A Stunning Defeat With Broad Implications For Labor: Tennessee Auto Workers Reject UAW Bid To Organize VW Plant

Hourly workers in Chattanooga, Tennessee narrowly voted to reject the UAW’s bid to unionize their Volkswagen plant. The union organizing drive was backed by the UAW,  VW’s German union, IG Metal, and the VW board of directors. The UAW’s goal was to bolster declining UAW membership and to slow the flight of automobile manufacturing to right-to-work states. Germany’s mighty IG Metal aided the organizing drive to protect VW jobs in high-labor-cost Germany under the guise of labor solidarity with their American brethren.

Germany’s co-determination rules, which equalize the number of labor and management seats on boards of directors, explain the VW’s board’s support of unionization of its U.S. plant. VW Germany went so far as to send instructions to its Tennessee plant to assist in, or at least not hinder, the pro-union campaign.

The UAW’s drive to unionize U.S. automotive manufacturing plants in the South and Midwest serves as a bell weather for organized labor’s prospects of gaining a union foothold in right-to-work states. The election has been closely watched by other foreign auto manufacturers, who have located in the South and Midwest to take advantage of lower labor costs and the U.S. market.

The VW vote indicates that auto workers in right-to-work states understand that the support of a foreign union to unionize their shop was a defensive move to limit outsourcing to lower-labor-cost parts of the world located in major consumer markets. The UAW’s Detroit model also appears to have taught autoworkers in right-to-work states to prefer an actual job that pays less than in unionized plants to no job at all.

Toyota, BMW, Mercedes, and Nissan USA can breathe more easily. The UAW defeat in Tennessee took place under the most favorable of circumstances for union organizers. After the VW defeat, it is hard to imagine the UAW cracking any plants in right-to-work states.

The IG Metal-UAW debacle in Tennessee adds to the list of organized labor failures at a time when it has a lock on the National Labor Relations Board under the Obama administration. Other bitter defeats include Michigan becoming a right-to-work state in 2012 and Boeing machinists caving to the threat of locating a major assembly plant expansion in South Carolina. Increasingly, economic conditions in right-to-work plants are dictating terms of work and pay in unionized plants. As unionized workers understand the growing impotence of union representation, the unionized labor force in private industry will continue its shrinkage towards zero, leaving only the besieged public sector unions.

On the Failed Job Creation Front, Obama Has Completely Run Out of Ideas

Unemployment is the millstone around President Obama’s neck in the 2012 election campaign. Attentive voters understand he is offering excuses — a worse-than-expected economy, financial crises requiring longer recoveries, bad luck of tsunamis, droughts, and the Euro — not solutions. Obama cannot deliver solutions because a real jobs program contradicts his core principles, alienates his base, and infuriates his crony contributors. He can only promise more of the failed policies –stimulus and tinkering — of his first three and a half years
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Obama’s last foray into job creation was his American Jobs Act (AJA) submitted to Congress on September 12, 2011.  Labeled “Stimulus 2” by its critics, Obama’s shopworn list of remedies, promised to “put more people back to work and put more money in the pockets of working Americans….without adding a dime to the deficit.” The AJA’s temporary tax credits to businesses that hire, extension of the payroll tax holiday, and more money for teachers and infrastructure stalled in both Houses and had to be taken up piecemeal.  The payroll tax holiday extension passed Congress. Small businesses decided his tax credits for hiring were not worth the trouble.

A deafening silence followed.  Obama’s vaunted Jobs Task Force has not met for more than a half year. Obama is out of ideas. He can only offer excuses, criticize those offering new solutions, and divert attention from the worst recovery in history with chatter about the rich not paying their fair share and his opponent’s tax returns.

One year ago, on the eve of the President’s jobs address, I wrote Why Obama Cannot Support a Real Jobs Program.  In this piece, I showed what a real jobs program looks like and how it largely would have increased jobs, to use Obama’s AJA message, “without adding a dime to the deficit.” Here is the substance of what I wrote then as advice to the President:

go to forbes.com

Outsourcer-In-Chief: Obama Of General Motors

At a Colorado pep rally, President Obama praised his GM bailout as an example for American industry to follow.

“The American automobile industry has come roaring back…So now I want to say what we did with the auto industry, we can do it in manufacturing across America. Let’s make sure advanced, high-tech manufacturing jobs take root here, not in China. And that means supporting investment here. Governor Romney … invested in companies that were called ‘pioneers’ of outsourcing. I don’t want to outsource. I want to insource.” Applause!

According to Obama, GM does everything right. It offers high-paying jobs to American workers. It invests at home. GM put American manufacturing back in the high-tech race on American soil. The new GM is good for America, and America is good for GM, as a former GM chairman declared in 1953. GM is back where it should be.

We need to look no further than General Motors’ own figures to  learn that GM outsources almost two thirds of its jobs overseas. Less than one in five GM vehicles are manufactured in the United States.


go to forbes.com

Obama at Boeing to Praise the Dreamliner He Almost Killed

I am surprised President Obama showed his face at Boeing Corporation last Friday in Washington state to cheering union crowds to praise Boeing’s new 787 Dreamliner, declaring eloquently: “I am here to sell stuff.” 

As the Times account reported:

“the White House also carefully calibrated the optics of the trip, choosing to visit a unionized Boeing plant in Washington State just a few months after the NLRB dropped a lawsuit against Boeing over complaints it built a nonunion plant in South Carolina to retaliate against the union in Washington State for strikes.”

Indeed, the Obama administration’s NLRB held Boeing’s multi-billion Boeing 787 hostage by ruling it could not build an extra production facility for the  Dreamliner in right-to-work South Carolina (after Boeing had already completed construction of its new plant there). The Obama administration blackmailed Boeing just as it was to begin mass production of its 787 aircraft – a project already four years behind schedule and facing stiff competition from Europe’s Airbus 380.  

The Obama administration was telling the nation’s premier manufacturing exporter where it must do business or else.

Had Boeing not caved to its Washington State unions on a new contract, the Dreamliner would have still be in limbo today.

And Obama, the President who threatened to ruin the project on which Boeing’s fate depends, stood before cheering crowds in Washington state to praise Boeing and its new 787, as "the perfect example of American ingenuity."

What nerve! What chutzpah! I imagine the Republicans will wish to revisit this mugging on behalf of organized labor during the election campaign.

A New York Times Columnist Fesses Up: Democrats Cost Jobs

Joe Nociera, a New York Times, columnist has had enough.  He cannot really believe that Obama’s National Labor Relations Board shut down Boeing’s new South Carolina plant, with its 5,000 jobs on charges that Boeing retaliated unfairly against labor. 

Let me give some quotes from his “Democrats Cost Jobs, August 22, 2100:

 “As companies have moved manufacturing offshore, Boeing has remained steadfast in maintaining a large manufacturing presence in America. It is America’s biggest exporter of manufactured products.”

“The N.L.R.B.’s proposed solution, believe it or not,(my emphasis) is to move all the Dreamliner production back to Puget Sound, leaving those 5,000 workers in South Carolina twiddling their thumbs.”

“Seriously, when has a government agency ever tried to dictate where a company makes its products? I can’t ever remember it happening.”

“Boeing’s general counsel …has also said that it was a disservice to a country that is ‘in desperate need of economic growth and the concomitant job creation.’ He’s right.  That’s also why I’ve become mildly obsessed with the Boeing affair. Nothing matters more right now than job creation.” 

“The word “retaliation” suggests direct payback….. Boeing did nothing like that. It not only hasn’t laid off a single worker in Washington State, it has added around 3,000 new ones. Seven out of every 10 Dreamliners will be assembled in Puget Sound.”

“That is what is so jarring about this case — and not just for Boeing. Without any warning, the rules have changed. Uncertainty has replaced certainty. Other companies have to start wondering what other rules could soon change. It becomes a reason to hold back on hiring.”

“When he was asked about the Boeing case earlier this summer, President Obama said that the N.L.R.B. is an independent agency and that his hands were tied. That may be true, though it’s worth pointing out that most of its top executives are his appointees.

But when he gets back from vacation, he might do well looking at his own administration, instead of simply blaming the lack of jobs on the Republicans.”

I agree with columnist Nociera. I imagine his bosses do not.

The President’s Waste-of-Time Jobs Council

It took GE’s Jeff Immelt and Amex’s Ken Chenault and their “26 private sector leaders and people standing up for the rights of workers” 90 days to issue five “fast-action” recommendations to create “more than one million jobs.” (WSJ, June 13 “How We're Meeting the Job Creation Challenge”).

The Presidents Jobs Council’s recommendations are either:

1) Obvious (better education and training), or

2) Require more government spending (more SBA loans, more infrastructure spending), or

3) Make money for GE (install energy saving devices in buildings) or for Amex (issue more tourist visas), or

4) Call upon federal, state, and local licensers to do their jobs expeditiously as they are supposed to do anyway.

The Jobs Council will issue longer-term recommendations later. I lose all optimism, when I read that “government, business and labor (read: crony capitalists and big labor) need to work together to get this done.”

I do not need 90 days and millions of government money to give you my “Jobs Council” recommendations:

1) Reduce energy costs by halting the EPA’s attack on coal and drop regulations that require renewable energy to produce electricity. These measures lower the costs of doing business and encourage hiring.

2) Limit the duration of unemployment insurance. Unemployment insurance cannot be a permanent entitlement. Empirical studies show unemployed persons exit unemployment near the end of their benefits.

3) Withdraw the NLRB’s ruling against Boeing’s new plant in South Carolina. The federal government and its regulators cannot be seen as blatantly anti-business. We cannot have an economy in which the government interferes in key investment decisions.

4) Allow for increased mobility of occupational licenses across state borders by attacking special-interest protection of licensed occupations. Increased mobility lowers unemployment.

5) Drop all attempts to prop up underwater mortgages and let the housing market clear as quickly as possible. Phase out Fannie Mae and Freddie Mac. Housing will not expand until the industry reaches an equilibrium.

6) Have a bi-partisan agreement that reduces government spending and debt now, not in the distant future. The lack of agreement creates too much uncertainty about future taxes.

7) Provide businesses certainty as to their current and future tax liabilities. No business will hire without knowing its bottom line after taxes. Keep marginal tax rates low.

8) Adopt a bi-partisan solution of the unfunded liabilities of Social Security and Medicare starting now, not in the distant future.

9) Reform the education system to teach everyone basic skills of reading, writing, and math. With these skills, people can acquire the specific skills business needs.

10) Put teeth in the requirement that all regulations must produce benefits in excess of costs with realistic estimates of both.

11) Repeal Obama Care to give employers certainty as to their true employee costs. Let employers compete for workers by offering better health insurance and employees choose among employers for health insurance benefits.

12) Follow the dictum of Franklyn Delano Roosevelt and prohibit collective bargaining for public employees. The public is the "boss" of public sector workers not greedy capitalists.

13) Ratify outstanding free trade agreements. Expansions of trade lead to job expansion.

I guarantee that my jobs program will actually create jobs and economic growth. I imagine most honest economists would agree with me.

Neither political party, however, has the will or gumption to enact it.

Chilling Words: Obama’s Regulators Are Now Punishing Thought Crime

“The law allows companies to shift production for economic reasons, but not to retaliate for past strikes or other worker actions. For us, it’s a motive analysis.”

Lafe Solomon, Acting General Counsel, NLRB

If federal regulators base their actions on “motives,” they have assumed unlimited power. Under this regulatory philosophy, regulatory decisions are based on what is presumed going on inside the heads of businesses as they make their decisions.

It seems that NLRB regulators have determined that Boeing’s “motive” in locating a new plant in South Carolina violated the National Labor Relations Act. In coming to this conclusion, the NLRB had thousands of pages of internal Boeing documents relating to its plant location decisions. In these thousands of pages, a large number of reasons were given for Boeing’s decision. Among them were considerations of supply certainty, labor costs, and tens or hundreds of other factors.

Somehow the NLRB was able to read the minds of Boeing executives and brush aside all other factors as distractions. Boeing’s true “motive” was to retaliate illegally against unions for past strikes. No other motive counted. Boeing had committed a thought crime against its Washington state union.

The Soviet 1936 Constitution also made thought crimes a criminal offense. Any action that “lessened the economic achievements of the Soviet Union” was a potential capital offense. Accordingly, every plane crash, railway accident, or factory breakdown had to be investigated to determine the “motives” of those involved. There was always the fact that something had gone wrong, and to get to the real “truth” investigators had to look into souls of those involved. Perhaps they had the wrong background, had relatives abroad, or circulated among the wrong people. Under Stalin, tens of thousands of innocent managers and engineers were executed for thought crimes. It was safer for prosecutors to conclude that the motives of these managers and engineers were criminal than to miss a few real counter-revolutionaries.

In the NLRB versus Boeing, there is also one fact: Boeing built its new plant in South Carolina. If the NLRB can claim knowledge of Boeing’s “motives,” it is no longer constrained in any way. It can rule that any business decision relating to organized labor was motivated by a thought crime.

Let Labor Compete: Why Does It Need NLRB Protection?

The National Labor Relations Board May 10 “notice” requires reviews of cases involving businesses that move production to curb labor costs. The May 10 notice was overshadowed by the NLRB’s ruling against Boeing’s new plant in South Carolina, but it could have a more substantial effect. While businesses can locate plants on the basis of other costs, they must think twice about locating production to take advantage of labor cost savings. It is an attempt to intimidate companies that are considering moving operations to right-to-work states. The May 10 Notice will be challenged in Congress and in the courts when it gains the attention it deserves.

The “New Theory of Unions” argued in the 1980s that union labor is more efficient than non-union labor. Its higher productivity offsets higher union wages and does not raise labor costs to employers. The upshot of this new theory was that unions should be able to compete in the marketplace against non-union labor. It would not need sympathetic regulatory agencies like the NLRB to impose higher union labor costs on employers by decree.

This New Theory of Unions challenged the traditional view. According to standard textbook accounts, unions gained higher wages through restricting supply and by collective bargaining. Craft unions used licensing, barriers to entry to the profession, and the other restrictions to drive wages above competitive levels. Industrial unions used the threat of strike to impose higher wages on reluctant employers. The traditional view of unions did not allow for unions to offer employers a “bargain” in the form of a more productive work force.

The New Theory of Unions argued that unions make their members more productive than they would have been without unions. With unions, employees gain a “voice” other than the “exit voice” – that is the sound of the employee leaving. Union seniority rules raise the loyalty of employees. Union members are more willing to train junior employees. They become more interested in the long-term health of the company. The proponents of the New Theory of Unions cited empirical studies of particular industries and professions finding that union workers indeed had higher labor productivity than non-union labor. In a number of cases, the higher productivity offset the higher union wages.

The continued decline in private-sector union membership (now below 7 percent) suggests that unions are not delivering on the promises of the New Theory of Unions. If union labor could out-compete non-union labor through higher productivity, employers would not be tempted to change to non-union labor. Unions would not require NLRB decrees to force private employers to hire their members.

The best union protection would be to deliver higher productivity workers. If they cannot, private-sector unions will continue their decline. The only role left for unions will be in the public sector where wages and employment are determined by politics, not economics.


The fact that unions need activist protection from agencies like the NLRB tells us that unions do not offer productivity advantages to offset higher union wages. If the New Theory of Unions holds any water, unions might be advised to turn their attention from politics to making their members more efficient and productive. It would be interesting to look at union budgets to see how much they spend on improving and raising the skills and motivations of their members.

The Power to Regulate Is the Power to Destroy: Three Political Appointees versus 547,461 Shareholders (NLRB vs. Boeing)

Corporation-haters want you to believe big corporations are run in the interests of greedy executives. This is wrong: U.S. corporations align the interests of executives with their bosses, the shareholders. If executives do not act in the interests of shareholders, they will be gone and rather quickly.

The National Labor Relations Board, comprised of three political appointees, has just ruled Boeing’s new $1 billion South Carolina plant illegal because it was chosen to “retaliate” against organized labor. Boeing claims it chose South Carolina, which happens to be a right to work state, for a large number of reasons. One was the need to assure steady production of its new 787 Dreamliner without the threat of strike.

Boeing’s management would not base such a major investment decision on the desire for “retaliation.” It decides on the basis of what serves the interests of its 547,461 shareholders.

Well, even if that is true, are not Boeing’s 547,461 shareholders greedy fat cats. Why should we feel sorry if their investment goes sour?

The top 20 shareholders of Boeing are all investment funds, like Vanguard, CREF, and T. Rowe Price. The largest of them owns 2.1 percent. The 20th largest, Fidelity Blue Chip, owns one quarter of one percent. These are not “fat cats” but investment and retirement funds managing the savings of ordinary people. Among its individual shareholders, there may be “rich” investors, but there are many more ordinary people just trying to get by. All of them are harmed by the NLRB, which does not take its interests into consideration.

John Marshall, Chief Justice from 1801-1835, famously declared “the power to tax is the power to destroy.” Marshall clearly understood the corollary: “The power to regulate is also the power to destroy.” Marshall’s court -- "as a mighty instrument for the protection of the rights of private property" -- consistently held the line against government regulation of private business.

The constitutional protection of private property broke in 1877 with a ruling that businesses “affected with the public interest” can be regulated by the state. Now thousands of federal and state regulators, such as the NLRB, routinely intervene in the affairs of private business, acting, as they claim “in the public interest.”

Is the NLRB ruling in the public interest? If it stands, Boeing will have to write off its $1 billion investment. It cannot meet its orders for the 787, which is already three years behind schedule. South Carolina workers who thought they had a Boeing job do not. The interests of its more than half million shareholders are damaged. Boeing, our premier manufacturing exporter, can lose its competitive battle with European Airbus Industrie. A wiser Boeing then builds its next plant in China, and pundits, who openly welcome the NLRB decision, bemoan the decline of U.S. manufacturing.

Boeing’s only recourse right now may be to throw money at Congress and the President. Maybe they can rein in their NLRB for the right price.

If the NLRB ruling is in the public interest, someone must benefit. The beneficiaries are clear: The couple of thousand union members and their leaders at Boeing’s Washington state plant. They have received their reward for political support of the administration. The country has lost.

Yes, the power to regulate is the power to destroy (and no one can do much about it).