When it comes to assessing why the Big 3 automakers are on the verge of going out business, it can be described in one word: Unions.
Take a look at the industries that have major union presence: Airlines- almost all bankrupt/failed several times, Steel industry-bankrupt, and, of course, Auto makers.
In the auto industry, they have been an economic anchor that has been strangling these companies for years. The average cost per hour that artificial union demands have created is around $73-$74 (Big 3 average) per hour. Compare that with their non-unionized competitors’ cost of $48 (Toyota) per hour and it’s no surprise why they are failing.
Unions are also tied to the other interesting question: Why were the Big 3 were so heavily into large SUV and Truck vehicles? It suddenly occurred to me that if you were paying $1800-$2000 in extra union costs per vehicle, the only models with enough profit margin and salability would be the largest and most expensive vehicles. $2000 added to the price tag of a $10,000-$15,000 vehicle would be a 13%-20% addition in price or reduction in profit. $2000 added to a $25,000-$40,000 SUV or Truck would equate to only a 5%-8% price or profit impact.
I have tried for the longest time to figure out what value, if any, unions brought to the marketplace or businesses originally. The only circumstance where they might have once had value was during the age of pensions. They once might have been a strong collective voice to stop a company from firing someone at 15-19 years of service to avoid paying a 20 year service pension. But even then, a company that betrayed employees like that would lose workers and talent to companies that rewarded worker loyalty. Today we have the portability of 401k funds.
Unions are clearly Socialist enterprises that create nothing. Everything that they claim they to do for workers, they do manually and poorly. The free market does the same things automatically and with efficiency.
Wages? A company’s purpose is not to pay a worker a ‘living wage’ or a wage called for by arbitrary social or political influences outside the business. If the wage is too low, you go to a different company paying better wages. If no company in your industry is paying better wages, you get new work skills and make a career change. If a company loses too many employees, it will automatically raise wages to keep necessary talent.
Jobs? If your company doesn’t make a product that people want efficiently and affordably, it fails and the jobs are lost. That market share and jobs will re-appear in other more successful companies aligned to the marketplace. Or, if the company is an automaker, they go through bankruptcy to shed the union contracts that destroyed them in the first place.
Unions are a business parasite. They claim to be a force for ‘helping’ workers earn a ‘fair’ wage. But what is result? Uncompetitive companies that go out of business. How does destroying a company and the jobs it created help anyone? If doesn’t, unless you are a union manager or administrator.