$1 for 3 months. Save 97%.
$1 for 3 months. Save 97%.

Opinion: UAW strike more about the future than the cash

Patrick L. Anderson
In this strike, GM’s insistence that UAW workers pay more than 4% of their health insurance costs should not surprise anyone in business, Anderson says.

The UAW strike on General Motors is already the longest since the 1970s, stretching into the third week as this is written. Regardless of the strike’s duration, it is already clear that this particular labor-management dispute is about much more than money. There are three fundamental issues at stake, and at least two of them affect nearly every American.

The first issue is the skyrocketing cost of health care, and who must pay for it. The cost of an average employer-sponsored health insurance policy has now grown to over $20,000 per employee, per year. The UAW’s benefit package, like that of most unionized work forces, is even more expensive.

Think about that for a minute. The cost of health insurance for a typical private sector worker is now often more expensive than the car he or she drives to work. Three years of health insurance now adds up to over $60,000 — more than the cost of a $34,000 car plus gas, insurance and repairs during those same three years.

Governments, public schools, universities, large tech companies and major manufacturers typically pass on growing health care costs to their customers — or to taxpayers. Most private-sector employers, however, simply cannot do that.

In this strike, GM’s insistence that UAW workers pay more than 4% of their health insurance costs should not surprise anyone in business. The place of health care on the bargaining table confirms that these costs remain a serious political, social and business issue in the United States, along with our reliance on employers and taxpayers to pay them.

The UAW strike on General Motors is already the longest since the 1970s.

The second issue is whether unions can slow the changing nature of manufacturing.

The world’s most valuable corporations are now concentrated in the tech sector. These firms often distribute manufacturing among various plants operated by supplier firms, whose labor agreements vary considerably from place to place. This is a much more flexible system than that of the legacy automotive assembly plants, most of which have similar union labor contracts. Moreover, these unionized plants face competition from “transplants” that also operate in the United States and currently enjoy both a cost and a flexibility advantage.

The UAW is dead set against allowing GM to hire a limited number of temporary workers, and it opposes a lower wage scale for newer workers.  It also wants assurances that future assembly of electric vehicles — for which batteries and electronics will become the major components — will be done with unionized labor in the U.S. and Canada.

This issue is really about what century we are in, rather than what wages we pay. Regardless of the outcome in this particular labor-management battle, other industries have already moved to more flexible manufacturing systems. The only question is whether GM — and afterward Ford and Chrysler — is able to take small steps in that direction. If it can’t, it will end up losing market share, along with its UAW jobs. The slow movement toward electric vehicles adds further impetus to this issue.

Eric Scharrer, 32, of Davison, left, and friend Dell Williston, 32, of Grand Blanc, join hundreds of others on the picket line outside the Flint Assembly Plant.

The last — and I argue the least important — major issue on the table is money. GM is finally making money, but its profitability is well below the impression created in numerous news media accounts. In fact, GM made a solid $8 billion in 2018 — but it lost $3.9 billion in 2017. Furthermore, GM builds and sells the largest number of its vehicles in China, not the United States.

Earlier this year, GM paid a typical UAW worker $10,750 in profit sharing on top of their wages and benefits. The Center for Auto Research suggests that GM now pays at least $13 per hour more than the most efficient “transplant” operations that are not unionized by the UAW.

Anderson Economic Group estimated that GM’s levelized North American production-based profits would have been about $16 million per production day in September, absent a strike. Of course, a profitable GM should increase wages. How it does that while facing a cost gap with its most efficient competitors is the challenge.

Two of the three major issues at stake in this strike affect every American industry and involve policies that affect every American worker. In this sense, both the UAW and GM are right about the high stakes in this strike: It’s not primarily about the money. It’s about the future.

Patrick L. Anderson is the principal and CEO of Anderson Economic Group, a consultancy founded in 1996. He is also the executive chairman of Supported Intelligence, an artificial intelligence software firm.