POV: Have Gun, Will Nudge
by Ayn Rand | March 1962
It's Not the Unions — It's the Labor Laws
by Doug Altner | March 19, 2014
Regulatory Strangulation
by Steve Simpson | March 13, 2014
Obamacare creates a new class of free riders
by Rituparna Basu | January 23, 2014
Obamacare Is Suffocating An Already Sick Health Insurance Patient
by Rituparna Basu | January 22, 2014
The Broken State of American Health Insurance Prior to the Affordable Care Act: A Market Rife with Government Distortion
by Rituparna Basu | January 21, 2014
Obamacare is Really, Really Bad for You, Especially If You're Young
by Rituparna Basu | August 21, 2013
Justice Department should let US Airways & American Airlines merger proceed
by Tom Bowden | August 16, 2013
Why Is Apple Inc. On Trial? For Good Behavior, It Turns Out
by Tom Bowden | June 20, 2013
The Forgotten Man of the Minimum-Wage Debate
by Doug Altner | June 19, 2013
Why Delivering Beer Isn’t Easy
by Doug Altner | June 11, 2013
What Explains GM’s Problems With The UAW?
by Doug Altner | May 20, 2013
What Are The Search Results When You Google ‘Antitrust’?
by Tom Bowden | April 18, 2013
To Protect the Defenseless, We Must Abolish the Minimum Wage
by Don Watkins | March 27, 2013
I’ll Buy My Own Contraception, Thanks
by Rituparna Basu | November 13, 2012
Why The Glass-Steagall Myth Persists
by Yaron Brook | November 12, 2012
Why Ayn Rand’s Absence From Last Thursday’s Debate Benefits Big Government
by Yaron Brook | October 15, 2012
Changing the Debate: How to Move from an Entitlement State to a Free Market
by Don Watkins | July 02, 2012
3 Things Everyone Needs to Know About the Apple Antitrust Case
by Don Watkins | April 10, 2012
What's Really Wrong with Entitlements
by Don Watkins | February 21, 2012
The Entitlement State Is Morally Bankrupt
by Don Watkins | September 13, 2011
How Important Is the Obamacare Litigation?
by Tom Bowden | August 12, 2011
Atlas Shrugged: With America on the Brink, Should You “Go Galt” and Strike?
by Onkar Ghate | April 29, 2011
The Road to Socialized Medicine Is Paved With Pre-existing Conditions (Part 3)
by Yaron Brook | April 06, 2011
The Road to Socialized Medicine Is Paved with Pre-existing Conditions (Part 2)
by Yaron Brook | March 10, 2011
In Defense of Finance
by Yaron Brook | February 15, 2011
The Road to Socialized Medicine Is Paved with Pre-existing Conditions
by Yaron Brook | February 10, 2011
The Avastin Travesty
by Tom Bowden | December 12, 2010
Apple Now Targeted for Success Like Microsoft Was in the 1990s
by Tom Bowden | October 04, 2010
The Un-American Dream
by Don Watkins | August 27, 2010
What About Private Health Emergencies?
by Tom Bowden | April 08, 2010
What’s Really Driving the Toyota Controversy?
by Don Watkins | March 26, 2010
Anti-Smoking Paternalism: A Cancer on American Liberty
by Don Watkins | March 06, 2010
Apple vs. GM: Ayn Rand Knew the Difference. Do You?
by Don Watkins | March 02, 2010
Smash the Labor Monopolies!
by Tom Bowden | September 15, 2009
America’s Unfree Market
by Yaron Brook | May 2009
Atlas Shrugged and the Housing Crisis that Government Built
by Yaron Brook | March 2009
The Green Energy Fantasy
by Keith Lockitch | February 25, 2009
Stop Blaming Capitalism for Government Failures
by Yaron Brook | November 13, 2008
The Resurgence of Big Government
by Yaron Brook | Fall 2008
The Government Did It
by Yaron Brook | July 18, 2008
From Flat World To Free World
by Yaron Brook | June 26, 2008
How Government Makes Disasters More Disastrous
by Tom Bowden | April 29, 2008
Life And Taxes
by Yaron Brook | April 17, 2008
War On Free Political Speech
by Yaron Brook | March 21, 2008
To Stimulate The Economy, Liberate It
by Yaron Brook | February 14, 2008
Exploiters vs. Victims in the Grocery Strike
by Elan Journo | January 30, 2004
Prescription Drug Benefits Violate the Rights of Drug Companies
by Onkar Ghate | July 24, 2002
Drop the Antitrust Case Against Microsoft
by Onkar Ghate | March 17, 2002


Government And Business in Voice for Reason
Government & BusinessRegulations

What Explains GM’s Problems With The UAW?

by Doug Altner | May 20, 2013 |

Long before General Motors neared collapse, it was a proud and flourishing symbol of American manufacturing. In the 1950s, GM was the first company to ever make $1 billion in a single year, and it had 50% of the domestic automobile market. GM executives used to proudly quip, “we’re still losing 5 out of every 10 sales!” What happened to this great company?

Many factors are acknowledged as contributing to GM’s decline: it juggled too many brands, over-extended its dealer network, failed to respond rapidly to market cues, and struggled to work with its union, the United Auto Workers.

But the extent of its problems with the UAW is astonishing — and the problems themselves warrant explanation. Consider some of the onerous arrangements that GM’s management agreed to.

Labor costs for a typical UAW worker at a GM plant were by some estimates $73 per hour — compared to the $44 per hour for workers at non-unionized Toyota and Honda plants in the U.S.

Or take the infamous “jobs bank”: surplus workers, rather than getting laid off, would receive 95% of their full salaries plus benefits while the company waited to reassign them. But instead of being temporarily idle, thousands of “bankers” would be there for months, if not years, while they watched movies, solved crosswords, and just passed the time. Some senior employees would even pull strings to get “laid off” so they could finish their remaining few years “working” in the bank before retiring with full benefits.

There was also the so-called “thirty and out” rule allowing union workers to retire with full pensions and health care benefits after thirty years of work. A worker might be able to retire in his early 50s and collect an annual pension of $37,500, paid wholly by GM. By 2008 there were 4.6 retired GM employees for each active worker. Did anyone think this was sustainable?

Union work rules made it cumbersome to complete simple and vital tasks in a timely manner. For example, Rand Simberg — a former GM employee who is now at the Competitive Enterprise Institute — explained that, while overseeing the flow of components at a GM factory, he was not permitted to flip a circuit breaker if it tripped in one of the assembly robots. Instead, he had to wait for an authorized electrician to flip the switch. Of course, assembly lines could shut down while waiting for the electrician to arrive, costing the plant thousands of dollars per minute.

Why did GM bear these burdens? Some find it plausible to attribute such problems to inept management. After all, Steve Rattner — President Obama’s auto czar — did call GM’s management “stunningly poor.” But we cannot evaluate GM’s decisions without recognizing a wider context: the coercive nature of labor laws.

If labor relationships were completely voluntary, executives would be free to refuse any union demand that they considered unreasonable, and to even expunge persistently troublesome unions from their facilities. However, businessmen lack this freedom today. Labor laws such as the Wagner Act of 1935 prohibit businessmen from discouraging workers from unionizing, force them to recognize a union if it gets enough votes, and force the company to bargain with its union.

In practice, this pushes business and labor into a forced marriage of sorts. Unions like the UAW can get away with making demands that are hard to imagine employers entertaining, if they were free to say no without legal repercussions. Forced between a rock and a hard place, employers like GM must either cave in to some of the demands or risk facing costly and time-consuming litigation over whether they were negotiating “in good faith.”

Even former UAW president Leonard Woodcock confided to a friend: “Our members have the best contract that people with their skills and education could ever hope to get. But we have convinced them that with every new contract, they are entitled to more.” GM’s management and the UAW were locked into a legally mandated, coercive relationship. And the union knew it.

Whatever one concludes about GM’s history with the UAW, the company made many arrangements that a large employer would want to avoid — not have to keep for decades — if labor relations were fully voluntary.

About The Author

Doug Altner

Doug Altner was an analyst and instructor at the Ayn Rand Institute between 2011 and 2014.