Wednesday, September 15, 2010

Harley Davidson demands concessions because it can!

Jack Norman, the research director for the Institute for Wisconsin's Future and a former Milwaukee Journal Sentinel economics reporter, asks:

Was Harley forced by market conditions to demand enormous cuts in jobs, wages and benefits? Or was it a deliberate strategy to take advantage of the economic crisis?

His answers suggest that many large corporations are using the threat to relocate to secure significant labor cost reductions not because the market requires them, but because they can.

Norman's analysis is linked here.


Anonymous said...

Harley management got concessions because the can. Public employees got Cadillac health and pension plans because they could. Two sides of the same coin.

Michael Rosen said...

Two problems with your snarky comment: First, the concessions Harley demanded will detroy middle class jobs while health insurance and pensions for public and private employees has helped create the middle class; 2)good health care coverage and decent pensions cannot honestly be characterized as Cadillac plans. The problem is that private employers like Harley whom you apparently sympathize with want their employees to have Yugo healthcare coverage and pensions or none at all like harley's new casual workers.

Anonymous said...

All I wanted from my snarky comment was to get people to start to think for themselves and stop believing everything they hear or read from one sided arguments from whatever the source ie, management or union, Democrat or Republican. I wouldn't think you would have a one sided argument against that, would you?

My point was that Harley is taking advantage of the union because it can (in your words), just like the the public employees of Milwaukee County did with their pension backdrops, because they could (in my words).

I do agree with the Harley Board in seeking the concessions. It will help keep jobs in Milwaukee. It may help keep Harley in business. Where I disagree from the Board is that management should have participated in the concessions. When times are good, the rewards should be shared. When times are not good, the contractions should be shared. There are ebbs and flows in life, not much is linear.

Besides, if there are no rebuttal comments, this would be a pretty boring blog.

Michael Rosen said...


You write you agree with the Harley board seeking concessions because it will keep jobs in Milwaukee. That’s like thanking an armed robber for saving you life after he steals your money! You seem to forget that it was this very board that was threatening to move the jobs out of Milwaukee!

Harley could have profitably remained in Milwaukee without the concessions it secured. The firm’s Milwaukee operations had been profitable for 15 of the last 16 years and it made profit in the first 6 months this year. It did NOT have to move to remain profitable. Harley’s management used the economic crisis to obtain concessions that its operating business model did not require.

Our unemployment compensation system is designed to allow firms to respond to declines in demand (a recession) by laying off its employees to reduce operating costs until demand resumes. If Harley had chosen this strategy it could have reduced its operating costs, maintained profitability and called its laid off workers back to middle class employment when the economy began to grow again. Instead it used the recession to restructure its internal operations by eliminating family supporting jobs, with more sure to follow, creating a new low-wage, no benefit workforce with no employment security. This is a model that other firms will surely replicate helping to further destroy the area’s middle class and weaken the surrounding communities.

Your comparison to county employees is historically inaccurate. Unlike Harley management which demanded the concessions because in the current depressed economic climate it could, the county employee unions did NOT propose the backdrop. It was proposed by the county management that assumed that the ahistorical stock market returns of the 1990s would continue.

You are right that without debate the blog would be less interesting. Snide comments, however, do not contribute to a productive debate.

Peter said...

If I recall correctly, the only reason Harley was not profitable in the 16th of 16 years was that they took a big paper write-down, a one-time occurrence. They were actually profitable on operations that year.

American corporations, like Harley, are sitting on record amounts of cash. They are doing more cost-slashing because they can get away with such liquidations right now -- ironically, this is further depressing the American economy as it both saps aggregate demand and drives down worker bargaining power, driving down wages, driving down aggregate demand and higher multipliers on purchases by workers.

So no matter what one's position is on whether or not Harley proposed some bullshit because they could, it's an objective truth that this kind of behavior is harming the American economy and the American worker.

The problem is that in a nation where we under-regulate macro-economics and labor markets, this kind of behavior is not only tolerated, but encouraged. Time for some real policy solutions that are about democratic and broadly-shared prosperity.

The Other Side of the Coin said...

Peter, could you explain your comment on "under-regulated labor markets"?

Just some of the regulations off the top of my head:

Fair Labor Standards Act
Family Leave

What aspect of labor would you like to regulate?

Michael Rosen said...

The fact that the United States has the federal regulatory agencies that you list does not mean that they are effective. One of President Reagan’s tactical insights was that Americans wanted clean air and water, fair labor laws, safe working conditions, etc. While eliminating these regulations was desirable from the right’s perspective, it was not politically feasible. So the Reagan administration undermined the regulations by appointing directors who were opposed to its mission (management lawyers running the NLRB and former mining officials running OSHA for example) and by slashing the agency’s funding. As a result, the regulatory agencies remain, but they don’t have the commitment to their mission or the staffing to enforce the regulations that are on the books. This practice has been perfected under successor administrations.