A Comeback for the Uaw?

As strikes go, Chrysler’s wasn’t all that impressive. When

Chrysler’s unionized workers nationwide left their assembly

line positions in early October 2007 to protest the

holdup in securing a new four-year labor contract, the media

reported “the second major UAW walkout in a

month”—but it seemed more like a long lunch with picketing

during dessert. By nightfall the parties had come to

an agreement, and the next morning the newspapers chorused

such headlines as “It’s a New Day in Detroit” and

“Detroit’s 3 Finally on Track.”

Many observers seem to believe that the Big Three’s

woes are all tied to union wages and the benefits its bluecollar

workforce receives. But those are not their biggest

problems. While the new agreements with the UAW could

help, cutting labor costs won’t cure what ails Detroit. In

fact, just the opposite could happen.

General Motors has cried loudest about the “unfair”

wage advantage the Japanese automakers enjoy. It has bemoaned

what it sees as a $1,500 to $1,900 price disadvantage

(owing to active and retiree health care costs) on

every product it sells. Detroit spends approximately $78

an hour in blue-collar wages and benefits, while Toyota

Motor spends less than $50. But a plant’s productivity

may be more important than actual wages paid there.

Auto executives know real labor costs aren’t framed just

by the per-hour pay but are measured by how many vehicles

the fewest workers can build in one shift. And consider

Ford’s last minivan attempt. No matter what Ford

spent to develop or build a new minivan, it was DOA at

Ford and Lincoln-Mercury dealerships. When a new vehicle

comes to market and fails, the manufacturer loses

hundreds of millions—if not billions—no matter what its

labor costs are.

Much has been made of the fact that Detroit already

spent much more than Japanese automakers in the United

States for health insurance. Yet GM admitted something

important after the union contracts were signed: Fully...