American Axle Strike: Unions Continue to Kill U.S. Manufacturing

From American Axle strike could be prolonged - UPI.com:

American Axel (sic) made a profit of $37 million last year and wants to cut its wage and benefits package to a total of $20 to $30 per hour. They are currently paying $70 per hour, the News reported.

Is that right? $70 per hour? Who makes that kind of money in the the auto industry? I am confident it is none of the Toyota, Honda or Hyundai employees. Surely it is not the Tokai Rika or Nippondenso employees either.

The fact is that not only is demand down, but American companies are not as competitive as they need to be. One of the key components is the high cost of employees. This is a huge conundrum as for U.S. companies as health benefits are essential and the domestic cost of living is increasing. Not an appetizing recipe.

This can be shown by the ongoing trends that have been in the spotlight lately as US Auto Parts Companies Look Overseas:

American Axle & Manufacturing Holdings Inc., Visteon Corp. and ArvinMeritor Inc. are either closing plants, buying out workers or researching plans to offload health-care costs to halt financial erosion in the U.S. in 2008. Meanwhile, these same companies are building new plants, hiring workers and winning new contracts in Europe and Asia.

The backlash from the American Axle (AXL) strike will ripple through the auto sector potentially putting a stake through the heart at General Motors (GM) and Ford (F). These companies are in no position to withstand a prolonged union stranglehold.

Unions had their place in the development of our country’s manufacturing boom as there was an inequity between company and worker. That inequity has flipped somewhat and now is in favor of worker over company.

And… don’t get me started on my soapbox with my distaste for the modern day union. It appears that early on, unions were created to benefit the working in an effort to bring them a better working environment along with a reasonable pay for the work performed. Now, unions are in an adversarial relationship with companies and appear to exist as profit centers for the union management.

There needs to be a paradigm shift with the realization that unions have been the downfall of the Detroit marketplace and will continue to move jobs overseas. Is it any surprise that we outsource and offshore so much of our labor and manufacturing pool? How long do we allow unions to lose jobs for Americans?

Disclosure: Horowitz & Company clients do not hold positions in stocks mentioned as of the publish date.

Comments

[JoeChristmas]

Unions are not the problem. The problem is the ridiculous health care system in the US, and the rising costs that erode company margins. I suppose this may finally mean something will be done to fix the mess. When it was just poor people suffering, it really didn't matter. Now that companies are losing competitiveness, perhaps something will be done by our corrupt politicians. But blaming unions for "killing US manufacturing" is a sick joke.

2008 Mar 04 11:15 AM

[Malkiel]

Another unenlightened anti-union diatribe from somebody who only sees the labor movement through the lense of the midwest-centric automobile industry. It was management in all industries that forced the adversarial model on the unions; Henry Ford and the other industrial giants hated unions back in the day and used armed thuggery to try to destroy them.

The idea that unions were somehow a passing fad and aren't needed any more is just rubbish. Employers will always be more powerful than any individual employee and being able to bargain collectively is a fundamental right employees need to have in order to level the playing field. The decline in the quality of life for working people during the "Reagan revolution" years would not have happened had workers been able to bargain collectively. We should be at the point in the evolution of our advanced industrial economy where health care and fair labor costs are already factored in and investors know in advance those things will come off the bottom line.

As for your specific complaints about this company, the decline in the value of the dollar has made internal costs meaningless to foreign buyers and pricing, but the workers have fixed or increasing costs. If you're threatening to close a plant down whether they give back wages or not, what's the incentive to take pay cuts? May as well get the full value while they can...

2008 Mar 04 11:26 AM

[EDGE]

Finally someone who speaks the truth. The union was useful at one tme, but the unions have in large report caused our jobs to go overseas. What happened to honest wages for a honest days work.

2008 Mar 04 11:35 AM

[Mykl99]

I usually don't comment on this stuff since it all seems to be an opinion someone has or not.

#1 Unions are like the biggest thing to bring democracy to the common worker - nothing else does so to put a common worker on par with management.

#2 yes some companies understand (in particular IT companies) that their company is the employees so unions are less needed. This however doesn't apply to ALL BUSINESSES.

#3 Okay - $70 an hour is not that high of a wage when you include all benefits - health care, social security, other insurances, vacation, sick time, etc which are normally counted in the figure quoted.

#4 Hmmm...despite all the complaints - the company still made $37MM? Where is the complaint here.

#5 Greed is certainly out of control in this country - CEO and sports figure salaries far out pace anything anyone is is making but gee - the economy is still driven entirely by the consumer so it seems that $70 per hour isn't so bad any more now is it?

2008 Mar 04 12:05 PM

[Buffalo Will]

My wife is employed by this company and is currently on strike against them. The costs you quote in your article are "all in costs" meaning the total cost of wages AND benefits. It also includes the cost for retiree medical coverage. My wife's hourly wage is approximately $17 an hour. I am sure YOU make more than $17 an hour.

2008 Mar 04 12:08 PM

[maire]

I'm sure unions have there place in some situations. However being in the auto industry for the past six years only in recent months has there been so much job instability. The cause, union workers going on strike. Now I would agree a drastic wage cut would make me mad to but then I'm making less than $20 an hour. The strike is affecting more than just american axel and GM. It spreads out of the U.S. and affects all of GM's suppliers. Most of us cannot afford to be off for more than a week and when we hear there is talk of the strike lasting a month or more it is very stressful. It would be nice if the two parties would at least return to the barganing table and keep talking. Our company had to cut wages as well just to stay competative. True I don't doubt that these companies make a lot more than what they say they do but I'd rather be employed than worrying about how I am going to pay the bills. Perhaps they can do what our company did and make the wage cuts for new hires.

2008 Mar 04 12:17 PM

[mnet]

you're right $70 an hour is ridiculous but what they don't tell is that figure includes salary employees wages and benefits as they are considered "overhead" for the hourly employee. These companys should scramble to other countries to produce their products, they don't have to pay any taxes or tariffs on these products produced and brought back in the US. The Mexican working in these factories are getting around $2 an hour. Now check out what the Executive compensation is then ask if the inequity justifies the need of a good union.

2008 Mar 04 01:45 PM

[2020]

Good atricle.
Generally a correct assesment, one thing left out however.
How much is management compensation in this company?

2008 Mar 04 01:55 PM

[dianome]

My husband works there and makes around 17 an hour. We are VERY middle class with a home worth less than 80 grand and one car payment (one car's paid off). That's what we can afford with him and me BOTH working. We have two kids in the mix too. To ask him to take a pay cut of HALF would limit our ability to keep our home. Never mind EVER buying a new car to replace the 11 year old one we have now. We don't smoke, don't party, and don't buy 'name brand' clothing. We wear Kmart or Walmart. I have NEVER been to a starbucks (I hate coffee, but just the same - VERY LITTLE discretionary spending).
He works hard every day (so much so that he has to ice his shoulders and take aleve daily!)
His plant voted in a THIRD tier of wages last contract AND the highest tier took a PAY CUT last time. Dickie D made NINE MILLION last year and all management got HUGE bonuses. My husband still only makes 17 an hour; usually with a 50 hour week (around 2600 hrs/year).
If you divide 9,000,000 by 2600 (hours), old Dickie boy makes roughly $3461.53 an hour. Now tell me WHO'S overpaid??????

2008 Mar 04 02:13 PM

[BKR]

Wouldn't it be nice to see the US become competitive again? Its not the wages of the blue collar workers so much as the cost for health care and retirement. Do you think maybe the government should do something? Do you think people should the stand by and watch as thier standard of living is erroded? It sounds like many other people in addition to yourself need to look out the windows of thier fancy offices or Mercedes' and see what is happening to the people instead of only listening to the spin the overpaid executives would like us to beleive.

2008 Mar 04 02:33 PM

[BKR]

Wouldn't it be nice to see the US become competitive again? Its not the wages of the blue collar workers so much as the cost for health care and retirement. Do you think maybe the government should do something? Do you think people should the stand by and watch as thier standard of living is erroded? It sounds like many other people in addition to yourself need to look out the windows of thier fancy offices or Mercedes' and see what is happening to the people instead of only listening to the spin the overpaid executives would like us to beleive.

2008 Mar 04 02:33 PM

[BKR]

Wouldn't it be nice to see the US become competitive again? Its not the wages of the blue collar workers so much as the cost for health care and retirement. Do you think maybe the government should do something? Do you think people should the stand by and watch as thier standard of living is erroded? It sounds like many other people in addition to yourself need to look out the windows of thier fancy offices or Mercedes' and see what is happening to the people instead of only listening to the spin the overpaid executives would like us to beleive.

2008 Mar 04 02:33 PM

[jacksmith]

I work in a Unionized plant that supplies to GM. I think it is terrible how the lazy workers get rewarded for being lazy everyday! The good workers get punished with more responsibility and accountability. With Union jobs everyone gets paid the same so no one has an incentive to work harder then anyone else. It is a constant competition of who can do the least amount of work.. I hope that one day they just get rid of Unions because they are a waste of time and money. In our plant there are several employees that should not be working there (late everyday, build poor quality parts, late from breaks ect...) Those employees don't care at all. I wish they could fire them and bring in better employees who need the jobs, but they can't. I consider myself a pretty good worker and it just is a nightmare everyday at work watching bad workers get away with doing nothing all day long.

2008 Mar 04 03:00 PM

[User 160131]

Re: your article on unions

My husband worked for GM for 33+ years; never did he make $70 per hour as you say. The unions aren't killing U S Manufacturing; the greedy company CEO's and boards who send all the manufacturing jobs overseas are killing the US manufacturing.
When is it ever right that a GM president makes a million and a half dollars per year, then gets a six million dollar bonus when the workers get $600.00 bonus.
My husband was telling people 20 years ago that the US was going to become a service industry country, instead of a manufacturing company. Well, guess what, it is coming to pass.

2008 Mar 04 03:41 PM

[Pioneer]

This guy is an idiot. He mentions that Ford will be brought to their knees from this fight, but Ford sources no product to AA. It's Chrysler, you dolt.

Also, they are not being "paid" $70 per hour. Their pay and benefits add up to that number.

Whatever you are being paid, it's way too much.

2008 Mar 04 04:22 PM

[Cant figure this out]

why shouldnt the workers recieve good pay
you recieve good pay and put in less effort

2008 Mar 04 04:27 PM

[SingleMom]

I am disturbed that WE all allow these large corporations to put profit over the benefit of the employees. I doubt anyone in the auto industry that belong to a union is making 70$ per hour, however, so what if they are? Why can't the foreign automakers in this country make a decent wage of 25$ per hour or more with benefits? They can't right now because making a profit means more to the corporations. Not one corporation I have seen a report on offers their employees a fair wage (enough to pay bills, and set something aside, and improve the quality of life for the employee and their family) without belonging to a union. Why do so many "upper" managment" members make $70 per second, and then expect the people putting that money in their pocket to take so much less and have a lessor quality of life? It's that way of thinking that got us here. Big money now, forget the little guys-but make them work 40-45 hours per week and expect them to take a cut in pay when I need a raise-and while we're at it, let's ship off more jobs to foreign countries to avoid paying taxes, livable wages, and bigger profits. yeah, it seems to be working out great, doesn't it? Anyone seen the unemployment line lately? It's getting longer, and the no one seems to care-not the President, Congress, and least of all the ones who are laying us Americans off to further their profit margin and answer to stockholders that aren't even on American soil. I don't see any Chinese or Taiwan coming to my doorstep to pay my bills, but the American corporations sure are ready to do that for them.

2008 Mar 04 04:28 PM

[JayD.]

I worked at a union job loading trucks while putting myself through graduate school. Jack is so correct, once a union employee gains permanent status, they all too often become next to worthless as their output drops to "just enough to keep their job". The efficiency of the shop is severely compromised and the costs of this inefficiency must be passed on to the end user. Naturally, management looks for ways to cut costs and increase efficiency. The union blocks management from doing too much to shake up the shop. One alternative is to move the operation elsewhere and leave ALL of the union workers behind.

If the move is overseas, the heartless company also rids itself of the medical and retirement costs. Sadly, the Personal Retirement Account which our corrupt politicians refuse to consider as an alternative to SS is probably years away.

The segment of our medical insurance dollar that goes to lawyers, administrators, and non-covered beneficiaries begs for correction and there are many who are ready to jump in with a single payer solution that will let all of these heartless corporations off the hook but leave us with lousy medical care.

Sorry about the rant.

2008 Mar 04 04:35 PM

[SingleMom]

I get the sad impression that you believe that American Auto workers should make that kind of money? Why not? How much do you make? Per hour? Does that figure include all your pension &ealth care? How much are your co-pays for health care and office visit, prescriptions?

It seems people like you are ready to jump the gun and sit in judgement and help decide a wage for those who work hard and are trying to make a living and support thier family and community. You are allowed to make such a wage-can't we all? When you go for a drive, are you supporting overseas production on low wages? Or solid American wages-where you actually support those you live next door to?

We should all be writing letter after letter to our Congress men and women to step up and stick up for us, the American worker, and protect our health care (LOWER the cost!), protect our children's education, etc. I hope my children are strong enough to handle working 40 + hours a week without health care..........

2008 Mar 04 04:35 PM

[SingleMom]

Join me in helping theses strikers......I believe in thier efforts. Why in the world should Joe Blow Corporate expect hard-working citizens to take cuts---did the Ceo take one? Doubt it, what about the other parts of upper management? Why is it the bottom of the totem pole that gets cut up first?

I am striking with you all tomorrow evening......Solidarit... Forever!

2008 Mar 04 04:39 PM