The 5% Solution

As part of the news coverage concerning the Federal bailout of the Big 3 domestic automakers, I have seen stories about how the president of the United Auto Workers, Ron Gettelfinger, has been meeting with other leaders of the union to discuss how labor is going to have to put some cost saving ideas on the table to help the Big 3 avoid bankruptcy. Obviously, it is the union's interest to avoid a Chapter 11 filing, because a bankruptcy trustee could unilaterally make changes to union contracts to preserve the value of the business for the creditors. It's better to volunteer givebacks before they are imposed upon you.

First and foremost should be the Jobs Bank. That is the part of the contract that says laid off UAW workers get to receive 95% of their hourly pay and full benefits while waiting for another job position to open up. Since the domestic manufacturers have been cutting headcount for years, the new job positions never do open up. The UAW members merely collect full wages and benefits, while doing no work for the company. The Jobs Bank has been bleeding the car companies for years now. The union says that the Jobs Bank is not that much of a problem, since there are only about 3500 employees currently in the program.

Only 3500! Wages and benefits for the average Big 3 autoworker are $75 per hour (compared to $45 per hour for Japanese transplants like Toyota and Honda). Simple math tells us that $75/hour times 1800 hours/year time 3500 equals $472 million dollars a year in potential savings. Now I've gotten kind of numb from listening to all the big numbers thrown from all of the different Federal bailouts so far this year, but $472 million sounds like a lot of money to me.

But I've got another idea for changing the UAW contract with the domestic automakers. This won't help stave off bankruptcy in the short term, but in the long run could help them regain some of their lost competitiveness. I call it the 5% solution.

The concept is simple, change the contract to allow management to fire up to 5% of the UAW workers every year, no questions asked. That means no seniority, no grievances filed, no arbitration. Management would have to follow Federal law, which prevents firing people based on their membership in a protected class (race, gender, age, etc.). Other than that, pull whoever you want and give them the boot. Management would not be required to exercise this right, they would merely have the option.

In Right to Work states, employment law features a doctrine known as employment at will. Employment at will assumes that the work relationship is mutually agreed upon, and that either party has reciprical rights to terminate that relationship at any time. Simply put, you can tell the boss to take this job and shove it. The boss can give you the boot. All I'm proposing is to apply this doctrine to the UAW contracts, subject to a limit of 5%.

Consider the effect this change would have. As things stand now, to terminate a union worker requires cause, and proving cause requires evidence that will stand up in a legal proceeding. Being lazy and inefficient doesn't qualify as just cause. But if you could fire 5% without having to show cause, think about the impact that would have on the organization.

You could let the maintenance worker go who has a lot of seniority but can't fix equipment, and keep the newer guy who can actually keep the machines running. Or how about the stock handler who has spent his years finding the best places to hide, and always shows up five minutes after he has been paged. Or the assembler who sends parts with a quality problem down the line instead of raising the flag about the issue. "Not my problem" the assembler says. Think about what it would do to efficiency to get rid of the shirkers and malingerers who drag down the whole team.

Management would not even have to use the option for it to have a salutary effect on the organization. Whe they know they can be fired, almost everyone will hustle harder to impress hte boss. The worst will pick up the pace significantly, and even the best will put out a little extra effort. When they see the bar being raised, employees will be more focused throughout the organization.

Some will complain that my idea will mean the end of job security, and will shift the balance of power away from labor and deciviely towards management. Well, right now the industrial workers with the most contractual rights on job security are the UAW workers. That's what the Jobs Bank was all about. But you have to ask yourself: How much job security do you have if your employer is on the brink of bankruptcy?

The only real job security is when the company is winning in the marketplace. It's time for a change in how the unions do business.