By Anthony Ogorek
http://stream.publicbroadcasting.net/production/mp3/wbfo/local-wbfo-720559.mp3
Buffalo, NY – The United Auto Workers has voted to end the longest walkout in its history at parts maker American Axle. The unfortunate resolution of these contract negotiations is that hundreds of local unionized jobs will be vaporized, more buyouts will be offered to employees with at least ten years of service, and wages will be ratcheted down for those auto workers who remain.
According to The Wall Street Journal, "The auto industry is the nation's largest manufacturing sector, accounting for almost 4% of U.S. gross domestic product. It employs about 2.5 million people directly or indirectly, and spends tens of billions of dollars a year in research and development."
Amherst Town Supervisor Dr. Satish Mohan, an engineer and professor at SUNY-Buffalo recently wrote an extensive commentary on the state of manufacturing in the United States. Dr. Mohan's piece undoubtedly will appeal to many elements of our highly unionized community, that still long for the days when the Niagara Frontier was a manufacturing powerhouse. Dr. Mohan, who ran on a progressive platform, seems to be anything but progressive in his views of America's place in a global economy - one in which the emerging economies have emerged. He lays the contracting manufacturing sector at the feet of "our economists, accountants and managers today [who] have misguided notions regarding manufacturing and economic growth. They believe in cheaper imports rather than in manufacturing here."
From my perspective, it seems that the American public is calling the shots, not misguided economists, accountants and managers. It is the American public that is demanding lower prices on everything from finished goods to services. Additionally, the working poor, along with the rest of us, all benefit from the every day low prices of a Wal- Mart store.
The simple truth is that global excess manufacturing capacity has been one of the primary drivers in keeping inflation down over the past decade or so. Retirees, who often are on fixed incomes, are the greatest beneficiaries of a low inflation environment.
Over the past forty years, America has continued to evolve into an ownership society, with increasing numbers of workers and retirees relying on the financial markets for their retirement security. Most public and corporate pension funds, as well as employee 401(k) accounts, have significant exposure to stocks.
These corporations have a responsibility to their shareholders to make products that consumers perceive are a reasonable value. Today, shareholders are not asking management if they have a strategy for outsourcing to control manufacturing costs; they are asking what the strategy is.
Unfortunately, as a group, consumers have offered no evidence that they are willing to pay more for domestically manufactured goods. As evidence, the Big Three domestic auto manufacturers have chronically had to offer price incentives, thereby gutting their profit margins, to induce people to buy their products. A few years ago, auto manufacturers even went so far as to offer "employee pricing" to retail customers.
While the local unionized manufacturing industry has continued to contract, transplants continue to expand production in the nonunionized South. So although some manufacturing jobs have gone offshore, others have gone to lower cost regions of our country. With excess U.S. manufacturing capacity, it is not hard to see why lower cost producers will get the work. Our efforts are best spent on meaningful retraining of displaced workers, rather than lamenting our loss of manufacturing might.
Listener-Commentator Anthony Ogorek is principal of Ogorek Wealth Management in Williamsville.