End of the Road: Is the Auto Industry Dead?

By Mark Brenner and Jane Slaughter, Labor Notes. Posted November 19, 2008.

Mixed Bag for Workers

For America's auto workers, the 1990s were decidedly more mixed. On the one hand, after a decade of bruising concessions and plant closings, everyone was relieved to see the return of both jobs and steady wage increases.

On the other hand, much of the new investment coming into the industry was from foreign companies -- Toyota, Mazda, BMW, Nissan, Honda, Mercedes -- who sprinkled factories first on the outer edges of the Midwest auto corridor and then across the right-to-work South. These "transplants" kept their factories non-union, as did the auto parts industry that mushroomed in the 1990s, as the Big Three replaced vertical integration with outsourcing.

Union density in auto, which in the dog days of the 1980s declined from 62 percent to 50, fell even faster in the prosperous 1990s, dropping to 37 percent by the year 2000. The UAW proved unwilling or unable to organize these newcomers, and one can only wonder whether things might be different today had the union summoned up some of the spirit, energy, and vision that drew hundreds of thousands of unorganized auto workers into the union in the 1930s.

Instead the UAW concentrated on the state of its existing members, securing promises of new investment and job security from the Big Three both in contract talks and through job actions. For example, a 54- day strike at two strategic GM parts plants in 1998 idled most of General Motors' North American operations, and resulted in $200 million in new investment in the two plants.

Unfortunately for the UAW, its fight to protect its shrinking store of good jobs was swimming against a much stronger national tide. The 1990s witnessed an explosion in income inequality, in no small part due to skyrocketing CEO pay (71 times workers' average wages in 1989, rising to 300 times by 2000) and a stock market run-up of historic proportions. The longest economic expansion since World War II did surprisingly little for those in the lower rungs of the income distribution, in part because of the declining share of the workforce represented by unions.

Adding to the insecurity were large-scale retrenchments by the bulwarks of corporate America, including Xerox, IBM, and ATT.

Underappreciated at the time, perhaps the biggest development of the 1990s was the move from defined-benefit pension plans to 401(k)-style defined-contribution plans. This seemed of little consequence when the stock market was posting double-digit gains year-in and year-out, but when the turn of the century recession hit, baby-boomers across the nation saw their retirements vaporize. UAW members at the Big Three were some of the few to retain their original pensions.

Downturn

These trends collided with a deflating stock market in 2000 to create a squeeze play for the auto industry and its hourly workforce. The recession hit Detroit particularly hard, as rising gas prices turned consumers off the low-mileage SUVs and minivans that had saved Detroit's bacon a decade earlier. In the last five years the Big Three's market share has fallen from 66 percent to 58 percent, and sales would have been even worse without the deep discounts auto makers felt forced to offer.

At the same time that the domestic picture soured, many of the Big Three's global acquisitions also unraveled. General Motors, for example, paid a cool $2.4 billion to acquire a 20 percent stake in Fiat in 2000, then ponied up another $2 billion to get itself out of the deal five years later.

Ford has injected more than $5 billion into Jaguar and to this day the luxury brand remains stubbornly in the red. Meanwhile the marriage of DaimlerChrysler has hardly been a match made in heaven--the merged company is worth less today in stock market terms than Daimler was on its own before they united.

Hemorrhaging money and with no end in sight, last year Detroit's automakers took desperate measures to become smaller but more profitable companies, with Delphi declaring bankruptcy and GM and Ford putting 55,000 jobs on the chopping block. Since that time, they have all been singing the same tune, blaming their troubles on the generous wages, pensions, and healthcare of their unionized workforce.

In a move whose irony cannot be lost on executives, Detroit has redirected decades of consumer frustration with American automakers for their lackluster designs and poor quality into widespread resentment of rank-and-file auto workers for their company-paid health care and pensions. The auto makers have tapped into middle America's deep-seated anxiety and insecurity with a not-so-subtle message: "If you don't have a pension or any hint of job security, why should they?"

The scale and speed of these changes has left the UAW flat-footed, struggling to get a hearing-much less formulate a strategy-in its fight to save some of the last good manufacturing jobs in America.

So Who Cares?

Cynics might argue, who cares? The UAW represents fewer than 400,000 auto workers in an industry of more than a million, and the concessions the companies are clamoring for will simply bring their wages and benefits closer to what the market will bear for less-skilled workers anyway. Besides, manufacturing is so 20th century. Aren't we a post-industrial economy with a future in services and high-tech jobs? America can design and engineer stuff and let the rest of the world build it (think X-Boxes and Ipods).

See more stories tagged with: economy, uaw, auto industry

Mark Brenner is the Director of Labor Notes.

Jane Slaughter is a founder of Labor Notes.

Liked this story? Get top stories in your inbox each week from Corporate Accountability and WorkPlace! Sign up now »