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Monday, February 07, 2005

Can giants bleed to death?

Evidently the auto workers unions don't think so. According to this Buffalo News storyl, the big three might be paying somewhere near $1.3 billion in wages and benefits to 10,000 union workers who no longer have jobs - these people have been laid off and aren't expected to ever come back to work.

As the story glibly points out:
Auto analysts note that's a cost foreign automakers like Toyota, Honda or Nissan don't have.

And the unions are shocked when their gravy trains expire?

Comments:
I wouldnt call it a gravy train. The auto companies negotiated these agreements with the workers and their union as part of the entire job package. A worker who invests years of their time in one job, acquiring the necessary skills in that job which are non-transferable to other occupations needs to have some kind of assurance or compensation for this risk they assume.

The reason the Japanese automakers do not have these costs is not because their workers are willing to bear the full brunt of the risk associated with the employment relationship. It's because their workers are protected by state run pension and benefit plans. A situation which gives foreign high-wage manufacturers a competitve advantage.

Mathias
Unions-Firms-Markets
 
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