FLASHBACK to October 2005:
DETROIT NEWS -- The jobs bank was established during 1984 labor contract talks between the UAW and the Big Three. The union, still reeling from the loss of 500,000 jobs during the recession of the late 1970s and early 1980s, was determined to protect those who were left. Detroit automakers were eager to win union support to boost productivity through increased automation and more production flexibility.
The result was a plan to guarantee pay and benefits for union members whose jobs fell victim to technological progress or plant restructurings. In most cases, workers end up in the jobs bank only after they have exhausted their government unemployment benefits, which are also supplemented by the companies through a related program. In some cases, workers go directly into the program and the benefits can last until they are eligible to retire or return to the factory floor.
By making it so expensive to keep paying idled workers, the UAW thought Detroit automakers would avoid layoffs. By discouraging layoffs, the union thought it could prevent outsourcing. That strategy has worked but at the expense of the domestic auto industry's long-term viability (MP: That's why they're now asking for a handout/bailout). American automakers have produced cars and trucks even when there is little market demand for them, forcing manufacturers to offer big rebates and discounts (MP: another reason the Big 3 has been losing money and needs a handout).
"Sometimes they just push product on us," said Bill Holden Jr., general manager of Holden Dodge Inc. in Dover, Del., who said this does not go over well with the dealers. "But they've got these contracts with the union."
In Detroit's battle against Asian and European competitors that are unencumbered by such labor costs, the job banks have become a major competitive disadvantage (MP: And explains why the Big 3 is asking for a handout/bailout).
Detroit automakers declined to discuss the programs in detail or say exactly how much they are spending, but the four-year labor contracts they signed with the UAW in 2003 established contribution caps that give a good idea of the size of the expense.
According to those documents, GM agreed to contribute up to $2.1 billion over four years. DaimlerChrysler set aside $451 million for its program, along with another $50 million for salaried employees covered under the contract. Ford, which also maintained responsibility for Visteon Corp.'s UAW employees, agreed to contribute $944 million. Delphi pledged to contribute $630 million. (See chart above, showing the $4.2 billion total cost of the jobs bank.)
-- Local leaders of the United Auto Workers agreed to suspend the program where laid-off workers can get up to 95% of their wages and benefits, a concept that came to symbolize the stereotype of overpaid, underworked factory workers.
Local leaders agreed on Wednesday to immediately suspend the jobs bank, which has 3,542 workers. Suspending the program just as the automakers prepare to eliminate more workers also prevents the newly laid off from joining it in the months ahead, company officials said.
Gettelfinger said the jobs bank -- something the union has defended steadfastly in the past -- has become a lightning rod since congressional hearings two weeks ago. Top UAW officials and staff must now meet with automakers to work out the removal of workers in the jobs bank.
1) Is it any wonder that: a) "Detroit automakers declined to discuss the programs in detail or say exactly how much they are spending," and b) the Big Three is now asking for a bailout after spending more than $4 billion on an outdated "jobs bank" program over the last four years?
2) If the Big Three hadn't wasted an estimated $4 billion from 2005-2008 paying idled "workers" not to "work," what could they have done with that money? Well, they could have produced about 200,000 cars at an average cost of $20,000 or built 8 new factories at an average cost of $550 million.
3) Speculation: Without the burden of the jobs bank, and the $4.2 billion estimated cost of the jobs bank over the last four years, the Big 3 wouldn't be begging for a handout today. Even if the hourly wages of the Big Three are now comparable to wages at Toyota and Honda, and even if the productivity gap has narrowed, the cost of the job banks to Big Three is probably one of the biggest factors contributing to their competitive disadvantage and one of the biggest reasons they are facing bankruptcy today.
If the UAW had agreed five years ago to end the jobs bank, the Big Three wouldn't be in so much trouble today, and wouldn't be in D.C. today begging for a handout.