Wednesday, September 26, 2007; 11:00 AM
Washington Post business columnist Steven Pearlstein was online Wednesday, Sept. 26 at 11 a.m. ET to discuss the United Auto Workers strike against General Motors.
The transcript follows.
About Pearlstein: Steven Pearlstein writes about business and the economy for The Washington Post. His journalism career includes editing roles at The Post and Inc. magazine. He was founding publisher and editor of The Boston Observer, a monthly journal of liberal opinion. He got his start in journalism reporting for two New Hampshire newspapers -- the Concord Monitor and the Foster's Daily Democrat. Pearlstein has also worked as a television news reporter and a congressional staffer.
His column archive is online here.
New Brunswick, N.J.: I'm glad something has been worked out, but I feel some despair over the disappearance of manufacturing from the U.S. - and even more over the alternative, an absolutely impoverished workforce. I sure would like all those people criticizing the UAW to consider taking a voluntary wage cut to $12/hr and also paying sharply higher monthly premiums for health care.
I also am sick of the term "legacy costs," (as though a benevolent uncle has asked ungrateful children for a little help) rather than the reality: the companies want to break their contracts with retired workers because they are costly. How about if I tell the company I want to reduce my auto payments because they're too costly?
The workers are asked contribute cash out of their pocket to pay for management's poor decisions. The alternative: impoverishment.
Steven Pearlstein: Yes, for those who haven't heard, the strike has been settled and a contract tentatively agreed to, pending worker ratification. Details are still sketchy.
You raise an interesting question though: suppose a company's wages and benefits have got way out of line, with serious consequences for the competitiveness and profitability of the company. Its losing lots of money. If you are a worker, you can bitch and moan and say, "Why should I have to take a $12 pay cut?" just to use your hypothetical. Getting your pay cut is a lousy thing to have happen to you. Or you can say, "Look, we obviously got way above market for my set of skills, I had a good run at above market wages, and now I have to decide if I want to work for a market wage, which is less, or try to earn more by looking for a new job. But I understand that if I don't agree to cut my wage, there won't be a company left to work for for very long, or it will file for bankruptcy reorganization and I'll be paid $12 less anyway, only my pension will be seized by the creditors." So this is the reality. You chose to see it only through the narrow lens of the worker, and come up thinking its unfair. But tell me: was it "fair" that, for all those years when the Big Three owned the US market, that people paid more for their cars (on a quality adjusted basis) than they should have so these workers could earn twice what other American workers did with the same skills, working under the same conditions? The harsh truth is that, in business and economics, fairness in that sense doesn't have much to do with things.
Washington, D.C.: Hi Steven. How much backlash has there been against UAW workers on strike? I've gotten the sense most workers don't support the UAW. The Michigan economy is in shambles with the highest unemployment rate of any state. Thus, could GM simply fired some of the strikers and hired (or rehired) some of those unemployed willing to take these jobs? Thanks.
Steven Pearlstein: I'm sure that now that the strike has been settled, the UAW will come off looking good because of some guarantees it won about investment in U.S. plants.
But I should point out another piece of news I stumbled over this morning: Bank of America is going to eliminate more than 2,000 jobs after completing its acquisition of LaSalle Bank, most of them in Michigan.
Michigan, with Ohio close behind, are probably already in recession. They have the highest foreclosure rates. They are still trying to make the transition from manufacturing to service. And they are losing their best and brightest. It is a real problem and they deserve some help from the rest of the country. The $15 billion a year we are wasting on farm subsidies would be a good place to start.
Fairfax, Va.: Steven, I think that GM is being proactive at correcting their mistakes of their product line. I think the 2008 model year is much more innovative than previous ones and GM is focused on being more flexible. That said, how does this two-day strike affect the public's opinion of GM products?
Steven Pearlstein: I doubt a short strike will change perceptions one way or the other. A longer strike would have hurt the brand image.
Alexandria, Va.: Hi Steven, in light of the tentative agreement between the UAW and GM, what would happen if the UAW was unable to cover retiree medical expenses should the VEBA ever run out? Would GM then be obligated to pay for the shortfall?
Likewise, how has GM's health package changed for newer UAW workers? Do they still receive the same benefits? Thank you.
Steven Pearlstein: I don't know the details. On the VEBA, I think the obligation and the assets go to the new trust administered by the union. And there is a safety valve clause in there that requires the company to increase its annual contributions if there is excessive health care inflation. But the point of the deal was to get it off GM's books, which includes the open-ended nature of the liability. So if, for some reason, health care costs go up, or the money is invested poorly, it is possible that retirees may have to pay more toward their coverage or accept lower levels of coverage. But that would only be if things don't work out as expected.
Falls Church, Va.: Good columns this week, but I had a few questions about Sunday's column on the falling dollar. You cited oil dependence as a primary cause, but the dollar has also been falling against currencies from other countries that are just as oil-dependent as we are, like Japan, hasn't it?
Also, you didn't mention the Chinese currency peg. As long as the yuan can't adjust, and the US economy remains robust enough that the capital account is drawing money in, the dollar is naturally going to fall, isn't it?
Steven Pearlstein: Currencies are complicated, and there is never a simple explanation for anything. But a significant part of our trade deficit is caused by imported oil. Obviously, there are other factors, like misaligned currency values with the Chinese yuan, which is kept pegged to the dollar, artificially, by the central bank of China.
Geneva, Ohio: How far is the UAW going to give up retiree benefits to gain GM assurances of job security. Especially in view of GM's past record of saying one thing and then reneging?
Steven Pearlstein: We'll find out how much they gave up, but my sense is that very little was given up on retiree benefits, and alot of job security remains.
Falls Church, Va.: Why is GM better off paying to establish a UAW health-care trust fund for its retirees than it would be if it remained directly responsible for its retirees' health care?
Steven Pearlstein: Because if health costs continue to rise faster than expected, the risk is borne by the workers, who would either have to contribute more to their own health care or accept lower levels of benefits. It represents a shifting or risks and obligation.
Kensington, Md.: Although you do not advance such arguments, I would just like to mention that the field of economics does not universally despise unions. Just the situations when a union's goals are so narrowly focussed that it causes distortions in the economy and inefficient re-allocations of resources, which is what the auto makers are up against.
Yes, we have unions to thank for the weekend. And for much of the work safety rules. And many other things that have been recognized to have positive net benefits in all jobs (mundane things like bathroom breaks). This is where they are brilliant. In these cases, employers initially underestimated the demand for such "benefits" (or could ignore them because they were monopsonies). In other words, unions helped educate employers about what the underlying labor supply function really looks like. When they have gone beyond that, they have effectively negotiated for things that workers really do not demand except in the context of the strike-game that they used to be able to control the outcome of. Now that that game is broken, unions should perhaps retreat to issues that are still broadly fair and relevant.
I think it would be fantastic if unions more enthusiastically fought for basic workers' rights internationally, the lack of which in so many other countries puts American companies at a competitive disadvantage and ultimately threatens a wide scope of jobs. Instead, that task seems to have been left to idealistic college students who are preparing ultimately for white collar careers and who are barely literate in the complex realities of the issues.
Steven Pearlstein: Interesting take. I would say that too much of the energy of the union movement has gone into maintaining above-market wages and benefits for the old industrial unions and too little into organizing and winning acceptable wages for workers much farther down the income ladder. This is why, in my opinion, the SIEU has the right take on a lot of things, because the janitors and hospital workers and hotel workers and garbage collectors that it organizers are the ones who suffer the most economically and need the clout of collective bargaining to obtain very basic things, like health insurance and sick days and pregnancy leave.
St. Louis, Mo.: The overall consensus among many in my area is that members of the UAW make too much money for performing unskilled labor and even those performing what the UAW considers "skilled" labor, isn't what the majority of the public thinks is skilled labor. The UAW has been gouging the big three for years and the party's over. It's time for UAW workers to work like the rest of America.
Steven Pearlstein: Well, that's rather bluntly put, but it is probably correct. The trick is for the UAW to work with the company to replace unskilled work with capital investment and new technology that requires more skilled, but fewer, workers. That will mean fewer union members. But it would allow the company to remain competitive while paying those wages which, as you point out, are right now above market by a considerable degree.
Atlanta, Ga.: Just curious: What kind of wages do the striking workers make now (ballpark figures)? Maybe a low, high and average figure. I find it hard to believe that some of the highest paid workers in Michigan are going on strike when Michigan has one of the higher unemployment rates in the country. It seems as is if it would be better for them to strike when the economy was strong and there were fewer replacement workers available to take their jobs.
Steven Pearlstein: One of the reasons people form unions is to use collective action (i.s. the threat of a strike) to insulate themsleves from the labor market and win above-market compensation. And this results in the market anomalies you mention, which is the state's highest paid workers are striking at a time of high unemployment. Which is why job security is such an issue for them, because they know what the reality would be if they had to be out looking for a job. The practical reality is that these job guarantees give the workers leverage when the companies want to downsize, because it forces the company to offer them generous severance packages to achieve workforce reductions.
As a retiree: I'm not sure whether having control of my health-care funds in the hands of the UAW is better or worse. Something tells me the fund's annual returns will be lower than if GM gave me the money to invest myself, and the UAW bosses will still be driving Caddys.
Steven Pearlstein: There's an interesting point of view. My own view is that this is a good thing for the union movement, if union leaders can do it well, because it gives a legitimate reason for people to join or affiliate with unions, whether they are part of collective barganing units or not. If it comes to pass that unions are known for offering the best health care plans, that could be a very powerful selling point.
Washington, D.C.: I have always considered myself liberal and progressive but I have to say, this whole UAW issue makes me realize how irrelevant and out of touch unions are in America. Sweat shops workers in south Asia need protection, not these folks. Who do the UAW people think they are? I have never seen such entitled workers in my life. I have a college degree, masters degree and work 50 hours a week (no paid overtime), I help pay my health insurance and know that once I quit I am fully responsible for it. So please explain to me why semi-skilled workers in an autoplant think they are entitled to free health care for LIFE and 100 percent job security? no one else gets it in this country, why do they think they are somehow being singled out? no wonder the auto industry is tanking. when the company goes bankrupt who will the UAW whine to? wait, they may have to actually compete like every other American in every other industry!!
Steven Pearlstein: You know, I've always considered myself a liberal and progressive too, and I've written just about those exact words. But you should know that when a union member hears that, they just see red, because they think they earned it fair and square. Their reference point is never the marketplace. It is always the last contract (and what the company executives make). And the UAW is one of the worst in this regard, because Detroit is such an insular business culture. Its that insularity that led to Detroit losing touch with its customers. And it leads to union contracts that make sense only if you are sitting in Detroit.
New York, N.Y.: Steve, I have a question about a similar concept in a different area. What are your thoughts about the fiscal crises municipalities will face in paying pensions and retiree health care? Whenever this issue arises it appears that the labor unions and city and state governments are stuck in a time warp and think that municipal workers are entitled to free lifetime health care and generous pensions.
Unlike GM, it doesn't seem that municipalities are willing to take on this issue. Thanks!!
Steven Pearlstein: You got that right. It is one of the biggest financial time bombs out there, ticking away. And you just never find a governor or legislature that is willing to take this on and start getting real about it. The reason is obvious: by the time it becomes a problem, it will be some other politician's problem. But that is not responsible leadership.
You see the impact of this most especially in France, where the public sector workers have actually won for themselves special rights to retire earlier with bigger pensions than other workers. And to his credit, President Sarkozy, new in office, has given them until the end of the year to work out something more fair and reasonable. It could be his crucial showdown with labor.
Princeton, N.J.: Just a line that if we had a national health-care program such as Medicare for all, there probably would not have been a strike, etc.
Steven Pearlstein: I knew you'd say that. But that is really taking the point too far. Its more than about health care costs. It's about wages, about inflexible work rules, about retiring at full pension after 30 years. And, yes, its about gold-plated health insurance coverage that unnecessarily drives up utilization and cost.
Alexandria, Va.: My mother was a salaried employee with GM, serving as a nurse at the Buffalo plant, so while she retired with GM she was not a member of UAW. We are afraid this deal may be the one that yanks her retirement out from under her but don't know for sure. How does this deal affect her retiree benefits?
Steven Pearlstein: No, if she's not in a union, she can't be required to have her health benefits administered by the union.
Clifton, Va.: GM should have played hard ball and let the strike go on and use the strike as a reason to file Chapter 11 and then they could have kicked their pension fund liabilities, dumped the retiree health care and renegotiate all their union contracts. The idiot in charge of UAW needs to realize this isn't 1957 anymore and it would be in union's best interest to work with GM to save jobs and increase market share.
Steven Pearlstein: Well, I think the union realizes this and was doing just what you asked, working with the company to save jobs and increase market share. That's their view of it, its why they have made the concessions they did. But here's the problem right there, in a nutshell: they view them as "concessions," because their point of reference is the last contract, rather than the marketplace. If you think agreeing to pay $10 a month for the first time for your health insurance premium is a "concession," then you are still not being realistic. But that is the way they view it.
Albany, N.Y.: Why can't workers, managers, and owners have shared success in an enterprise? If it fails or declines, most will have to find a new job. If it does well everyone is happy. I'm still a grad student, so I lack perspective, but is finding a new job the worst thing in the world?
Steven Pearlstein: This idea of shared success and failure is precisely what I was driving at so inarticulately this morning. The fact is that it is ridiculous in 2007, in a troubled industry, to have a pay scheme that is based almost exclusively on seniority and negotiated/fixed "bonuses." No more than two-thirds of the autoworkers pay should be fixed, and the rest should vary on the basis of individual, group and company performance measures. And the fact that they are nowhere near that -- nowhere!-- is what is so disappointing, because it means they don't really yet have that culture of sharing in success and failure. The mentality is still: I go to work, I do my job and I go home -- and the company's fate is management's problem. The union, and even the management, think they've gone beyond that. But the truth is that unless the culture of shared success is embedded into all the systems -- the compensation system, a system of shared decision making, the marketing and design of the products and so forth -- its really not there. It's just lip service.
Oakton, Va.: Do you know what sort of pension benefits and job security Toyota offers to its employees?
Steven Pearlstein: They offer little or no job security and pretty middle-of-the-road 401 (k) contributions.
Arlington, Va.: Since GM likely had more cars in inventory than they wanted, how much pressure did a short strike actually put on the company? Isn't this more likely posturing by the union leadership to help sell their membership on a tough deal?
Steven Pearlstein: To be cynical, it may have been a bit of a show the union leadership wanted to put on in anticipation of pushback by militants.
Dayton, Ohio: Hey - tell New Brunswick that manufacturing hasn't disappeared from the US. It's just not done by big vertically-integrated monsters like GM any more. The Honda plant in Ohio uses hundreds - yes hundreds - of suppliers in the area, for everything from nuts and screws to complete dashboard assemblies.
Manufacturing doesn't have to mean huge smokestacks and thousands of people in one building.
Steven Pearlstein: Exactly right.
Silver Spring, Md.: Control of benefits by the UAW could be a great thing and fits within the trends of companies shedding lifetime responsibilities for workers. GM gets these obligations off their books and the union gains control of the assets. If they succeed, this should be good all around and could become a model for other companies and local governments where there are unions.
My dad worked for the same company for 37 years and about zero people that I know will be able to say the same thing when we retire. Portability of skills, retirement benefits and health insurance will be key for the current generation.
Steven Pearlstein: Also exactly right.
Arlington, Va.: Given the short duration of and relative lack of invective over the UAW/GM strike, was the strike really just symbolic theater for both sides?
Steven Pearlstein: You decide.
Boston, Mass.: As I'm sitting in my cube, doing computery type things for my employer, I'm wondering if you know...
Does the UAW represent the geeks and engineers and non-managing finance-type number-crunching people who work for GM too?
Steven Pearlstein: Some but probably not many.
Princeton, N.J.: Ya know, I would have more sympathy with all this stuff about how bad unions are if youse guys would look at a much more important economic problem, namely that of increasing wealth and income inequality. When my friend Jim Simons makes $1,700,000,000 last year and the top 1 percent and even more, the top .1 percent take more and more of the wealth and income of the country, when very little of the productivity gains benefits those who made it possible, I can't get excited about a bunch of middle class guys in Mich. trying to better their lives How many UAW members are in the top 1 percent?
Steven Pearlstein: Well, that makes for very effective rhetoric. But the right response is that the $1.7 billion is ridiculous and so is paying semi-skilled factory workers $75 an hour in wages and benefits. And if you took all of Mr. Simons $1.7 billion and distributed it among all blue collar workers, it wouldn't go very far.
Seattle, Wash.: I'm not sure how much I agree with this, but floating the question for an answer anyway:
How much of the "paid too much" argument is based on the fact that UAW is an organized union and Mexican, Chinese, Vietnamese, etc. autoworkers aren't? How would things change if those workers did organize?
Steven Pearlstein: What do you think would happen if we could wave a magic wand and -- voila-- every auto worker around the globe was organized by the UAW and paid the same exact wages and benefits. The union view is that this would be a tremendous thing, and bring workers everywhere into the middle class. But where do you think that money would come from? Unions like to argue that if you give all that money to all those people, the spending will create so much economic activity that it will virtually pay for itself. In terms of economic thinking, that's on a par with arguing that if you lower tax rates, you will wind up with more tax revenue. They are both voodoo economics.
The right answer to my question is that, if you waved that magic wand, you would push up the price of cars to consumers and, in the process, dampen demand for cars so that the companies would have to reduce their workforce. But of course if they were UAW companies, they couldn't reduce their workforce because of lifetime job security, so they would file for bankruptcy reoganization.
Medway, Mass.: All this talk about the wages a GM worker makes, I would like to know which plants are being closed and UAW workers are loosing their jobs. thank you.
Steven Pearlstein: Don't know.
"we obviously got way above market for my set of skills": True, true Steven! Thanks for telling it like it is!
Next thing you know the peons will start questioning why the auto executives keep getting massive pay increases in the context of substandard company performance and horrid business decisions.
Thanks for putting smack down on those who deserve it! The one's who had no clout to make any of the disastrous decisions which got us into this mess.
Steven Pearlstein: Look, you're talking to someone who writes all the time about excessive executive compensation. But just because theirs is excessive (less excessive, by the way, that executives in other industries) doesn't really bear on the question of whether unionized auto workers receive above-market wages and benefits. This is the typical UAW view of the world, which is you ignore everything outside of the Detroit auto industry. And you can keep doing it, and you'll ride that point of view right into bankruptcy court.
You can take all the "massive" pay increases received by Big Three executives, put them in a pot, and they don't amount to a fraction of a percent of what these companies lost last year. So please, if you are going to argue finances, get your numbers right.
Re: Albany: What about the flip-side of Albany's argument? Say GM turns itself around and starts raking in tens of billions of pure profit each quarter. Do you think that their management would share that with the UAW and other workers? Isn't that why unions formed in the first place?
Steven Pearlstein: Yes, and they should share those profits with the unions. Absolutely.
Illinois: I've only ever had jobs with benefits that range from zero to lousy, so I see your point that requiring small co-pays for insurance shouldn't be regarded as unreasonable by the UAW. Still, I have sympathy for the members of the UAW because they aren't getting what they were promised. How are people supposed to plan their finances if they can't be certain what their benefits really are?
I also have a lot of sympathy with workers looking at inflated management salaries and asking why their own are falling. Why should management that is making poor decisions be well paid for incompetence while lower-rung employees seem to take all the financial hits?
Steven Pearlstein: Again, the management of the auto companies has done a lousy job over the years, but of all the things they did wrong, paying themselves ridiculously inflated salaries is pretty low on the list.
Washington, D.C.: What about a grand bargain between government and the auto companies: the government takes on a high percent of the pension costs negotiated to date and medical costs due to retirees in exchange for the auto companies dropping their lobbying, obstinacy, and stupidity about using existing technology to increase mileage for cars made at US plants? That includes calling off Dingell.
Steven Pearlstein: Might be worth it!
Washington, D.C.: Do the auto companies have a profit-sharing plan for UAW members? If management and labor are really going to cooperate for the success of the company, each side should have a stake in that success. A profit-sharing scheme could provide that, and possibly temper the anger that many feel at the size of executive compensation packages.
Steven Pearlstein: I think there are some profit sharing provisions in this contract, but without seeing the details, I'm fairly sure they don't come anywhere near the significance in the overall compensation scheme that they need to be. Furthermore, the variable pay has to be tied to more than just the company's financial performance. It needs to be tied to individual and group quality and productivity goals.
Seattle, Wash., again: Not really what I was aiming at. Instead of making the foreign auto-workers part of UAW, I meant more along the lines of 'they form their own unions and use collective bargaining themselves'.
Steven Pearlstein: If they did, their wage and benefit costs would still be a fraction of what they are in the US, and you wouldn't really change that much.
Falls Church, Va.: I don't know if it's necessarily relevant, but one of the health plans available to certain federal workers is administered by the Mail Handlers Union, and it's very highly regarded. So there's good precedent for the UAW's approach.
Steven Pearlstein: Didn't know that. Thanks.
Steven Pearlstein: That's it for today, folks. "See" you next week.
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