Hard Labor

How is labor faring in the auto industry’s troubles?

The administration has taken an active role in the negotiations between creditors, management, and the unions. In Chrysler’s case, the union seems to be getting a bigger share of the company than the secured lenders. A win for Labor, right?

Well, in the short run, yes. But who’s gonna lend to industries with politically powerful unions, now? There are lots of industries-from newpapers to airlines to heavy machinery-that need capital to update their operations. When politics can preempt indenture agreements, investors will just stay home.

Union membership has been declining since 1954 until today, declining from 28% to a mere 7% of the non-government workforce. By penalizing investors in the few companies that support labor unions, that decline will only accelerate.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-04T21:19:56+00:00 May 28th, 2009|Global Market Update|0 Comments

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