Jobs Bank didn't die in 2009, it just moved south

As the UAW heads into what are likely to be difficult negotiations with the Detroit 3, can we take an irony-filled walk down memory lane?

Here's why: In January 2009, UAW members were forced — at political gunpoint — to surrender the controversial Jobs Bank job security programs that had kept thousands of laid-off auto workers paying their mortgages and car loans as the Great Recession grew.

"There is no other business in this country where that would be tolerated," an exasperated Sen. Bob Corker, R-Tenn., famously declared to the Detroit 3 CEOs and the UAW's president during the congressional bailout hearings in November 2008.

But Corker was wrong, because just a few months after that declaration, Toyota Motor North America would quietly run one of the most successful jobs bank programs in industry history.

And you know what? Even a decade later, Toyota's top executives in North America still insist that not only was it the right thing to do at the time, but it also saved Toyota money. And notably, not only would they likely do it again today, they've already done it a second time — in 2011, when a devastating tsunami in Japan wreaked havoc on Toyota's operations worldwide.

"The last recession, our belief was, while it was fairly deep, we didn't think that it was going to last for a protracted period of time, so it would have been crazy to lay people off, only to bring them back and retrain them," recalled Jim Lentz, now CEO of Toyota Motor North America. "We felt it was best to do a lot of training, and once we've done all the training we could do, have people work in their communities to keep them on. I think that would always be our first direction."

Why is this history lesson relevant today? Because at some point at the respective bargaining tables this year, negotiators on both sides will weigh the costs of wage increases vs. job security, and both will have to live with the outcome of that measurement for what will probably be the next four years.

Detroit's Jobs Bank, ironically, had been suggested by the automakers during talks in 1984 when auto workers were — quite accurately, it turns out — worried how coming advances in automation would impact their job security. The program allowed laid-off workers to receive up to their full pay if they reported to the Jobs Bank, and as much as 85 percent of pay if they stayed home. In 2006, before the program was amended and limited during landmark talks in 2007, as many as 15,000 workers from GM, Ford and Chrysler were in the Jobs Bank.

For active UAW members now, layoff notices are still a threat. Under the current contract, laid-off workers are entitled to unemployment compensation as well as supplemental pay from the union. The union tells its membership that together, the two will amount to something like 85 percent of nonovertime take-home pay, but the math of life after the Jobs Bank is much more difficult when you figure things up. A laid-off worker who normally took home $1,000 per week — to use a round number — would get around $850 a week between unemployment and supplemental pay. But that $850 would itself be taxed, making it likely a lot closer to $650 a week than to the $1,000 they would have received if the Jobs Bank still existed.

Was the program costly for the Detroit automakers? To be sure. But Toyota's Lentz argues that the cost is worth paying, "especially if you care about quality, and you have to bring people in and retrain them" when the work returns. "I think we're much better off doing it that way. Plus, it also buys a lot of loyalty for your folks as well," Lentz told Automotive News in late March.

That loyalty, while it has a cost, also provides tremendous benefits, says Chris Reynolds, who is head of manufacturing and corporate resources for Toyota Motor North America as well as the son of a former hourly worker at Ford Motor Co.

"My dad was a River Rouge factory worker who got laid off, brought back, laid off, brought back. He worked for Ford for 30 years, but when I started working for Toyota, he wasn't jumping on my back saying that I ought to be loyal to Ford," Reynolds explained.

Loyalty "not only brings a happier team member, but it brings someone who actually feels like they're invested in the mission of the plant, and they come up with some amazing ideas that nobody else would come up with" because they're on the line, doing that job day in and day out, Reynolds says.

"That's worth a lot. It's cheaper, but it also drives a lot of value in terms of that team member relationship."

Would UAW members — still rightly worried about job security — value a return of the Jobs Bank? Hard to say. But Detroit's automakers might want to weigh Toyota's words carefully on the matter.

After all, they do know a thing or two about manufacturing.