Pro-Union Is Not Pro-Worker

By Frank Ryan

A recurring theme from the current administration is that to be pro-organized labor is to be pro-worker. Concurrently, the administration has consistently refuted that it is using class warfare as a theme.

A comment from Vice President Biden in March 2011 summed it up when he stated, "We don't see the value of collective bargaining; we see the absolute positive necessity of collective bargaining. Let's get something straight: the only people who have the capacity -- organizational capacity and muscle -- to keep, as they say, the barbarians from the gate, is organized labor. And make no mistake about it: the guys on the other team get it. They know if they cripple labor, the gate is open, man. The gate is wide open. And we know that, too."

For Joe Biden to incorrectly and belligerently suggest that being pro-union means being pro-worker is pure flawed logic. He obviously has never worked as a supplier to a large union company or worked as an employee in a company supplying a union company.

In my experiences helping groups avoid bankruptcy, the tier-1 and tier-2 suppliers to the auto industry and their employees, many of whom are UAW members as well, have suffered horribly at the hands of the big three (GM, Chrysler, and Ford) and the big one (the UAW).

The suppliers to the auto industry have seen prices cut and wages slashed for their workers with the result that America has lost even more jobs overseas to help pay for the contract settlements with the auto manufacturers. The loss of manufacturing jobs in the United States has even caused the UAW membership itself to plummet from 1.5 million members in 1979 to about 355,000 in 2010, yet the union fails to acknowledge its role in the decline of its own membership.

The most recent labor negotiation with the UAW is concerning because of the impact it will have on workers at the suppliers to the big 3 or to the car buyers if prices are raised to pay for this contract. After a taxpayer-funded bailout and substantial write-off of debt by GM and Chrysler, the auto company employees will reap bonuses and benefits unheard of in the rest of America in this current economic climate. Class warfare at its finest!

While one might concede that it is wonderful to provide such benefits if you can afford them, those benefits can be paid only if, ultimately, the customer is willing to pay a higher price for your product.

Should the customer not want to pay a higher price, such bonuses and benefits must come from suppliers, the suppliers employees, shareholders (pension plans in many cases), and government.

The greed of this most recent labor negotiation in the middle of a recession/depression is palpable. The sheer arrogance and abuse of power by the industry and its union reminds me of someone silly enough to fly to Washington, D.C. in a private jet to ask for a bailout -- not that anyone would be silly enough to do that.

The GM contract provides for a $5,000 signing bonus as well as up to $4,000 in inflation protection over the next four years. The starting wage will be over $19 per hour. For veteran workers, however, pay is "frozen" at over $29 per hour.

How Ford, GM, and Chrysler intend to pay for this contract is beyond me and the markets if you look at their common stock prices. Shares of GM alone have declined from $32 to $24 per share recently, so taxpayers as owners of GM have "paid" again.

In 2009, 27 automobile industry suppliers filed bankruptcy. The year 2008 was little better. Recent studies in 2010 suggest that suppliers to the automobile industry will continue to move overseas to meet new price concession demands.

With the supplier bankruptcies legendary and the GM and Chrysler bankruptcy deals that adversely affected automobile dealers in 2009, I would suspect that the overwhelming majority of the workers of these firms are unlikely to view the success of the UAW negotiations favorably. Pay and benefit reductions and moving plants overseas have become the norm at many of the big 3 suppliers for well over a decade.

Perhaps one day Joe Biden will realize that when he applauds the UAW for their negotiating power at the big 3, he is truly condemning the workers of auto suppliers to years of suffering to include more layoffs and plant closings.

Perhaps one day our leaders will realize that "pro-union is not pro-worker," "pro-big business is not pro-customer," and "pro-big government is not pro-taxpayer."

Frank Ryan, CPA specializes in corporate restructuring and lectures on ethics and corporate governance for National and State CPA Associations. He is on the boards of numerous non-profit and publicly traded companies. He can be reached at FRYAN1951@aol.com.