Tag Archive for 'Employee Free Choice Act'

How GM’s bankruptcy could become a cautionary tale for small business

At the beginning of each year I publish my predictions for that year. This was one of my 2006 predictions:

“Prediction: At least one U.S. car manufacturer will file Chapter 11 bankruptcy. It will probably be GM. All three have too much 20th century employee benefits baggage to be viable in the 21st century global marketplace. The other two will follow.”

Turns out my vision was pretty good, if not my timing. After 101 years of operation – for decades the largest automobile manufacturer in the world, and one of America’s great industrial success stories – General Motors succumbed to what I believed was inevitable over three years ago and filed for Chapter 11 bankruptcy protection.

Chrysler, also once a venerable industry force, had in recent years taken a circuitous route from a publicly traded company, to being acquired by Daimler Benz, then a private equity firm, and finally, on April 30th of this year, went into Chapter 11. One of the main reasons Ford hasn’t filed for bankruptcy, nor took government assistance funds, as GM and Chrysler did, was because it raised capital from mortgaging many of the properties it owned, which old Henry had paid for decades ago.

It’s important to remember that the so-called Big Three represent the remaining American car companies, not the entire U.S. automobile industry. While the other companies, represented by foreign owned firms that have established factories and successful distribution in the U.S., are not exactly thriving in the current economy, none are in peril of failure.

So what sets the two auto industry groups apart? Primarily two things unique to the Big Three: 1) Bad management; and 2) United Auto Workers Union (UAW).

Bad management can be replaced with good management. Indeed, this has happened with the foreign companies from time to time, and could have happened in Detroit. But the one thing the Big Three couldn’t overcome was the current and residual baggage imposed by generations of unsustainable wage and benefits concessions in the UAW contracts.

At the very moment that two of the Big Three are experiencing the most ignominious circumstances for any company, bankruptcy – fully half of which blame must be laid at the feet of the UAW – there are lawmakers pushing a bill that would increase the ability of unions to organize more easily in smaller and smaller businesses. Without any sense of irony, Congress is bailing out one union-laden industry, while trying to make forming unions easier. It’s a story that would be perfect in a Bizarro World comic book.

The bill in question is called the “Employee Free Choice Act” (EFCA). This is a misleading title, because one of the markers of this bill is to remove the secret ballot provision, long required by labor laws, and replace it with the ability for a union organizer to push a ballot in front of an employee and require them to vote in front of them. There is more bad news for small businesses in this bill, but isn’t imperiling the sanctity of the secret ballot, a hallmark of America, enough to oppose this legislation?

If the Employee Free Choice Act ever becomes law, the following year I will be forced to include this in prediction: “Hundreds of thousands of small businesses will make these three unnatural management decisions in reaction to the EFCA: 1) off-shoring jobs; 2) limiting growth of the business to keep them under the number that EFCA allows; 3) and some will just close up rather than unionize, knowing that to do otherwise would merely prolong the inevitable experience of GM and Chrysler.”

Recently, on my small business radio program, The Small Business Advocate Show, I talked about the EFCA and the dangers it poses for small business. Take a few minutes to listen, and be sure to leave a comment.

Small business and a union organizing threat

Union representation in the private sector has dropped from around 30% in 1960 to less than 8% today. The union product doesn’t sell well to the new generation labor force because 21st century employers do a pretty good job of taking care of their workers. I consider unions to be dinosaurs waiting to become extinct.

To reverse this trend, unions, with the help of their soul-mates in the U.S. Congress, have concocted an erroneously named bill called the Employee Free Choice Act (aka Card Check bill). This law would be anything but free choice because, as designed, a union organizer can require an employee to vote “yes” or “no” on a card in front of the organizer and anyone else standing around. In other words: no secret ballot – one of the cherished hallmarks of our democratic heritage.

This bill, which should be called the, “Employee No Choice Act,” will likely be introduced and brought up for a vote within the first 100 days of the Obama administration. If passed, it will create a dangerous scenario for many small businesses because it would allow union organizers to have more influence with workers at smaller and smaller businesses, which historically were not attractive union prospects. All they need is a majority of votes to organize, and if the small business owner and newly organized labor can’t come to an agreement on terms within 90 days, either party can require a process that would lead to binding arbitration.

Clearly, vestiges of 20th century commitments to the UAW is a significant reason the Big Three U.S. auto makers can’t compete in the 21st century with foreign auto manufacturers, who built factories in the U.S. and employ thousands of Americans without union representation. One of the most dramatic example is what’s known as the “Job Bank.” Check out the information on this link or do a Google search with this term to see for yourself.

Why would we want to impose unions on more companies, including small businesses, when the evidence of their negative impact has never been more dramatic. With so many union “soul mates” in control of the Federal government in 2009, small business owners will have to step up our vigilance and do what we can to defeat this dangerous law.

I talked about this issue on my radio program, The Small Business Advocate Show, this week. Take a listen and let me know what you think about my ideas.




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