It was in 2008 that General Motors went broke and was bailed out by the taxpayers (we eventually got back about $40 billion of the $50 billion we put in) thanks to years of outrageous UAW union contracts. It seems GM CEOs did not have the courage to stand up for their shareholders and the company eventually went under.

Now the UAW is back again, demanding the automakers pay their workers a 40% increase and go to a 32-hour work week. They also want to go back to “defined benefit” pension plans, that wrecked the Teamster’s pensions a few years ago. When the current GM CEO said this was ridiculous, the union said she was also massively overpaid, getting about $30 million a year.

Both sides could be right. Barra claims she gets all that money based on her “performance.” Not sure how GM measures this. She got the top job back in early 2014, when the price of GM stock was around $40. Today it’s around $34. Her Japanese counterparts get paid a lot less, yet seem to make pretty good cars and have much more profitable North American operations.

I suspect all that “performance” money will not be buying GM shareholders any more courage than the last generation of CEOs had in the old GM. There is obviously no plan to bring in replacement workers or tough out a long strike. In the end, GM and the other car makers could cave in yet again.

There are other ways of doing business, though. Consider Caterpillar Corp. (CAT), the world’s largest maker of heavy equipment vehicles. They have tremendous international competition, even more than the automakers, and must also put up with the UAW. Back in the early 1990s, the union demanded excessive contract terms, but management was ready and said no way. CAT had to endure one of the more contentious strikes of that era but in the end, with replacements coming in to help managers, they stayed open and workers crossed the picket lines. 

The financial results vindicated their actions. Caterpillar stock has vastly outperformed the S&P. Strong financials allow the company to constantly invest in new products. Thirty years ago, Japanese competitors like Komatsu were supposed to blow away CAT; instead, the company is as dominant as ever. It’s still a union firm, but they just won’t roll over.

There are plenty of similar examples of big vehicle makers that understood how to handle the UAW. Cummins engine is a great one. Back in the 1930s, the company voluntarily signed a collective bargaining agreement. But it was with a local group of employees who formed the independent Diesel Workers Union. This infuriated the UAW, which sued, but Cummins won in court. Having a dedicated independent union, as opposed to a group of nutty left-wing activists, as its partner, allowed Cummins to pay out great salaries and benefits, while being the envy of the industry for innovation and profits.

Some companies never quite understood this. The old International Harvester (IH) was stuck with perhaps the most communist-dominated labor union in the 1930s, the Farm Equipment Workers (FE) who were eventually kicked out of the CIO in the late 1940s. This allowed IH to move over to the UAW, who were not much better, while the old FE shop stewards were left place. All the company plants were hotbeds of unrest and what was once the world’s biggest maker of trucks and tractors was broken apart in the 1980s.   

The one thing going for the auto workers this time, may be that the union leaders are not any smarter than the company CEOs. The UAW is led by a militant new character named Shawn Fain. He has implemented a “targeted strike” strategy at just a few auto plants, so he doesn’t have to spend down his strike fund. The problem is, you can’t just shut down a few plants these days without impacting many others in a cascade. That’s already happening, with tens of thousands of union workers laid off and becoming eligible for the strike fund payments of $500 a week.

Late last week, Fain expanded the strike, probably in recognition limited strikes would cripple all the plants in any event.

If the union runs out of money in the next couple of months, Mary Barra and her colleagues may luck out and be able to negotiate a better contract. No thanks to anything she would have actually done.

Of course, when it comes to Ms. Barra’s own money, she is very smart. According to disclosure records she has been a consistent seller of GM stock throughout her tenure as CEO.

Frank Friday is an attorney in Louisville, KY.  

Image: Steve Fecht for General Motors