Shoe on the Other Foot

The UAW is now responsible for profitability

By Matthew P. Cavedon

Labor Day marked the climax of the unprecedented rise to power in Detroit of the United Auto Workers. Originally a traditional labor union representing over 400,000 employees in America and Canada, the union has played a major role in restructuring the American auto industry since General Motors and Chrysler went bankrupt earlier this year.

On Labor Day, the UAW became a major shareholder in General Motors, with its health care trust holding 17.5 percent of the company’s shares according to the Toronto Star. Throw in the its two-thirds ownership stake in Chrysler, according to Bloomberg, not to mention its continued representation of Ford’s workers, and the union is the new king of the American auto.

As a conservative, I’m supposed to oppose things like worker takeovers of private corporations, but some good is likely to come of the UAW taking over Detroit. For example, the Big Three auto manufacturers have been hurting so badly over the past few years in part because they have had to compensate their workers to no end. The UAW has demanded so much compensation that, according to the New York Times, its average worker makes $74 an hour. The average American Toyota worker, who is not unionized, makes only $44 an hour.

As the newly minted owner of Chrysler and GM, the UAW will finally be forced to make tough choices. If it continues to demand excessive compensation, it will forfeit its profits. By putting both profits and compensation in the hands of the UAW, reality is about to force the union to think in an economically rational way.

That said, there are causes for concern about the power of the UAW. Unlike corporations, labor unions in the United States are not subject to antitrust laws that break up monopolies. While the Big Three are much weaker than they were even a few years ago, they still control 47 percent of the American auto market as of 2008, according to Motor Intelligence. That means the UAW has direct control or significant influence over nearly half of American car manufacturing and sales. Combine that market power with what the Center for Responsive Politics reports to be nearly $40 million contributed to political candidates in the past three election cycles, and the UAW is a behemoth with well-connected allies.

What is to be done? The government must subject labor unions like the UAW, inasmuch as they own private corporations, to the same antitrust laws that apply to every other business. In practical terms, this likely means breaking up the UAW into three parts: GM and Chrysler would become worker cooperatives, with Ford continuing its relationship with the UAW as a traditional labor union.

The government also needs to stop bailing out private industries that fail to turn a profit. If it does so and otherwise lets the new cooperatives and Ford race against imports and any newcomers to the American auto industry for profits in the free market, the model of worker ownership will get a valid test. If it is profitable, perhaps it can be expanded to other failing industries. If not, then at least Americans will continue to make and buy Saturns, Toyotas, Nissans, Mitsubishis, VWs, and Audis.

By letting the American auto industry run its course from this point, the government can allow the UAW’s workers their chance behind the wheel of the auto companies without putting the integrity of the market at risk. That would be a solution to the collapse of the Big Three similar in more than a few ways to a good car: safe, economical, and low-maintenance in the long run.