Who Killed Detroit?
August 28, 2015 4:29 PM Subscribe
A Republican Facebook friend recently made a post about the dangers of unionization, pointing to the decline of the US auto industry as an example. Is my friend right or wrong in saying that "the unions killed Detroit"? What books, articles, or research should I read on the topic so that the next time the topic comes up, I can make an informed contribution to the conversation?
A good thing to read would be Origins of the Urban Crisis by Thomas Sugrue.
posted by ArbitraryAndCapricious at 5:09 PM on August 28, 2015 [6 favorites]
posted by ArbitraryAndCapricious at 5:09 PM on August 28, 2015 [6 favorites]
Unions built Detroit.
Management killed it.
Unions didn't design gas guzzling monstrosities.
Planned obsolescence was not a union initiative.
Neither was the Ford Hibachi.
Funny how Mercedes , BMW seem to do ok with unions.
posted by yyz at 5:15 PM on August 28, 2015 [33 favorites]
Management killed it.
Unions didn't design gas guzzling monstrosities.
Planned obsolescence was not a union initiative.
Neither was the Ford Hibachi.
Funny how Mercedes , BMW seem to do ok with unions.
posted by yyz at 5:15 PM on August 28, 2015 [33 favorites]
To clarify do you mean the city of Detroit, or "Detroit" as in the American auto industry?
posted by plastic_animals at 5:18 PM on August 28, 2015 [5 favorites]
posted by plastic_animals at 5:18 PM on August 28, 2015 [5 favorites]
There are many different books on the topic, but at the end of the day it just came down to some combination of path dependency and there innovators dilemma. There degree to which management or labor were the root cause of that isn't blame worth assigning. All of them did dumb things. And they had unforeseen bad things happen.
Anyone who says any party was not culpable is letting their biases show.
posted by JPD at 5:35 PM on August 28, 2015 [3 favorites]
Anyone who says any party was not culpable is letting their biases show.
posted by JPD at 5:35 PM on August 28, 2015 [3 favorites]
Detroit was doomed from inception because it built its livelihood on the assumption that one specific industry would always be around, forever, until the end of time. The same is true of a lot of the Rust Belt cities. You can blame global industrialists for exporting the manufacturing jobs or blame the unions for jacking up labor costs with their pension systems but those are downstream effects and you're just pointing the finger at one side or the other. I think of golden-age Detroit as a sort of gold-rush town that sprung up with a swell of economic activity brought on by speculation and then crumbled when the mines ran dry. Solution: have a bunch of different types of mines. See for example Chicago, which had a similarly sized economy to Detroit and also suffered from white-flight and urban disinvestment, but which has never suffered nearly as fatal a blow as Detroit did, because Chicago has a diverse economy.
posted by deathpanels at 6:26 PM on August 28, 2015 [2 favorites]
posted by deathpanels at 6:26 PM on August 28, 2015 [2 favorites]
Charlie LeDuff's "Detroit: An American Autopsy" is an amazing look at some of the dynamics that have gone into what Detroit is today.
posted by jferg at 7:29 PM on August 28, 2015 [3 favorites]
posted by jferg at 7:29 PM on August 28, 2015 [3 favorites]
Origins of the Urban Crisis, as linked above, is a must-read. There isn't a neat and tidy answer to what you're asking about, and any proposed tidy answers are really not doing justice to the city.
posted by kiltedtaco at 11:46 PM on August 28, 2015
posted by kiltedtaco at 11:46 PM on August 28, 2015
People like to trot out the UAW and the Postal Workers Unions any time they want to bad-mouth unions. But take a look at this list of the largest unions in the U.S. and you'll see that both are a very small part of a much larger picture. Some of the other unions on that list have issues too but a lot of them you never hear about because they generally keep both the workers and management happy.
The only part the UAW played in the auto industry's problems didn't really have anything to do with the union. Companies have two choices in how to pay out retirement benefits, "Defined contribution" and "defined benefit". Union works traditionally have pensions which are a defined benefit plan. The plan defines how much you'll get paid when you retire and the company worries about how to fund it and invest for it. A 401k is a defined contribution plan where the plan defines how much the company will give you right now and then you're on your own investing it and managing disbursements when you're retired.
With defined contribution plans, the company records an expense when they contribute to the plan (usually the company match) and that's the end of it for them. With defined benefit plans, the company records a liability on their balance sheet for the funds set aside to fund the pension. They do some math to figure out how much they need to have on hand now to afford to pay them what they've promised in the future. Total all of those numbers up for every employee currently working and those who have already retired and it can start to be a pretty big chunk of your balance sheet. They account for retirement health care benefits the same way but there shifts in the projected future costs of health care can force you to revise that number and if things are already a little tight, that revision could well push your company into bankruptcy. IIRC, in GM's last annual report before they got bailed out, the pension and health care liabilities were about half of their total liabilities.
Ironically, GM and the UAW worked together to fix the problem. They created an investment trust that was funded by GM and then managed by the UAW. They let GM know what to contribute and GM just records the expense to it works like a defined contribution plan for them but it still functions like a pension for all of the workers. They just needed all of the already retired employees who had retired under older contracts to, well, get old and a....no longer have need of those payments. Had things not gone south and if they had been able to at least tread water until they could stop paying out on those older pensions, they probably would have been just fine.
So the union contracts had something to do with it but not because they're a union. There is nothing inherent to unions that requires them to use pensions over 401k plans, just tradition.
posted by VTX at 6:21 AM on August 29, 2015 [5 favorites]
The only part the UAW played in the auto industry's problems didn't really have anything to do with the union. Companies have two choices in how to pay out retirement benefits, "Defined contribution" and "defined benefit". Union works traditionally have pensions which are a defined benefit plan. The plan defines how much you'll get paid when you retire and the company worries about how to fund it and invest for it. A 401k is a defined contribution plan where the plan defines how much the company will give you right now and then you're on your own investing it and managing disbursements when you're retired.
With defined contribution plans, the company records an expense when they contribute to the plan (usually the company match) and that's the end of it for them. With defined benefit plans, the company records a liability on their balance sheet for the funds set aside to fund the pension. They do some math to figure out how much they need to have on hand now to afford to pay them what they've promised in the future. Total all of those numbers up for every employee currently working and those who have already retired and it can start to be a pretty big chunk of your balance sheet. They account for retirement health care benefits the same way but there shifts in the projected future costs of health care can force you to revise that number and if things are already a little tight, that revision could well push your company into bankruptcy. IIRC, in GM's last annual report before they got bailed out, the pension and health care liabilities were about half of their total liabilities.
Ironically, GM and the UAW worked together to fix the problem. They created an investment trust that was funded by GM and then managed by the UAW. They let GM know what to contribute and GM just records the expense to it works like a defined contribution plan for them but it still functions like a pension for all of the workers. They just needed all of the already retired employees who had retired under older contracts to, well, get old and a....no longer have need of those payments. Had things not gone south and if they had been able to at least tread water until they could stop paying out on those older pensions, they probably would have been just fine.
So the union contracts had something to do with it but not because they're a union. There is nothing inherent to unions that requires them to use pensions over 401k plans, just tradition.
posted by VTX at 6:21 AM on August 29, 2015 [5 favorites]
Tax-deferred Defined contribution plans were only invented in 1978, so actually there was a reason why union plans were db.
The issue isn't so much the db obligation so much as the dramatic shrinkage in market share and work force from the peak in the 60's to today. Unfortunately that's where the path dependency came in. It's pretty close to impossible to reset the economics of a business like that - union or non-union, although the elected nature of union leadership does make it somewhat difficult as its hard to win re election after you slash total comp...
posted by JPD at 7:04 AM on August 29, 2015
The issue isn't so much the db obligation so much as the dramatic shrinkage in market share and work force from the peak in the 60's to today. Unfortunately that's where the path dependency came in. It's pretty close to impossible to reset the economics of a business like that - union or non-union, although the elected nature of union leadership does make it somewhat difficult as its hard to win re election after you slash total comp...
posted by JPD at 7:04 AM on August 29, 2015
In the 50s Jane Jacobs predicted Detroit's decline on a physical planning basis - the low density sprawl of the West Side in particular.
posted by BinGregory at 7:41 AM on August 29, 2015 [2 favorites]
posted by BinGregory at 7:41 AM on August 29, 2015 [2 favorites]
Every contract signed by a union was also signed by management. There's no way unions are uniquely responsible.
posted by SemiSalt at 11:37 AM on August 29, 2015
posted by SemiSalt at 11:37 AM on August 29, 2015
Corporations will always aim for the cheapest labor, and even non-Union shops have closed because we can't complete with cheap-almost-if-not-actually-slave-like working conditions and wages (and environmental degradation). I've toured the maquiladoras in Mexico, and taken worker testimony - climbing into chemical vats to clean them without respirators, working woth barrels of chemicals that have warning labels but only written in English - again - no gloves no goggles no masks - complaining of pain and being told by the company doctor to get back to work and then walking off the job and miscarrying, in tremendous pain, in the back of a pickup truck. Those are proud US companies.
Really, it gets tempting to tell Republican friends to go fuck themselves.
posted by vitabellosi at 12:33 PM on August 29, 2015 [1 favorite]
Really, it gets tempting to tell Republican friends to go fuck themselves.
posted by vitabellosi at 12:33 PM on August 29, 2015 [1 favorite]
"Detroit" or the US car industry, so the story goes, was destroyed by Japanese quality and prices. And yet, Japanese car manufacturers have unionised workforces. So...
posted by wilful at 7:54 PM on August 29, 2015
posted by wilful at 7:54 PM on August 29, 2015
Yeah but in 1975 those workforces were much cheaper with more flexible work rules -union or not. The work rules were a big deal because it made it much harder to change how the cars were made - something the Japanese were much better at. Of course the reason why the unions wouldn't budge on work rules was because before those protections management used changing job descriptions and roles on a whim as a way to control and punish the work force, so when labor was asked to roll them back not unreasonably they were not interested.
But just saying "Japan has unions" as a way to defend labor is problematic in several ways. The very nature of collective bargaining and labor relations are very different in Japan and Germany.
posted by JPD at 6:50 AM on August 30, 2015
But just saying "Japan has unions" as a way to defend labor is problematic in several ways. The very nature of collective bargaining and labor relations are very different in Japan and Germany.
posted by JPD at 6:50 AM on August 30, 2015
I just listened to This American Life's NUMMI episode which was about GM's collapse, the quality of work (and the decline thereof), and how GM and Toyota opened a plant together. Very interesting.
posted by getawaysticks at 9:04 AM on August 31, 2015
posted by getawaysticks at 9:04 AM on August 31, 2015
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posted by furtive at 4:44 PM on August 28, 2015 [4 favorites]