomorrow (unless you live on a border state…); nurses don’t commute from South Korea to your local hospital.

UAW jobs are being shipped overseas- not just because their wages are exponentially burdensome to auto manufacturers, compared to other sources of labor- but also because we don’t HAVE to build cars here.

Now, back to our story…

The left would have you believe that unions do a big service to this nation by making secure, high paying jobs available to our citizens. However, as we will see, unions are now being proven to do the opposite. Sure, SEIU jobs will remain in American’s hands, but as I have illustrated, this has nothing to do with the union, but more to do with the fact those jobs cannot be exported. UAW jobs are in great peril, and it is in large part due to the ravenous appetites of the union worker for the biggest tit they can strong-arm their company into ‘accepting’.

In 1935, when the UAW opened for extortion- I mean ‘business’- this was a dramatically different world. We did not have the phone systems we have today; the satellite communications we have today; the internet and the ability to send and share information in seconds around the world. Today, Detroit can do engineering changes in an office and send the files to workers in China building “American” cars in a matter of minutes. In other words, the automobile jobs of yesteryear were a lot more like the SEIU jobs of today- that is, they could not easily be “exported”. The world’s information sharing technology has made it possible to have many elements of manufacturing be in places that are widely dispersed geographically.

Even Boeing has exported aerospace manufacturing, a direct result of a need to compete- read “lower our manufacturing costs”- on a global level.

The UAW still has a bitter pill to learn to swallow, and that is, they ARE dispensable.

Some Writing on the Wall?

This last week, Chrysler was “forced” into bankruptcy. The key to their story is an interesting and maddening one.

Chrysler had a series of investors, called “senior investors”, who had pledged/invested monies to Chrysler in order to try to help the company stave off failure. The normal structure of such a business deal involves the contractual understanding that, in the event of bankruptcy/failure, “senior” investors will be paid back 100% of their money FIRST, and everyone else (unions) would have to get in line. This is not an abnormal or unscrupulous business agreement.

When the writing was on the wall that Chrysler was on the verge of failing, discussions ensued with the unions and investors. The White House- meaning Barry- was involved. When it became apparent that an agreement could not be struck, and those investors were going to be paid back, it was clear that the UAW would suffer and be a big loser. So, Barry got involved, and prevented the deal which would pay back those “senior” investors, to protect the union. Chrysler then went into bankruptcy.

Somehow, I am still trying to figure out how Barry’s move was in the best interest of the United States. Barry is batting for the Unions, not Chrysler, and the US.

The White House is trying to pin the blame on “a small group of speculators” because they, in his pulpit opinion, “endanger Chrysler’s future by refusing to sacrifice like everyone else.”

Barry? Are you kidding? It’s called a contract. Oh- that’s right. You only think those matter if UNIONS have crafted them. I see.

These “speculators” invested some 6 billion dollars. They were being offered about a third of that back. They said no, contractually they are owed that money. I tend to stand by their assertion that they deserve this money, as they invested it with a clear contractual understanding into a failing company to try to help it survive. Have you heard of the UAW doing anything LIKE that to save their “trough”? NO.

This has a potentially chilling effect. Think of all of the other propped up, failing or struggling companies that the government is involved with right now. Banks, auto suppliers, auto manufacturers… If you are an investor, and might have been thinking about trying to “speculate” your way into a profit by offering money to these companies in order to prevent them from going under, are you feeling more comfortable or less, now? Barry just stuck a dagger in the heart of private investors who might have been willing to put a stake in saving such companies.

So now, as we come to the latter part of the week’s news, we see that GM, as part of their restructuring plan, is talking about moving many manufacturing jobs overseas, meaning a loss of 21 thousand jobs, and the closure of 13 out of 47 plants. Now, why on earth would the DO such a thing?

Because they can. Because they need to in order to be profitable, and being profitable means escaping the institutionalized extortion of the UAW.

GM can obtain labor (including health care benefits factored in) in South Korea for $22 and hour; Mexico for $10 and hour; and in China for perhaps as low as $3 an hour. Here in the US, they cost GM approximately $54 an hour.

As a quick tangent, using those figures, how long do you think the SEIU would last if we could “export” their “service” jobs? About a week.

This brings to the fore an interesting problem for Barry. Barry and his party are beholden to the unions. Do you think Barry will allow GM to make such a big move, outsourcing many hundreds or thousands of jobs, or will he try to force them to do things “his way”, the “union” way, and keep those jobs at home? After all, all Barry has to do to “justify” this in the minds of the lemmings is say “We did not extend billions of American tax dollars to GM in order to watch them ship jobs away from Americans…”

Well, we’ll see, Barry. After all, if you play THAT hand, GM can always jump into Chapter 11, all bets are off. In bankruptcy court, as in the Chrysler case which is being dealt with now, all of the union contracts are open targets for forced renegotiation. And this is open to jurist interpretation and mediation, outside of the reach of the White House, Democratic party, or Union lobbysist/officials.

Let’s see if the UAW is ready to recognize that they are no longer the power they used to be, and that they will have to compete with Chinese, South Korean, and Mexican workers.

Time for a rude awakening for the bloated union coffers and wage earners.

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