Insiders Versus Outsiders

The Wall Street Journal reports:

So robust is the recovery in the U.S. auto industry that virtually all the union workers who were laid off by Detroit auto makers during the crisis years can have their jobs back, if they want them.

Even General Motors Co.’s Lordstown, Ohio, complex, long known for its money-losing small cars and its bad labor climate, is running 24 hours a day, with more than 4,000 workers churning out hot-selling Chevy Cruze compacts.

But here in Moraine, the GM assembly plant closed for good. Despite being one of GM’s most productive and cooperative factories, Moraine was closed following the company’s 2007 labor pact with the United Auto Workers union. Under a deal struck by the UAW during GM’s bankruptcy two years later, Moraine’s 2,500 laid-off workers were barred from transferring to other plants, locking them out of the industry’s rebound.

The trouble with Moraine: Its workers weren’t in the UAW.


Moraine’s workers got nothing in the bankruptcy deal. Their plant, which had closed months earlier, was ultimately sold to a developer. The workers were barred from transfers to UAW plants, as were thousands of others who had worked for Delphi Corp., GM’s former parts arm.

How Moraine’s interests diverged from the UAW’s is rooted in the plant’s history. A former appliance factory, it was converted to a pickup truck plant in 1981 after GM sold its Frigidaire brand. At the time, workers there elected to stick with their existing union, the International Union of Electrical Workers, rather than join the UAW. Over time, they generally accepted contracts negotiated by the UAW.

Through much of the 1990s, vehicles built at Moraine—models like the Chevy TrailBlazer and GMC Envoy—were big sellers and contributors to GM’s profits. In 2007, the plant won recognition as the nation’s most efficient midsize-SUV plant from the Harbour Report, a measure of manufacturing productivity.

“Moraine was always a good plant. The IUE was always a good union,” says Art Schwartz, former general director of labor for GM and now president of Michigan-based Labor & Economic Associates. “It’s a shame what happened to them.”

When GM began spiraling downward in 2007, as soaring fuel prices pummeled truck and SUV sales, IUE leaders decided to break ranks with the UAW and offer concessions to keep GM and Moraine afloat.

The IUE agreed to a two-tier wage system—long opposed by the UAW—in which new hires earn half as much as longtime workers. It also agreed to let the company unload its retiree health obligations into a union-run trust fund.

But as the crisis deepened, and GM and the UAW began negotiating a way out, Moraine’s workers had no seat at the table.

In the fall of 2007, GM promised work to dozens of UAW-represented plants in exchange for concessions on wages and health care, including some of the very changes offered by the IUE. By the time GM doled out enough work to satisfy the UAW, there was nothing left for Moraine.

The reference in the title is to this theory of the labor market.

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