Home » My 8 weeks at Harvard Business School's Advanced Management Program » Day 43 – Unions killed the US (Steel) Industry!

Day 43 – Unions killed the US (Steel) Industry!

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Growing up, I vaguely remember my father and his partners dealing with Union issues.  Strikes, negotiations and production losses were all issues they were battling with – tense times I remember.  Edgy factory workers were striking and violence was likely! The agreements with Union leaders were generally unwelcome but compelling compromises.

Today we had a case on a company called US Steel – the case highlighted the state of the Steel Industry in the USA and focused in particular on the Unions’ role in the (shaping) the future (demise) of the industry.  As many of you can imagine, similar situations have been at play in the Automobile industry.  The Unions have systematically blackmailed these corporations and taken away everything out of the earnings except interest payments.

Here are some unbelievable numbers:

  • One of the steel companies, Bethleham Steel had 13000 active employees and 74000 retirees in 2001.  Retirees would get pension and healthcare at soaring costs to Bethleham Steel.
  • General Motors came up with a buyout offer for 113000 hourly workers to voluntarily terminate employment.  Here is the structure of the buyout:

GM offer

  • At GM, there is a room with space for about 400 employees that show up at 6AM each day and stay until 2:30 PM. 45 mins for lunch and a supervisor to watch over them.  Their job :  “DO NOTHING”.  This is a job bank which is a program that has nearly 15000 auto workers who continue to get paid for not doing anything and after their companies have stopped needing them.  Some of these folks top $100,000 in earnings.  A similar program has cost Ford ~$2B this year!
  • In California, full time dockworkers who load and unload ships make on average $100,000/year. Clerks who keep track of cargo movements make $120,000/year.  Medical coverage at no charge to them is an extra expense which adds upto another $42,000/year!

Now we can sit back relax and blame this on Globalization but…

Globalization yes but then …Toyota is certainly doing all right – even with the plants in the USA!

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