Jackson Jambalaya

The role of the UAW in the implosion of the American auto industry has been hotly debated for some time now as its critics place most of the blame on the union while its defenders point to irresponsible decisions made my management. However, very little is mentioned about the jobs bank that pays union members not to work and was agreed to by management. The jobs bank is a program created by the Big 3 and UAW in earlier decades as a compromise on layoffs and automation of assembly lines where workers laid off are paid at close to their original salaries, receive benefits, and do not work. That's right: they do not work.

The Detroit News reported in 2005:
"Pool (subject of the story) is one of more than 12,000 American autoworkers who, instead of installing windshields or bending sheet metal, spend their days counting the hours in a jobs bank set up by Detroit automakers and Delphi Corp. as part of an extraordinary job security agreement with the United Auto Workers union.
The jobs bank programs were the price the industry paid in the 1980s to win UAW support for controversial efforts to boost productivity through increased automation and more flexible manufacturing. ......
General Motors Corp. has roughly 5,000 workers in its jobs bank. Delphi has about 4,000 in its version of the same program. Some 2,100 workers are in DaimlerChrysler AG's Chrysler Group's job security program. Ford had 1,275 in its jobs bank as of Sept. 25. The pending closure of Ford's assembly plant in Loraine, Ohio, could add significantly to that total. Those numbers could swell in coming years as GM and Ford prepare to close more plants.
Detroit automakers declined to discuss the programs in detail or say exactly how much they are spending, but the four-year labor contracts they signed with the UAW in 2003 established contribution caps that give a good idea of the size of the expense.
According to those documents, GM agreed to contribute up to $2.1 billion over four years. DaimlerChrysler set aside $451 million for its program, along with another $50 million for salaried employees covered under the contract. Ford, which also maintained responsibility for Visteon Corp.'s UAW employees, agreed to contribute $944 million. ........"

Why exactly did management agree to this fiasco? Seems the same people who paid Ross Perot twice the value of his stock just so he wouldn't criticize them and decided to make Cadillacs and Chevies look alike used similar judgement:
"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..." (For more details on the jobs bank program (your jaw will drop a few times), read this story at Carlist.com: Jobs banks, featherbedding, welfare, its all the same thing)

This welfare program may disappear as the government today made elimination of the jobs bank part of the loan package it agreed to for the Big 3 today. Even though it will be removed, the jobs bank is one of the main reasons the American auto industry is in the ditch. While union defenders are correct in arguing that Big 3 auto workers make the same in wages per hour as their foreign-employed counterparts, the costs for them explode when benefits and the jobs bank is included. Comparing American and foreign auto manufacturer expenses is like comparing apples and oranges as the UAW forced the Big 3 decades ago to pay thousands or workers billions of dollars over time to not work. Such policies kept them from pouring money into research, improved quality, and more plants such as those they've built overseas (such as the Ford plant in Brazil that has FIVE different platforms). Even though last year both Toyota and GM sold the same amount of cars, GM is broke while Toyota made a profit.

A recent article in the International Herald Tribune bears this out:
"Detroit automakers — and Chrysler in particular — nearly erased the North American productivity gap with their Asian rivals in 2007 thanks to worker buyouts, leaner plants and other improvements, but they still make less money per vehicle because of higher costs, according to the Harbour Report on manufacturing released Thursday.....
Still, the Detroit Three are lagging in profits per vehicle because of higher costs for health care, pensions, sales incentives and the higher number of dealerships they support. Ford lost $1,467 per vehicle in 2007, while GM lost $729 and Chrysler lost $412, the report said. Toyota made $922 per vehicle, while Honda and Nissan both made $1,641. That gap is expected to narrow significantly in 2010, when the Detroit automakers hand over their retiree health care liabilities to new independent trusts overseen by the United Auto Workers union...." International Herald Tribune Story

There is no way a company can stay afloat with such numbers. While some like to blame the unions, its not completely their fault. Management made many bad decisions in car design, quality, strategy, and spending hundreds of millions of dollars on bonuses for themselves. Shareholders and bondholders demanded their fair share of the pie. Paul Ingrassia (a Pulitzer-prize winner) summed this perfect storm of incompetence quite nicely:
"The Detroit Three got into their current quandary by making decades of bad decisions, with some help from the United Auto Workers union. Yet despite the current crisis, General Motors is still paying dividends to shareholders, the car companies are paying bonuses to executives, and the private-equity billionaires at Cerberus who bought Chrysler are trying to reap enormous rewards from their risky investment. Meanwhile the UAW's Jobs Bank -- which pays laid-off workers for doing nothing -- remains in place."

Make no mistake, they all deserve a pox on their houses. However, the next time someone defends the unions and says Southern politicians are just trying to bankrupt Detroit, ask him to defend the jobs bank program.

Harbor Report on cost/profit differences between Japanese and American Auto Manufacturers