Thursday, November 05, 2009

Ford's Main Problem: The UAW's Crippling Job Classifications and Work Rules

Ford's 2,215 page 2007 master contract with the UAW
1941 UAW-Ford contract
Factory wages aren't Detroit's problem, and strikes are very rare in the auto industry nowadays. The real issue is the job classifications (see top photo of Ford's 2,215 page 2007 master contract with the UAW vs. the 1941 UAW-Ford contract below).

Ford's UAW contract has lots of them, governing who can and who can't perform specified tasks on the factory floor. So if a machine breaks down, an assembly line can come to a halt while everyone waits for the worker with the proper classification to arrive at the scene. If other workers nearby are perfectly capable of fixing the machine, well, that doesn't matter. The number of job classifications is less than it was a decade ago, but it's still far too many to maximize a factory's efficiency.

The classifications and attendant work rules are enforced by union bureaucracies—members of each plant's shop committee, grievance committee, health and safety committee, etc. They're all paid by the companies, as are their legions of corporate counterparts. One man's feather-bedding is another man's job.

All this begs a fundamental, and uncomfortable, question. Can a UAW-represented car company compete effectively, long term, with its nonunion competitors? At the very least, companies organized by the UAW have lots of extra costs to bear at their factories located in the U.S.

It's interesting, then, that Consumer Reports rates the quality of the four-cylinder Ford Fusion higher than the Toyota Camry and Honda Accord, and the Lincoln MKZ higher than its Acura and Lexus counterparts. The Fusion and MKZ are built in a factory without job classifications because it's in Hermosillo, Mexico, and isn't represented by the UAW. If Ford targets future expansion in Mexico, the recent contract vote will spell further decline for a union that, like Detroit's car companies, badly needs cultural change.

"How Ford Is Making Its Comeback: The news from Dearborn is sunny, except for the auto maker's labor relations," in today's WSJ by Paul Ingrassia

37 Comments:

At 11/06/2009 12:18 AM, Blogger TOF said...

I don't give Consumer Union's opinion on the quality of anything much credence. I say that from long and disappointing experience; their endorsement of the Fiat 128 in the late 1970s is an example. When that group made its initial forays into evaluating financial products it was immediately clear that they didn't know what they were talking about.

 
At 11/06/2009 12:32 AM, Anonymous Anonymous said...

Why is the UAW allowed to represent the workers at Ford? the UAW is now the de facto owner of GM and Chrysler, courtesy of the US taxpayer via the Obama administration. Representing Ford workers presents a clear conflict of interest, forcing Ford to negotiate for labor with it's direct competitors.

It's only a matter of time before the UAW labor cartel has completely destroyed the native American auto industry. The question is how much more of the taxpayers blood will they be allowed to suck?

 
At 11/06/2009 1:38 AM, Blogger JohnLloydScharf said...

They want to have "Card Check" so it is easier to join a union. If you signed one of those, "Guido" would show up on your doorstep to ask you why you wanted out of the UAW.

That Employee Free Choice Act only works one way. UAW would rather you be unemployed at $60,000 a year than working at $45,000 a year.


Do you ever wonder why a car costs less to make 12,000 miles away to be shipped to your town than one that is only 120 miles away?

 
At 11/06/2009 2:46 AM, Blogger OA said...

This is another example of why government shouldn't bail out companies. After bankrupting GM, the UAW was handed a huge ownership position instead of being out on the street. The smart thing would have been to reject the union contract in bankruptcy, which is the only time you can just reject any contract.

So they've got no downside with Ford. They can push it to the brink and you can bet they'll be given more power if it got pushed over the edge. No one mentions the tens of billions that vaporized with the GM and Chrysler bankruptcies, but we hear all these complaints about banks even if they've repaid TARP.

We should be riding the UAW until they pay back those billions.

 
At 11/06/2009 4:39 AM, Blogger Michael said...

OA,

GM and Chrysler went through pretend bankruptcies. The court tossed out 225 years bankruptcy law with the tacit approval from the supreme court. In GM's case not a minute of testimony was permitted. The White house was allowed to order thousand of companies out of business in violation of countless state and federal laws.

The only way to keep these 2 companies out of a proper bankruptcy now will be for the democrats to slip 10s of billions of dollars for these companies in to their thousand page bills in the dark of night.

And I do agree that Ford's workers are now being represented by the owners of it's competitors.

Ford is kind of being held hostage. They can threaten to move to Mexico, but Obama, with a stroke of his pen can void NAFTA.

 
At 11/06/2009 7:44 AM, Anonymous Anonymous said...

Dr. Perry, you let your politics get in the way of a sober analysis. Simple question that I want you to answer: If UAW work rules are so restrictive, why do union facilities have the highest productivity in North America? See the Harbour Report.

Also, it was established long ago that assy workers are perhaps the least part of product qualty in auto. See management gurus Deming and Juran.

Finally, you ight be surprised to know that the plant in Sornora is unionized and that there have been several labor disputes since it opened in 1983.

If you want to be an effective union hater you should work from a better understanding of the facts and the literature.

 
At 11/06/2009 7:55 AM, Blogger W.E. Heasley, CLU, LUTCF said...

The stack of paper/pages pictured in the post, the work rules, is reminiscent of another stack of 1,990 papers presented by Nancy Pelosi. Nancy’s 1,990 pages are basically “Health Care Work Rules“.

 
At 11/06/2009 8:18 AM, Blogger sethstorm said...


JohnLloydScharf said...

Never mind Guido's equivalent on the other side, the labor relations attorney.

They have the same effect that Guido has, except you never see him make a direct threat. It always comes through his clients.

You don't end up in the middle of a river wearing cement shoes; you end up without a job for some unrelated, but coincidental technicality due to your opinion. Never mind what happens if their client loses horribly.

The strangest thing of all is that you still have a secret ballot, you still have protections of "concerted speech" and anti-union intimidation still happens. Explain that one.

 
At 11/06/2009 8:34 AM, Anonymous Anonymous said...

Hmm. Have you looked at executive compensation lately?

Do you think executive compensation reflects value or simply an opportunity to snarf up earnings?

If you looked at asian executive compensation systems, you would see very low costs.

 
At 11/06/2009 9:10 AM, Blogger Michael said...

For the most part Clinton got the crazy executive compensation packages started when he want to cap executive salaries at 1 million with his 93 tax changes.

I think the media also over hypes executive compensation. Many packages contain various options that never get exercised.

But retention bonuses for poor performance is ridiculous.

 
At 11/06/2009 9:26 AM, Blogger juandos said...

anon @ 11/06/2009 7:44 AM claims: "If UAW work rules are so restrictive, why do union facilities have the highest productivity in North America? See the Harbour Report"...

Hmmm, do you have something credible and accessible to back that statement up that isn't UAW sourced?

Then there is this commentary (which I make no claims for) that questions some of Gettelfinger's claims about union productivity...

 
At 11/06/2009 9:45 AM, Anonymous Rand said...

If the government and UAW cabal were to take over Ford like they did Chrysler and General Motors, wouldn't that constitute a monopoly - precisely the thing that the anti-monopoly people are trying to prevent.

 
At 11/06/2009 9:50 AM, Blogger W. Earl Allen said...

My 2000 Focus ZX3 was made in Mexico. It has had a few problems, mostly fixed under warranty, but still soldiers on reliably.

Government sanctioned, supported, and protected labor monopolies are so 19th Century.

If all legal protections for labor monopolies were dropped right now (Fat chance! But the Berlin wall did fall.) we might be able to save at least one American car manufacturer.

 
At 11/06/2009 10:44 AM, Anonymous gettingrational said...

Why would Ford want to build any cars in the U.S.? Why fight the work rules and pay out huge benefits? "...Ford's benefits and fringe costs increased 85%, from $20.60 in 1997 to $38.13 in 2006." During the same period the average U.S. Manufacturing for benefits increased 48% for that period.

South Carolina and much of the South offers a lot less headaches without the probability of unions.
Productivity increases should be richly rewarded to the worker -- not just simply for showing up for work under the union banner.

 
At 11/06/2009 10:53 AM, Anonymous Anonymous said...

Union Membership Is Just A License To Steal

Mr. Gump and some 21,000 other salaried workers and retirees are furious that their roughly 46,000 union co-workers at Delphi have had their benefits restored, apparently with government largesse, and they have not...

The Pension Benefit Guaranty Corporation, which insures pension plans, caps the amount of benefits it will pay, using a formula based on age and the type of benefits an employee earned. But in a side arrangement, G.M. is agreeing to pay special supplements, called top-ups, so that Delphi’s union retirees get everything they were promised.

The automaker is drawing the money from its own pension fund, according to a person familiar with the arrangement. In a sense, the G.M. pension fund is being weakened to help the Delphi union members.

Mr. Gump and others suspect the Treasury Department told G.M. to pay the supplements.

[...]

Mr. Beiter estimated that slightly fewer than half of Delphi’s white-collar retirees would have their pensions cut, by 30 to 70 percent. One woman in his area who had earned a pension of $2,925 a month checked with the Guaranty Corporation and was told her retirement check would be pared to $390...

New York Times

 
At 11/06/2009 11:10 AM, Anonymous Anonymous said...

These job classifications and work rules were negotiated and agreed to by Ford and the UAW, so presumably if they were such a "crippling burden" they could have been renegotiated a long time ago -- but they weren't. The UAW is at fault for being unwilling to adjust to the realities of the times, but Ford is equally at fault for agreeing to these rules in the first place.

 
At 11/06/2009 11:32 AM, Anonymous Anonymous said...

juandos, follow the link - you didn't really think that the UAW would just make things up for their press release did you? You have to let your thoughts operate free of the hate! I said clearly that the independent source is the Harbour Report.

http://www.oliverwyman.com/content_images/OW_EN_Automotive_Press_2008_HarbourMedia08.pdf

You should look at the plant rankings in each area - the overall mfg numbers are highly infulenced by mix - 4 cyl vs 8, big car vs. small, etc.

Please report your findings to the group.

 
At 11/06/2009 12:05 PM, Anonymous Benny "Tell It LIke It Is Man" Cole said...

I gotta say, unions should concentrate on one thing: Wages, and OT pay.
After that, if management wants you to dance naked in the streets, then dance naked in the streets.
Work rules and featherbedding are bad ideas.

Yes, exec pay is obnoxious, and why the compensation committees of company boards pay it is a crime against shareholders.

 
At 11/06/2009 12:45 PM, Blogger juandos said...

"juandos, follow the link - you didn't really think that the UAW would just make things up for their press release did you?"...

Oh I did follow the links (and read the questionable contents) and I also know from personal experience that the UAW would indeed make up anything they thought that might in enhance their less than credible position...

Do you remember the UAW and Michael Moore hanging together to foist of the first propaganda film, "Roger and Me"?

"Please report your findings to the group"...

My report: anon @ 11/06/2009 11:32 AM needs something credible besides propaganda...

 
At 11/06/2009 1:38 PM, Blogger Walt G. said...

Are we supposed believe this document is all work rules and regulations? Post the whole thing and let the readers see the truth. I don't read Carpe Diem for sensationalism or simplistic explanations for complex problems. Only someone who has preconceived notions would be convinced with this evidence.

I am not familiar with Ford's contract, but much of GM's is mundane and has nothing to do with everyday labor operations. Twenty pages alone is written to saw that GM will follow the equal opportunity law and another 30 pages to say GM will not hurt the environment or build cars that injure people.

I would like to see paragraph 8 eliminated though: Management has the right to hire; promote; discharge or discipline for cause . . . . Much of the document just makes explicit what has been problems for both sides in the past. I know for a fact that problems are more difficult when the solution has not been explored before or agreements written down.

How many of you would build a house without a written contract. Few I would bet. There’s a good reason for that.

 
At 11/06/2009 1:53 PM, Anonymous Anonymous said...

I really don't care if UAW members, like Walt G., want to run GM, Chrysler and Ford into the ground with unrealistic and unsustainable demands. I can always purchase cars from someone else. What I object to is their scheming, along with the Democrat party, to steal billions of dollars from the taxpayers to keep their extortion racket going and to pay their benefits once they have sucked the last drop of blood from the automakers shareholders.

Keep your filthy socialist hands out of my pocket.

 
At 11/06/2009 2:04 PM, Anonymous gettingrational said...

One of the anons. cited the Harbour Report about hourly productivity. I wonder if Ford would like to have less hours worked in their $70.00 an hour factories? So you give the $70.00 an hour guys the simplest cars to build and the result is less hours per car!

I beleive productivty gains should be rewarded in a big way for the factory worker in the form of profit sharing and bonuses -- not by showing up for work with the UAW jacket on and hanging out.

I am not sure but productivity probably involves:
Continually reducing defects and changing the factory floor process for different model cars depending on popularity -- which is the opposite of job classifications and a lot of work rules.

 
At 11/06/2009 2:14 PM, Blogger Walt G. said...

A local bank president recently got around an $8 million retirement payoff from a bank that received federal bailout money. I am not sure, but I don't think he belongs to the Democratic Party and I know he is not a UAW member. I won’t argue whether that was right or wrong, but I don’t have a problem standing in line if they are passing out money to the “little” guys, too :)

Quality and safety at GM? We have safe accelerator pedals. For some reason, I have not read anything about Toyota’s safety problems/recalls here.

 
At 11/06/2009 2:59 PM, Anonymous Anonymous said...

A local bank president recently got around an $8 million retirement payoff from a bank that received federal bailout money.

Once upon a time ...

You seem entirely unaware that many banks were required to take "bailout" money whether they needed it or not. Perhaps that's the case with your imaginary bank. Either way, the fact that another person takes money that they are not entitled to does not justifying you "lining up" to steal as well. Would you join the mob and loot during a crisis? Judging by what you and your UAW "brothers" have done to the auto companies, I guess you would.

Like I said, go ahead, extort all you want from the shareholders of the big 3. In the end, you'll get what you deserve - unemployment, poverty and hopelessness. In fact, your story will be a cautionary tale about the ultimate outcome of union greed. What I object to, is the idea that once you have extorted your employer into bankruptcy, you are somehow entitled to steal from the taxpayer. You made your own bed, now sleep in it.

 
At 11/06/2009 3:32 PM, Anonymous Anonymous said...

... a bank that received federal bailout money.


Maybe that bank was in trouble because of UAW owned GMAC's use of government subsidies to undermine it's competitors:

“The government has created an artificial competitor,” said Christopher Whalen, managing director of Torrance, California-based Institutional Risk Analytics and creator of the IRA Bank Monitor, which rates the health of banks for consumers. “Every bank in the U.S. is at a disadvantage because our government is picking losers as winners.”

Ally’s campaign may set up a clash with competitors and regulators concerned that rate wars will put pressure on healthy banks.

[...]

GMAC averted collapse last year when the U.S. declared the firm crucial to the auto industry and pumped in $13.5 billion. The U.S. has a 35.4 percent stake, GMAC spokeswoman Gina Proia said.

“It’s irritating for the community banking industry to see someone who has failed in their business dealings now turning around and saying they are so smart,” said Paul Merski, chief economist of the Independent Community Bankers of America in Washington, which represents almost 5,000 banks. GMAC’s rates “are way out of line with the rest of the industry.”

Bloomberg

Everything that the UAW and the government touches turns to s*&t.

 
At 11/06/2009 3:47 PM, Blogger Walt G. said...

I'm pretty sure Citizens Bank is not an "imaginary" bank.

To be honest, I am not sure if I would have bailed out anyone, and that includes GM where I work. But I would not rule it out if the benefits of the bailout outweighed the cost of no bail out either. We could argue this; however, the alternative cost of doing nothing was not zero.

It’s too early to tell if any of the bailouts were mistakes or not. Anyone who says differently does not have any data to prove their position because the future has not been written yet and none of us has a crystal ball.

It’s ironic how prolific the doom and gloom posters are here about the domestic auto industry when the same people are so optimistic about the overall state of the economy. Maybe both just need to be given a chance to recover.

 
At 11/06/2009 3:47 PM, Blogger juandos said...

My main walt g comes shining through again!

"Twenty pages alone is written to saw that GM will follow the equal opportunity law"... (EEOC interference)

"30 pages to say GM will not hurt the environment"...
(EPA interference)

Geez! Anyone want to guess what just those two items cost GM (and other domestic car makers), employees, and consumers?

Union Membership Is Just A License To Steal

Whereas being a collection of parasites in a federal bureaucracy leeching off the productive citizen is what? The road to sainthood?

"The Pension Benefit Guaranty Corporation, which insures pension plans, caps the amount of benefits it will pay, using a formula based on age and the type of benefits an employee earned"...

Hmmm, I know exactly what that's about...

The supposedly hottest investor (according to CNN Money) plundered the assets of Ozark Airline and TWA (and the stockholders) help put some 7800 employees into the tender care of the PBGC...

"You seem entirely unaware that many banks were required to take "bailout" money whether they needed it or not"...

Ahhh, interesting comment anon @ 11/06/2009 2:59 PM...

From the Business Insider dated May. 13, 2009, 8:25: Documents Reveal How Paulson Forced Banks To Take TARP Cash

One more nugget of news from the Business Insider: Un-Skilled Workers Were Annihilated In October

 
At 11/06/2009 4:32 PM, Anonymous Anonymous said...

To be honest, I am not sure if I would have bailed out anyone, and that includes GM where I work.

I'm certain that I would not have. The U.S. has well defined bankruptcy laws in place to address these situations. The "moral hazard" created by the bailout of private firms and the UAW will plague our economy for generations.

At least many of the private firms had the excuse of acting in accord with government mandates and incentives, what was the UAW's excuse? And if, as you claim, the bailouts were necessary and maybe even beneficial why weren't you and your union "brothers" willing to sacrifice anything in order to help ensure a positive, sustainable outcome:

Well-Kept Media Secret: UAW Conceded No Base Pay, Health, or Pension Benefits in GM, Chrysler Bankruptcy Run-ups
From press coverage at the time, you would have thought that unionized GM and Chrysler workers made ginormous, humungous, unprecedented sacrifices to enable their companies to get through bankruptcy and to emerge as lean, mean vehicle-making machines.

[...]

... given the opportunity to cleanse all sins in bankruptcy, GM and Chrysler ended up doing very little to change their U.S. manufacturing day-to-day cost structure. Thanks to press coverage that has been almost completely derelict, almost no one knows this.

NewsBusters

Did you ever stand up at a union meeting and ask if the company could afford to meet your demands?

 
At 11/06/2009 5:30 PM, Anonymous Anonymous said...

Well - none of you have any answer to the question I asked Dr. Perry - if UAW rules are so restrictive, why are union plants at the top of the productivity list? Just accept it - it is a fact - the union shops are more productive.

Juandos you struck out completely - if you have a better source than Harbour, point it out. You look weak when you call the leading publication with a 20 year track record propaganda.

Best response was gettingrational - yes cost per hour x productivity is an important number. BUT, UAW costs now largely in line with Toyota, etc., so productivity will be critical.

 
At 11/06/2009 5:44 PM, Blogger Walt G. said...

anonymous 4:32,

If I implied the bailouts were necessary, I did not mean to.

If you accept that the government can manipulate the monetary system through the Federal Reserve and create green pieces of paper with dollar signs on them, you have to admit that they have the same type of power to give away those green pieces of paper.

As I said earlier, the bailouts may prove to be sound policy and they may not. Either way, the government was already running the show and this is just business as usual. Defense contractors and financial institutions use federal money in the amount the domestic auto industry received for lunch.

We need to separate those who despise unions from those who are trying to solve problems. I agree unions that will not change can be part of the problem, but there is no factual evidence here that proves unions are "Ford's Main Problem" as the title of this post so sensationally shouts. Inefficiency is not measured in inches of paper in a book. If it is, Webster's Dictionary has grown inefficient over the years, too.

 
At 11/06/2009 5:56 PM, Blogger juandos said...

"Juandos you struck out completely - if you have a better source than Harbour, point it out. You look weak when you call the leading publication with a 20 year track record propaganda"...

Sad, pathetic and delusional...

Do you have a copy of Harbour Report?

Of course you don't, since you're not going to lay out $595.00 of your own to get a copy...

All you have is something of a questionable 2nd hand nature...

 
At 11/06/2009 6:02 PM, Blogger Walt G. said...

anonymous 5:30,

This is not really a discussion about efficiency, quality of cars, or safety. A problem of the magnitude Toyota is currently facing over their accelerator pedal would have been mentioned here it was. If GM had Toyota's current problem with killing people, it would probably be blamed on the UAW.

Most of the posters here want to eliminate U.S. labor unions because they hate them, so rational discussions are not possible when emotions like that are involved.

 
At 11/06/2009 10:35 PM, Anonymous gettingrational said...

Walt, I am not bashing unions but trying to point out that U.S. manufacutring needs to change with the times. The unions need to give more flexibility to the companies and back unsustainable high benefit contracts.

The investment sector has been plundered then enriched again by the U.S. gov't and yes, this is outrageous compared to the blue collar guy working under a labor agreement.

 
At 11/07/2009 12:04 AM, Anonymous Anonymous said...

Most of the posters here want to eliminate U.S. labor unions because they hate them ...

Now I've heard everything, including a union member whining about "hate". If unions have a bad rep, they've earned it.

Just answer one thing for me, who are the public employees unions organized against?

 
At 11/07/2009 6:36 AM, Blogger Walt G. said...

anonymous 12:04,

Who are all the organizations you belong to against?

 
At 11/07/2009 6:52 AM, Blogger sethstorm said...


If unions have a bad rep, they've earned it.

Or you learned it without any direct experience.


gettingrational said at 11/06/2009 10:35 PM...

The problem is that what formed the unions is still there on the other side of the table. If unions have to give up horribly, that means even the South (and their foreign partners) has to lose.


Most of the posters here want to eliminate U.S. labor unions because they hate them, so rational discussions are not possible when emotions like that are involved.

Agreed and doubly so for those south of the Mason-Dixon or who are connected to some law firms.

For all of that irrational hate by the import brands, I thank them for making it easier to buy a (non-Mexican, Michigan built) Big Three product.

 
At 11/08/2009 11:28 AM, Anonymous Anonymous said...

Juandos, The Harbour link I posted is 35 pages of results. It is free. Here it is again.

http://www.oliverwyman.com/content_images/OW_EN_Automotive_Press_2008_HarbourMedia08.pdf

Please follow the link and report the top three plants in each category and their union status.

Is there any way I can get you to discuss the productivity rankings of these plants and not resort to insults and shrieks of propaganda?

 

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