Monday, October 17, 2005

12,000 paid not to work

Bidness: Hey, good deal if you can get it and it may have seemed like a good idea back in the 80's, but now it's yet another expense destroying the auto industry. The UAW is not in any position to defend this successfully.

The jobs bank was established during 1984 labor contract talks between the UAW and the Big Three. The union, still reeling from the loss of 500,000 jobs during the recession of the late 1970s and early 1980s, was determined to protect those who were left. Detroit automakers were eager to win union support to boost productivity through increased automation and more production flexibility. The result was a plan to guarantee pay and benefits for union members whose jobs fell victim to technological progress or plant restructurings. In most cases, workers end up in the jobs bank only after they have exhausted their government unemployment benefits, which are also supplemented by the companies through a related program. In some cases, workers go directly into the program and the benefits can last until they are eligible to retire or return to the factory floor. By making it so expensive to keep paying idled workers, the UAW thought Detroit automakers would avoid layoffs. By discouraging layoffs, the union thought it could prevent outsourcing. That strategy has worked but at the expense of the domestic auto industry's long-term viability. American automakers have produced cars and trucks even when there is little market demand for them, forcing manufacturers to offer big rebates and discounts. "Sometimes they just push product on us," said Bill Holden Jr., general manager of Holden Dodge Inc. in Dover, Del., who said this does not go over well with the dealers. "But they've got these contracts with the union." In Detroit's battle against Asian and European competitors that are unencumbered by such labor costs, the job banks have become a major competitive disadvantage.

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