Car union seems bent on taking shop down with ship
The Age
Wednesday June 3, 2009
Protectionism can't plug all the car makers' holes, writes Richard Bank. ONCE, the US merchant marine had hundreds of ships that transported a great portion of the goods bound to and from the US and employed tens of thousands of Americans at sea and on land.Today, only a handful of such vessels plying regularly scheduled routes still fly the Stars and Stripes and employ US crews. But these ships, though subsidised by the US government, are owned by Danish or Singaporean interests, and US taxpayers enjoy little or no benefit from them. Essentially, the US-owned and operated merchant marine fleet no longer exists. And in its demise lies a lesson for the US car industry.Despite the car makers' critical state, the United Auto Workers are resisting concrete steps to help the industry that has provided their livelihood for 70 years. Instead, they look to the Government for subsidies to help their employers survive. Reports from the annual AFL-CIO (US union peak body) conference earlier this year detailed the UAW's search for support from other unions - primarily teachers' unions - in lobbying Washington for more funds to stave off bankruptcies in Detroit.Shades of the US maritime industry, which began its death spiral in the 1970s, a time when it was subsidised by the federal government and when laws guaranteed that US-flag vessels would carry all government-related cargo. Yet even with these subsidies and guarantees, the dozen or more US companies - among them American Export Lines, Grace Lines and Pacific Far East Lines - failed, one after another, in the face of competition from more efficient carriers as more and more countries entered the international shipping market.Initially, the unions and their congressional supporters pointed to "cheap foreign competition" as the source of their troubles. But those cries persisted even into the late 1970s and '80s, when European and Japanese carriers were paying higher total wages per seafarer than US flag vessels. It's widely believed that along with less-than-stellar management, union demands for ever-higher wages and excess manning levels - such as insisting on crews of 35 or 40 when crews of 18 were sufficient to operate safely - doomed the US flag industry. Even with subsidies, technical innovations, containerisation and other pioneering cargo advances, US companies couldn't survive the financial burdens of the union demands.Instead of fixing the problem and meeting the competition, industry officials offered excuse after excuse and repeatedly trekked to Capitol Hill for more money. They sought protectionism as a remedy. Such a remedy might have helped the industry, but only at the expense of US consumers and exporters, as it would have resulted in higher, less competitive prices for US exports.Ironically, all this happened not in a time of economic downturn like today, but over a two-decade period when international trade and shipping were experiencing their greatest growth. The only US-owned liner shipping company that did well during those times, SeaLand, was the one carrier that held out longest without taking subsidies and sought out profitable trade lanes.The lesson is simple. In an open economy, the most efficient providers of goods or services that are similar in price or quality will succeed, and those with costs that outpace their earnings will fail. The parallels between the car industry and the departed US maritime industry are bright beacons.Foreign car makers with plants in the US, such as Honda, Toyota and Hyundai, have a total average hourly cost of $US55 an hour per worker; whereas GM, Chrysler and Ford spend close to double that figure.GM loses money on every car it sells. Sadly, the UAW leadership, now buoyed by the prospect of Washington ownership and control of Chrysler and GM, seems reluctant to negotiate in a meaningful way to reduce the companies' costs.Although executives who fly about in private jets in troubled times are not blameless, the UAW, instead of looking for help in its lobbying efforts, should unilaterally announce its willingness to accept the same employment terms as those offered by foreign car makers operating in the US. Such an announcement would remove one of the most difficult barriers to restructuring the industry. It could also open a whole new era of US car making. A positive effect on the sharemarket and on overall consumer confidence would follow.The maritime example shows that trying to keep a whole loaf instead of settling for half a loaf will result in no loaf at all.UAW-management labour negotiations over the past 30 years have (after difficult and strike-threatened periods) ballyhooed the ultimate "partnership" between management and labour. We now see that those pronouncements were window dressing even more illusory than announcements of bipartisan achievements in Washington.As the unemployment figures continue to climb, it's time for the UAW to protect its members, provide a true service to all its workers and become a real partner with Washington in the recovery the entire nation is waiting for.Or else be prepared to go down with the ship.Richard Bank, president of Millennium International Consultants, was director of the US State Department's Office of Maritime Affairs from 1972 to 1979.
© 2009 The Age