3/31/2006

GM/Delphi Strike Good For Economy?

GM could be forced to shut its doors at a cost of 1 billion per week if Delphi’s union contract cancellation request is denied. The United Auto Workers Union has said it would be "impossible to avoid a long strike" and that there is no reason to continue talks at this point.

It would seem the union has the upper hand. However, GM and Delphi are sending the signal back that if the union strikes there may not be any jobs to go back to after the strike.

The union is the real loser here. Either way they lose. If they go on strike GM and Delphi will have to file for bankruptcy and shut the doors and their contracts are void. If they offer concessions they still lose because jobs and wages will be cut and they give up power.

GM can win either way. Although chapter 11 maybe bad for publicity it maybe a chance to void union contracts and cut excess fat. If the union offers concessions they still win because GM can still cut and trim costs.

Either way the US economy in the long run will benefit. GM has been run like a government pork project since the 50’s. It’s time they get competitive in the global economy. However, in the short run this shake up will sting.

6 comments:

rico said...

It seems to me that companies with unions tend to be far less efficient than those without. I really hope that things turn around for them, and employees realize that they will actually have to do something to save their jobs instead of letting the union fight for them. Why do you think that Wal-Mart is number one? I would argue that a significant part of the reason is that there is no union.

Blake said...

I have no sympathy for GM. They should have to compete, and manage costs, etc. just like every other business. They deserve NO perks. Also, if they are one of the largest auto producers in the U.S., all the more reason for them to be resourceful on their own, and not to take handouts from Uncle Sam. As for unions, I salute them! Unions are needed and effective for a reason. They aren't out to get anyone, they are there to ensure fair, and just treatment for workers. If a company is sound, and efficient, unions won’t be there demise. If a company fails, it has more to do with their lack of responsible decision making than the “big bad unions”. It is my hope that there will always be individuals brave enough to fight for themselves via unions. Unions shouldn’t be seen as a threat but rather a law abiding group that can help promote positive change and treatment for all.

Cole said...

I agree with rico about unions. It seems that industries that are heavy with unions have a bad track record. The auto industry seems to be a perfect example. Another example is the airline industry. The part I do not get is how a union can truly claim to be out for the welfare of its members when the union's actions will not be in the members' best interest.

Dr. Tufte said...

Hannah seems to have a good handle on the game theory: the dominant strategy for GM is to not negotiate, and the resulting outcome for the union doesn't seem to depend much on their strategy choice.

As to Cole's point about the claims made by unions, they can say these things because the are exclusionary institutions. If they can make insiders happy by hurting outsiders, then they have succeeded.

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