Workers at Chrysler's U.S. plants went back to work six hours after the United Auto Workers union struck the automaker this week. The once powerful UAW, which in its heyday had more than 1.5 million members, used to be able to bring Detroit to its knees. No more. Today the UAW claims only 640,000 active workers, and its major goal in negotiations with the big car companies is to keep that number from shrinking. But the battle ultimately may be a losing one -- and the union is largely to blame.
It costs Chrysler an average of $75.86 an hour to employ each worker, according to the Associated Press, which is the highest in the American auto industry. The costs include not only what goes into the average worker's paycheck, just under $29 an hour, but more importantly the contributions the company makes to employees' health and retirement benefits.
Like General Motors, which settled after a two-day strike last month, Chrysler also pays retirees' health care, a roughly $19 billion liability. Chrysler's agreement with the union included a promise to create a health care trust similar to the one GM and the UAW set up to take over that company's $55 billion liability for the retiree health care program.
Last year, GM lost $10.6 billion, while the Chrysler division of DaimlerChrysler -- the German company that owned Chrysler until it was sold recently to a private equity firm in the U.S. -- lost $1.5 billion. Companies that lose money can't continue to increase salaries and benefits, much less pay out billions in benefits to people who no longer work for the company. But unions rarely demonstrate an understanding of this basic economic fact.
Even harder for unions to grasp is that there is no such thing as job security. Sure, a company can foolishly promise never to lay off workers, but it can't keep its promise if it doesn't make a profit. And unless productivity rises -- which means producing more with fewer workers -- profits will decline.
So what's a union to do? As the UAW's short-lived strikes against GM and Chrysler this fall demonstrate, trying to force employers to make concessions that are economically unfeasible doesn't work anymore.
Unions would be far better off abandoning their adversarial role and trying to become helpful partners with employers. It's in everyone's interest -- from the lowest-paid worker to the CEO -- that a company maximizes its profits.
Linda Chavez is chairman of the Center for Equal Opportunity and author of Betrayal: How Union Bosses Shake Down Their Members and Corrupt American Politics .
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