Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, January 12, 1993 TAG: 9301120395
SECTION: EDITORIAL PAGE: A-9 EDITION: METRO
SOURCE: By THOMAS O'BRIEN
DATELINE: LENGTH: Medium
AT GM, TIME FOR A REVOLUTION
THE NEW leadership of General Motors should make some bold new offers to its workers to restore GM competitiveness.Without a revolutionary proposal, pessimism is understandable. GM's costs per vehicle are about $800 higher than at Ford and Chrysler. Addressing labor-management problems creatively, though, could turn the situation around.
Currently, labor and management are at each others' throats, and recent strikes over threatened layoffs further damaged the company. What's needed is a proposal to get management and labor on the same team. The UAW should be receptive because GM plans to lay off 20 percent of its blue-collar workers by 1995. The union has a strong incentive to look for ways to preserve jobs.
First, GM should reopen the union contract (necessary in eight months in any case). Offer dramatically higher profit-sharing bonuses in exchange for far lower guaranteed hourly wages. (A good way to pay bonuses is in the form of GM stock. Making employees shareholders will give them a direct stake in the company's profitability).
Now, GM pays lavishly for labor whether during record profits (as just a few years back) or during record losses (today). These relatively fixed labor costs guarantee trauma and huge losses during bad times or the necessity of uncompetitive sticker prices. The package should be structured with pay incentives strong enough that had such a cooperative contract been in effect over the past decade net compensation would not have been any lower than it actually was.
This would stem losses during tough times. By cutting costs during recessions, it provides greater economic and corporate stability, with fewer citizens laid off and collecting unemployment, and the corporation is better able to stanch losses. Lower labor costs during hard times would also give GM the option of cutting sticker prices to regain or retain market share, keeping more jobs for Americans.
The problem of layoffs should be handled more constructively, to move slightly toward the Japanese model. Today, the company plans huge layoffs, while its most senior hourly workers still have no personal stake whatsoever in demonstrating flexibility. Far better is limiting layoffs and allowing more workers to keep their jobs while working fewer hours. This does require the company to continue benefits for more employees, but there would be a much stronger need for employees to pull together to enhance competitiveness. All workers then would have incentive to cut costs and increase productivity to increase their weekly hours and earnings.
Executive pay also needs to be overhauled. Management has to be in the same boat with hourly employees. During losses, management pay should take a big dive. It's essential that all employees feel that pay for all parties is proportional and, with fairly shared sacrifice, the UAW could be convinced this is a win/win package. Under such a constructive agreement, GM would come storming back to best the competition.
Of course, this model isn't limited to GM or even to big businesses. It should be an important labor model for other U.S. companies as it would provide greater long-term economic stability, enhance competitiveness and protect U.S. jobs.
Thomas O'Brien is director for research at the Horizon Institute for Policy Solutions in Charlottesville.