What's Wrong With GM? It must be their workers!

We have heard it over and over again. GM is failing because of the unions. No unionized company can compete. Do GM's problems really lie with the UAW? The answer is no ... and yes.

Let's look at the high costs of labor. According to GM's annual report they are paying the unions $73 per hour in wages and benefits. This has been picked up by newspapers and news outlets. If this were true it would be outrageous. My company has a pension plan and full medical benefits. They are kind enough to let me know the cost of each. My medical benefits run around $13,000 per year for my family. That comes to around $6.50 per hour. My retirement plan costs the company around $10,000 per year or approximately $5 per hour. Vacation costs around $1.50 per hour. The average union wage is between $25 and $32 per hour. At $32 per hour this comes to $45 per hour.

So how does GM come up with $73 per hour? Well the $73 per hour includes costs of retiree pensions and retiree health care. All this is borne by the current workers in the $73 rate. Those costs should have already been charged to previous years. What it means is that GM did not set the money aside over the past 30 years. They sacrificed long-term viability for short term profitability and now GM is bearing the burden of their short term thinking.

Even when you evaluate GM's labor costs that include post retiree benefits, it accounts for a meager 8% of GM's total costs. GM must have bigger problems than just labor costs.

The problem that GM does have with the unions is that neither trusts the other. Seventy-five years of animosity has bred a relationship that prevents the trust needed to work together to solve GM's problems. Labor is the answer to developing the long-term productivity but the productivity gains have to come with more job stability. These gains are worth billions per year but the real fear of job loss from productivity gains prevents the steps needed to realize this potential. Can trust truly be the answer?