Michigan: Why Detroit Has an Especially Bad Union Problem
According to The Wall Street Journal:
It's easy to blame the problems of the Detroit Three on their CEOs. Yet the three leaders come from different business backgrounds, with only Rick Wagoner at GM an industry man. Alan Mulally was a star at Boeing and has only two years at Ford. Robert Nardelli comes from General Electric by way of retailing (Home Depot), and has only about a year at Chrysler.
How is it that successful executives become so unsuccessful as soon as they move to Detroit? Also, how can we explain that whenever GM, Ford and Chrysler leave our shores, they compete well in foreign markets as varied as Europe, South America and China? What makes them viable competitors as soon as they cross the border?
One can point to state franchise laws, or to the federal government's Corporate Average Fuel Economy (CAFE) regulations. But the most striking difference appears to be that the Detroit Three are unionized, and the foreign transplants are, overwhelmingly, not. (The exceptions are the transplants that have historic ties to the Detroit Three, like NUMMI, the GM-Toyota venture in California.) Yet the issue can't just be about wage rates. The foreign transplants pay well, and the UAW has given significant concessions in recent bargaining.
It is perhaps the mode of doing business in a unionized company that remains a crippling disadvantage. The UAW is arguably the most successful industrial union of all time. But its very strength has allowed it to permeate into every aspect of manufacturing in the Detroit Three...click to continue.
