In terms of autoworkers' wages, GM's problems were not rooted in exorbitant gains. The UAW made their great strides in the 1950s and 1960s. Since the end of the 1970s they, like other workers, have generally been on the defensive. Productivity in U.S. motor vehicle assembly, for example, has almost doubled since 1990, yet real wages have remained virtually constant, and in the parts sector they have actually fallen by about 6 percent. In any case, while imports from Japan originally had the advantage of lower wage costs, the Japanese assembly plants that came to the U.S. more or less matched the wages of the Detroit Three to avoid unionization. But benefits, and particularly health care costs, were a different story.

The driving factor in the escalation of costs was not primarily the gains negotiated in collective agreements. Rather, it was the extraordinary increases in costs for the same benefits. Inflationary pressures, in other words, didn't come from autoworkers but from the drug companies and private health insurers providing and profiting from these benefits.81 Rising healthcare costs affect vehicle prices and sales. But if all companies faced the same costs, no company would be relatively disadvantaged. It is because the U.S. healthcare system is overwhelmingly private that the impact is so uneven. Even if the transplants were unionized and had the same benefits, their shorter period in the U.S. (and consequent lower number of retirees receiving healthcare benefits) meant that the transplants would still have a competitive advantage over U.S.-based companies.82

The gap is stunning. At the end of the 1970s, GM had some 470,000 hourly workers and 133,000 retirees and surviving spouses. In 2009, at the time of its bankruptcy, the workforce had decreased by over 85 percent (to 64,000) while the number of retirees had increased almost four-fold (to some half a million) as GM became one of the largest healthcare consumer in the U.S. From a ratio of fewer than 3 retirees per 10 active workers, GM had gone to 77 retirees per 10 active workers. This was hardly sustainable, especially when the Japanese transplants collectively — Toyota, Honda, Nissan, and Subaru — had less than 1000 retirees in the United States.

Pensions were a slightly different matter. Unlike healthcare costs, they were paid out of a stand-alone fund. Company payments were invested in stocks and bonds, and as long as the payments continued and the returns generated were high, there was no problem.

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