Friday, November 21, 2008

The Jobs Bank = $500 Million Annual Cost to Big 3

From today's Detroit News: "Currently, Chrysler has 711 workers in the jobs bank, GM has 1,404 and Ford has 1,476."

Let's do the math:

Ford: 1,476 workers x [$70 per hour base pay plus cost-of-living adjustments, holiday and vacation pay, health-care, pension and other benefits ) x 95% pay while on layoff] x 40 hours per week x 50 weeks per year = $196M per year.

GM: 1,404 workers x [$70 per hour (salary and benefits) x 95%] x 40 hours per week x 50 weeks per year = $187M per year.

Chrysler: 711 workers x [$70 per hour (salary and benefits) x 95% pay while on layoff] x 40 hours per week x 50 weeks per year = $95M per year.

Total Annual Cost of the Jobs Bank to the Big 3 = $478 million (almost half a billion dollars) for 3,591 "workers," and that does not include any support costs, administrative costs, or other costs to handle these workers all year long.

As the WSJ reminds us about the jobs bank, it's "Nice nonwork, if you can get it."

However from today's Detroit News article, "Eliminating the program entirely would be a tough sell for UAW president Ron Gettelfinger, who is unlikely to support any change that would put these workers out on the street. Additional buyouts remain an option, but the idea of nearly bankrupt automakers paying idled workers to leave is also likely to draw sharp criticism from some in Congress."

HT: Peter Bush

Update: So while the Big Three spent close to $500 million over the last year for idle "workers" in the "Jobs Bank," Honda built a brand new factory in Indiana for about the same amount of money ($550 million).


At 11/21/2008 1:03 PM, Anonymous Anonymous said...

Let's dive a little deeper. From the same Detroit News article:

While the specific provisions vary from company to company, idled union members now have a limited number of times they can reject offers of work at other facilities before losing their jobs. Company sources said these provisions would have allowed them to eliminate all or most of the workers still in their jobs banks by now, were it not for a dramatic drop in car and truck sales that has forced each of the automakers to cut production and idle more workers.”

The rate of pay for the jobs bank is usually 85% and not 95% for employees on protected status (Source: UAW/GM Report 2007 Contract Highlights).

Additional buyouts remain an option, but the idea of nearly bankrupt automakers paying idled workers to leave is also likely to draw sharp criticism from some in Congress."

The money paid for the special attrition plan for employees eligible for retirement (those with 30 years or more) came out of the hourly pension fund. So, why should that pose a problem?

Personally, I say get rid of the jobs bank or change the name to something more publically acceptable such as sabbaticals. Times have changed. The UAW and GM have to change, too. Maybe we need to model our business after publically funded educational institutions.

Here’s a little history of the jobs bank. I was around when the jobs bank was bargained into the UAW/GM contract, and I remember that it was an attempt to model GM after the Japanese auto companies, which, at that time, made lifetime employment commitments to their workers. For better or worse, the jobs bank was one not an American invention.

Don’t forget that the unemployment costs that the general public receives will have to be picked up by the states’ taxpayers when GM stops the funding and the jobs bank is eliminated. That’s about $22 million for just GM’s 1400 workers to receive $400 per week for 39 weeks. Additionally, there will be other expenses incurred by the laid-off workers picked up by the public. Then again, maybe they will all move South where the states subsidize their auto companies while hypocritically criticizing the Feds for contemplating the same action.

At 11/21/2008 2:32 PM, Anonymous Anonymous said...

Have you still not figured out that the $70/hour figure is complete rubbish? That doesn't exactly reflect well on your credibility.

At 11/21/2008 2:36 PM, Blogger bobble said...

here's a funny parable on GM management:

At 11/21/2008 2:46 PM, Blogger bobble said...

anon 2:32 "Have you still not figured out that the $70/hour figure is complete rubbish?"

right on.

here's more detail on why that is so

"The average GM assembly-line worker makes about $28 per hour in wages, and I can assure you that GM is not paying $42 an hour in health insurance and pension plan contributions. Rather, the $70 per hour figure (or $73 an hour, or whatever) is a ridiculous number obtained by adding up GM's total labor, health, and pension costs, and then dividing by the total number of hours worked. In other words, it includes all the healthcare and retirement costs of retired workers.

Now that GM's healthcare obligations are being moved to a UAW-run trust, even that fictitious number is going to fall sharply. But anybody who uses it as a rhetorical device suggesting that US car companies are run inefficiently is being disingenuous. As of 2007, the UAW represented 180,681 members at Chrysler, Ford and General Motors; it also represented 419,621 retired members and 120,723 surviving spouses. If you take the costs associated with 721,025 individuals and then divide those costs by the hours worked by 180,681 individuals, you're going to end up with a very large hourly rate. But it won't mean anything, unless you're trying to be deceptive."

At 11/21/2008 2:57 PM, Anonymous Anonymous said...

We could always use the retirees, surviving spouses, and active workers as the base and come up with a lower labor cost-per-hour than the transplants. Like I’ve said before, the labor costs are not directly comparable between a newer company and a one-hundred year-old company.

At 11/21/2008 3:58 PM, Blogger Mark J. Perry said...

Please see my most recent post on the $73.26 per hour total labor cost for GM.

At 12/15/2008 10:55 PM, Blogger rdan said...

Since we have done a bit on the auto question, the hype is about 'wages' being over 70, starting with Delphi and Heritage Foundation propaganda. They said wages right off, which of course was folded into legacy costs of retired workers to mislead us all.

If you do apples to apples, and equivalent costs, a better picture emerges. Good for Walt G.

At 1/25/2009 5:08 PM, Anonymous AngryAboutUnions said...

I don't think we need unions any longer. I mean, isn't that what the Department of Labor is for? To make sure we are treated fair and the environment is safe? As for retirement planning get a 401k like the rest of america has to do... Quit bleeding the auto companies dry!


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