Ax the UAW's 'Jobs Bank', Save GM
Detroit: While General Motors was losing billions, it was pumping billions into a union welfare system set up to pay workers not to work. In addition to axing Pontiac, it should kill the notorious "Jobs Bank."
Missing from Washington's post-mortems on GM is this two-decade-old program. It's also missing from the automaker's new turnaround plan to satisfy the Obama administration, which is squarely in the UAW's corner.
The latest restructuring includes shedding GM's Pontiac unit and offering the government a controlling stake in GM's stock. It would also give the UAW shares in exchange for pension relief.
The nation's biggest automaker is living on $15 billion in government loans, and hopes to get another $12 billion in bailout money to avoid bankruptcy.
UAW contracts helped put GM on this road to ruin. The UAW Jobs Bank has cost the company billions, acting as a major drag on earnings.
Still, the union is fighting to keep the program, though it recently agreed to allow management to suspend payments into the massive fund until the company can regain its footing.
"To give up the jobs bank is to give up everything the union fought decades to win," said a UAW boss in Flint, Mich.
The Jobs Bank was created as GM made its plants more flexible and automated to compete with the Japanese. As GM became more efficient, it no longer needed as many workers to run a plant. The union demanded that it keep paying workers displaced by the new technology.
The UAW argued that if workers knew they had job security in spite of the advances in automation, they might embrace the new methods.
Of course, the UAW got its concessions and then some, while still fighting the plant closings. The Jobs Bank became little more than a welfare system for laid-off workers, who are still paid most of their wages and benefits.
Many of the Flint job-bankers, for example, worked in a plant that no longer exists: the huge Buick City factory that closed 10 years ago. Yet GM has paid them up to $85,000 a year. They also still enjoy health care coverage, while continuing to collect years of service toward their pensions.
Rewriting labor contracts is not what the Obama administration is looking for in a restructuring plan. It wrongly assumes that GM's foray into the gas-guzzling SUV market sealed its fate.
And it wants the nation's largest automaker to roll out more eco-friendly hybrids, even though SUVs were for years a cash cow — and could be again, now that gas prices have settled back down. Hybrids are once again viewed as the expensive joke that they were.
The unreported, unspoken reason that GM is careening toward bankruptcy is the crushing labor mandates it's had to fund each year.
In addition to the billions spent on the Jobs Bank, GM has spent $103 billion during the past 15 years funding its pension and retiree health care obligations, according to industry analysts. That's nearly $7 billion a year — more than GM's capital spending budget for new models this year.
Meanwhile, Honda and other nonunion companies didn't have to bear such costs. Japanese automakers even built cars inside America with relatively young nonunion labor that, unlike their UAW counterparts, quickly learned to adapt and thrive in the leaner assembly systems that Japanese companies operated.
You won't hear President Obama or House Speaker Nancy Pelosi or Senate Majority Leader Harry Reid mention this in their analysis of the auto industry's woes from their driver's seats in Washington.
If GM and Chrysler don't survive this recession, blame the unions, not SUVs.