Nothing changes: Money-losing Chrysler adds to payroll to buy UAW labor peace

Dan Calabrese

Here’s a very simple question: For what reason would a business hire additional employees?

If the company runs according to sound principles, there is only one possible answer. It would hire additional employees if it needs those employees to do something that will ultimately enhance the profitability of the company.

That’s it. There is no other acceptable answer.

Now, why is Chrysler hiring 2,100 additional employees? Is it because rising demand is pushing its capacity, and it needs to get more people cranking out more cars to sustain its soaring profitability? No. Bankrupt and bailed out by the taxpayers just two years ago, Chrysler is still losing money.

Chrysler is hiring 2,100 additional employees to buy labor peace. The UAW represents 26,000 Chrysler employees, and wants that number to be larger. So in order to get the UAW to agree to smaller signing bonuses, a suspension of cost-of-living increases and a host of other things Chrysler desperately needs, the money-losing automaker agreed to increase the size of its unionized workforce by nearly 10 percent.

There is a school of thought that the Big Three’s biggest critics – and I suppose I’m one of them – is being too hard on the old boys by insisting that nothing has really changed. They have, after all, gotten rid of the Jobs Bank, shed a lot of their legacy costs and won the right to hire entry-level workers for a wage approaching sanity.

One cheer for all that.

But Chrysler is still not able to operate according to rational business principles. If it was, it would not be hiring 2,100 people for no reason related to production capacity or product demand, at a time when it is still losing money. No clear-thinking business executive on the face of the earth would decide to do that.

But the Big Three still do not operate the way clear-thinking businesses operate. They are not allowed to do so. The best they can do is wrangle the best deal they can get from the UAW, which still has the power to cripple any of the three companies with strikes, knowing full well that state and federal laws make it almost impossible for a company hit by a strike to do anything but give in to union demands.

The Metro Detroit community cheers when an automaker and the UAW reach a deal – regardless of the merits of the deal. And when all three automakers reach deals without a real threat, let alone the reality, of a strike – party time! All the more so when we are told that the deal achieved what has become the holy grail of everything – job creation!

I understand that it makes people happy, at a time when unemployment is 9.1 percent, to hear that jobs are being created. Supposedly, the three deals combined will result in the creation of 180,000 jobs when you include suppliers in the mix.

So what’s with some jerk in the newspaper raising an objection to that?

This: If your employer hired you because it needed your services to maintain a profitable activity, and determined it could not maintain said profitable activity without you, awesome. Do your job well and you’ll likely have security and a good income for a long time as part of a money-making enterprise.

But if your employer hired you because it was arm-twisted into doing so, despite the fact that it is not making money at all, and has no real plan for how to turn your labors into enhanced company profits, then what do you really expect in terms of longevity, security and advancement?

And if companies throughout the state were to operate in this way, where would that lead Michigan’s economy? See: 2008.

Just because the Big Three has abandoned its most insane practices of the past doesn’t change the fact that none of the three companies really operate, even now, according to sound business principles. They don’t. The UAW won’t let them. If it would, Chrysler would at least wait until it is making money, and demand necessitates adding capacity, before it expands its unionized workforce by 2,100.

Incremental reforms are welcome, but it will take fundamental reforms to really set up the Big Three for a sustainable future. And in a fundamental sense, hard is it is for some to hear, nothing has changed.


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