The UAW is Poised For Growth – Are Toyota, Honda, and Nissan Ready?
For years, casual observers of the auto industry were quick to point to the UAW as a source of trouble for GM, Chrysler, and Ford. Tales of do-nothing jobs banks and $70/hour compensation were the source of a popular disdain for the UAW and unions in general, and the UAW found it very difficult to attract new members in this climate.
Today, things are quite a bit different. While it says here that the UAW wasn’t perfect, anyone with a real knowledge of the auto industry will acknowledge that the UAW deserves only a part of the blame for the meltdown of GM and Chrysler. The fact is, terrible management, poor quality, and poor designs were the primary sources of GM and Chrysler failure.
The UAW hall in Bowling Green, Kentucky (pictured) might be the most important union battleground of the 21st century.
The good news for the UAW is that all of this is behind them now. The UAW is now more likely than ever to recruit Toyota, Honda, and Nissan workers over the next 2 to 5 years. Here’s why:
- For years, Japanese automakers have used veiled threats of plant closures to dissuade unionization. The latest tactic from Toyota is to show a video to workers that maps out plants with UAW membership and a correlation with plant closures. The big restructuring at GM, Ford, and Chrysler and the reduction in production capacity means that plant closures won’t be near as common as they once were, making this threat a little less powerful, especially once the current pending closures are completed.
- Toyota and Honda have been able to offer factory workers big bonuses, but times are changing. As recently as 2006, Toyota was able to pay workers in Kentucky $6k to $8k in annual bonuses, resulting in an effective salary that was higher than UAW workers in UAW plants. The Japanese automakers have also said that unionization would likely eliminate bonuses. However, considering that none of the Japanese automakers are likely to offer bonuses anytime soon, this threat isn’t nearly as powerful either.
- Overtime is making a comeback. Paying fewer workers overtime is more cost effective than hiring extra workers. As the domestic automakers shed plants over the next 2 years, the UAW workers that remain are likely to earn more overtime than workers at non-union plants operated by Japanese transplants. Consider that Nissan and Toyota have both announced they’re cutting overtime, and you have yet another source of recruiting power for the UAW – bigger checks for union workers because of more overtime.
- Japanese plants and workforces in the USA are shrinking. Nissan announced 20,000 jobs worldwide will be cut in 2009 – so far, none of them in the USA (but it’s early). Toyota recently froze plans to build a new plant in Mississippi. Toyota and Honda have both offered workers voluntary buy-out packages, and the writing on the wall is that Japanese automakers aren’t immune to market swings. For years, the UAW has struggled to convince non-union autoworkers that “it could happen to you.” Now the UAW has proof.
- The political winds are blowing in the UAW’s favor. Say what you will about President Obama and a Democratically controlled congress, but there’s no mistaking this point: The UAW has the most political capital they’ve had in a long time, especially after agreeing to major reductions in wages and benefits in order to try and help save GM and Chrysler.
- The UAW has to recruit autoworkers at Japanese plants in order to survive. If the UAW can’t recruit autoworkers at Nissan, Toyota, and Honda plants, they’re not going to survive. Their membership is smaller than ever, and the current UAW leadership has just agreed to the biggest contract concessions in the history of the union. New members are needed if the UAW wants to remain relevant.
- The auto business is going to be a lot tougher for Honda, Nissan, and Toyota going forward. For the last two decades, Japanese automakers have feasted on weak, poorly operated domestic automakers. That’s not going to happen anymore – Ford is producing vehicles with industry leading quality, and GM and Chrysler just “fixed” their business models. The domestics are going to be more competitive than ever, and that means the Japanese automakers are going to cut costs, tweak production, and try to do more with less. That’s going to filter down to the workers.
It’s important to note that the UAW isn’t necessarily bad for automakers – especially if the UAW is the reasonable and realistic version that we’ve seen over the last 6 months. Unions provide benefits and protections to workers, and when managed carefully they can work with (and not against) their employers. Automakers often enjoy political benefits from unionization – the number of tax benefits and corporate loopholes that automakers enjoy in Michigan, for example, would never have been possible without strong political support from unionized workers and the UAW’s powerful lobby.
The bottom line: These are interesting, historic times in the auto industry. The climate has never been better for the UAW to recruit autoworkers at Toyota, Honda, and Nissan. Will they be able to make inroads? How will Toyota, Honda, and Nissan respond?
What do you think – with the UAW establish itself in a non-union factory in the next 5 years?