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Free Market Project

3/1/2006 9:34:01 AM

Updated 02/24/06

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As GM Goes, So Go the Media 
Covering layoffs and pension woes, journalists overlook union’s colossal harm to the auto industry.

By Amy Menefee
Free Market Project

Nov. 23, 2005

Send this page to a friend! (click here)     There is a terrible, yet predictable, irony in the media’s coverage of General Motors Corp. 

     Journalists have concentrated on the recent layoff announcement’s impact on unionized workers. What they’ve ignored is the union’s impact on the industry – as one of the driving forces behind the automaker’s financial crisis. 

     Reporters have been more concerned with crafting holiday analogies than with telling the whole story. NBC’s Katie Couric said on the November 22 “Today” that GM employees “might not have a whole lot to be thankful for this Thanksgiving.” And the day before on the “Evening News,” CBS’s Jim Acosta said “GM is carving up its workforce like a Butterball turkey.” 

     The union angle was a staple in coverage on the three networks, with broadcasters highlighting the “human toll” of the layoffs for workers who would lose their extensive benefits. On the November 22 “Today,” NBC’s Carl Quintanilla said, “For many of those employees, working at GM has long meant a steady union wage, health care and a pension.” 

     Likewise, CBS’s Jim Acosta said on the November 21 “Evening News” that “A GM worker in Doraville (Ga.) makes roughly $25 an hour, and gets generous health care and retirement benefits.” GM estimates its cost per worker – including benefits – is $73.73 per hour, according to GM spokesman Stefan Weinmann. That works out to more than $153,000 per year – more than parts supplier Delphi, which recently declared bankruptcy. 

     Acosta introduced a worker who “is a second-generation employee who wanted to pass on that kind of legacy to his son.” The factory worker then worried that “it’s going to be tough on the younger people out there.” 

     Ironically, that high wage and benefits package has been a big reason for GM’s troubles. It might make for comfortable workers, but it bleeds the company dry. Ryan Ellis, executive director of the Alliance for Worker Freedom, said unions are “like locusts.” “They go from one crop to another,” Ellis said. “They latch onto an industry, suck out as many benefits as possible,” and move on. 

     Unionized health care resulted in “very much 1940s-style plans that don’t encourage shopping around or market forces at all,” Ellis said, while much of the rest of the working world moved toward individual contribution programs like 401(k)s. 

     For workers whose benefits have been cut or who are losing their jobs, anger toward the company would be misdirected, Ellis said. “Their anger ought to be directed toward the union that’s keeping them from having modern benefits.” 

     Coverage of GM’s layoff announcements ignored the union’s negative impact, interviewing workers who lamented an impending loss of their middle-class status. But a Wall Street Journal editorial explained on November 22 that “the recent pop-media notion of a blue-collar middle class in inexorable decline is mostly myth.” The number of jobs provided by foreign automakers in the United States is “growing while the Big Three shrink,” the Journal said. 

     That means the old adage journalists have been repeating, “As GM goes, so goes the nation,” isn’t exactly true. Other industries modernized their benefits years ago, as the Free Market Project has reported. And as the Cato Institute’s Daniel Griswold pointed out in a November 23 article, the American auto industry as a whole isn’t struggling like GM. “In the past decade, the total volume of automobiles and parts manufactured in the United States has grown by 40 percent, according to the Federal Reserve Board,” Griswold wrote. “All that means that production and jobs have not been shifting from GM to rival automakers abroad, but to its rivals inside the United States.” 

What’s the problem? 
     “Good Morning America” posed the question on November 22: “What was the management mistake looking back… that led to this?” ABC’s Betsy Stark replied that “Detroit was slow to react” to its Asian competitors. The previous night on “World News Tonight,” Stark accused “Asian competitors” of “stealing sales.” 

     When GM was negotiating a new benefits contract with its union workers last month, ABC’s Dean Reynolds made a similar diagnosis of the company’s problems. On the October 17 “World News Tonight,” Reynolds listed “greater competition, rising gasoline prices and an accompanying loss of interest in its high-priced, gas-guzzling SUVs.” On the October 17 “Good Morning America,” ABC financial contributor Mellody Hobson blamed gas prices: “The bigger story here is oil,” she said. “Oil, gas at $3 a gallon, that is what is causing the ripple effect, and GM is one of the casualties.” 

     SUV sales declined when gas prices started rising, but gas has been trending downward since October 6. The national average for regular gas has dropped 87 cents per gallon from its post-Katrina high.

     Although many media reports have blamed recent events for the auto industry’s trials, Heritage Foundation labor analyst Tim Kane said that “You could see this coming 10 years ago.”

     CBS’s Anthony Mason came closer to the whole truth on the November 21 “CBS Evening News.” He cited “higher gas prices, poor products, the big problem underneath legacy costs; they have two and a half retirees for every worker they’re supporting. That’s a cost that’s not going to go away.” But where did the obligation for that retiree support come from? Union contracts. 

     “American industry right now is suffering from … these obligations that were negotiated between Big Business and Big Labor,” Kane said. He said GM is a perfect example of the benefits problem, supporting more retirees than it has current workers. The company can’t be a competitive business while sustaining the “excessive” benefits that the unions demanded, Kane said. 

One Bright Spot in Coverage

     To its credit, “NBC Nightly News” personalized the story of job losses in a realistic way, avoiding a tone proclaiming the end was near. Ron Mott’s November 21 report from Doraville, Ga., showed that that community would continue despite its loss of a GM plant. Mott explained that free market forces had grown the community’s economy: “other businesses have moved here and thrived, making the city less dependent on the good fortunes of just one company.” Mott concluded that “life around here, though different, will go on.” 


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