Sunday, November 09, 2008

Should We Really Bail Out $73.20 Per Hour Labor?

The chart above shows average hourly compensation (additional data source here) for the Big Three ($73.20) and Toyota ($48.00), compared to average hourly compensation for Management and Professional Workers ($47.57), Manufacturing/Goods Producing ($31.59) and all workers ($28.48), data available here.

Should U.S. taxpayers really be providing billions of dollars to bailout companies (GM, Ford and Chrysler) that compensate their workers 52.5% more than the market (assuming Toyota wages and benefits are market), 54% more than management and professional workers, 132% more than the average manufacturing wage, and 157% more than the average compensation of all American workers?

Maybe the country would be better off in the long run if we let the Big Three fail, and in the process break the UAW labor monopoly, and then let Toyota, Honda and Volkswagen take over the U.S. auto industry, and restore realistic, competitive, market wages to the industry. It might be the best long-run solution.

84 Comments:

At 11/10/2008 2:54 AM, Anonymous Anonymous said...

Why are you analyzing wages in the auto industry? I don't remember you analyzing the wages in the financial industry when they were bailed out.

Since the financial industry pays higher wages and they were bailed out and since you seem to accept wages as criteria, then by your own reasoning it follows that the the auto industry should be bailed out too.

 
At 11/10/2008 6:54 AM, Blogger Len said...

Wages!
Thanks for bringing them up.
It is all about the money.
The auto industry "managers" have caved into the UAW's demands for years and now they are reaping the benefits of their failed leadership.
How come no one mentions that the jobs that are being "exported overseas" are the result of the wage differential?
It's not just the 80% of Congress that don't have a financial or economics background, it's much of the public.
If you make things to sell to buyers would you rather pay $17 an hour or .62 cents an hour to get your product produced?

 
At 11/10/2008 7:56 AM, Blogger briefs said...

Great point. Wages have gone up too quickly in both the auto industry and steel industry. The question though remains should the government care?

If the Big 3 file Bk, then we the taxpayers will be picking up the tab on all those over-promised pensions. Perhaps we will anyway, like the airlines and steel companies.

 
At 11/10/2008 8:02 AM, Blogger Walt G. said...

If I lose my GM job, I could always seek full-time work with the college where the state directly funds at least 1/3 of my pay. Just because public funding is not defined as a “bailout” does not change the fact that taxpayers’ money finds its way into a lot of paychecks.

 
At 11/10/2008 8:52 AM, Blogger Thomas Blair said...

We can analyze the reasons for said failure all we want, but one thing is clear: the Big 3 have clearly demonstrated that they are unable to compete in today's marketplace. They're simply not making cars that people want to buy at the price offered, as evidenced by their rapidly declining market shares. It could be for any number of reasons; cost inputs (labor, materials, engineering, capital equipment), fuel economy, after-purchase service, car quality, car styles, etc.

The point is that they're failing.

Anonymous 2:54a,

I could remembering incorrectly, but Dr. Perry opposed the financial bailouts, too. Even if he didn't, it doesn't matter. Bad companies must be allowed to fail.

 
At 11/10/2008 9:07 AM, Blogger matt said...

Enlightening post. I've been working at a manufacturer involved in supplying automotive components and have see analysis of labor + fringe rates we, the automotive suppliers, have to have to be competitive, and it's a little over 1/3 this rate.

I agree with Thomas Blair, that fundamentally they can not do business in this economic climate. Let their business model become profitable, and if not, well time to change business models.

 
At 11/10/2008 9:37 AM, Anonymous jill said...

Who exactly are we bailing out? Gm just opened a plant in Russia. Most auto parts are foreign made. Most of their R&D is done by engineers located overseas.

 
At 11/10/2008 12:41 PM, Blogger 1 said...

"Who exactly are we bailing out?"...

Good question!

"Most of their R&D is done by engineers located overseas"...

Really?!?!

I'm not doubting you but I wonder if you have something in the way of a link that shows this?

 
At 11/10/2008 1:18 PM, Anonymous Anonymous said...

I would love to see an actual breakdown of how much money stays in the USA, and how much leaves, for each vehicle OF ANY MAKE that we Americans buy. I wanted to buy American, bought a Chevy, then discovered it was made in Canada. I know there are huge Honda, Toyota, etc plants in the US, but how much money leaves after the product is sold? How can a consumer even try to support American workers? And at the hourly wage you reported, why should we want to?

 
At 11/10/2008 2:28 PM, Blogger RightMichigan.com said...

Amazing numbers, and not surprisingly, usually overlooked by the liberal press in their coverage of national economic policy and Michigan job losses.

Until the Big 3 get the unions back out of the stratasphere and somewhere a little bit closer to earth we're only throwing good money after bad.

--Nick
www.RightMichigan.com

 
At 11/11/2008 8:23 AM, Anonymous Anonymous said...

How can a consumer even try to support American workers?

By buying the best priduct at the best price.

 
At 11/11/2008 5:48 PM, Anonymous Anonymous said...

"Most of their R&D is done by engineers located overseas"...

Really?!?!

I'm not doubting you but I wonder if you have something in the way of a link that shows this?

I don't know about the auto industry specifically, but I'm an engineer that works in the appliance industry, and I can assure you that a substantial portion of engineering is offshored overseas. I'm sure the auto industry follows similar practices.

 
At 11/12/2008 12:48 AM, Anonymous Anonymous said...

Let'em fail. Socialist policies of unions do not work. It inflates prices for everything and you and I will pay more for everything. Card check will put more businesses in jeopardy.
Democrats. Wrecking our country one day at a time.

 
At 11/13/2008 3:27 AM, Anonymous Ads said...

Wow, amazing stats! Could be a result of you pulling them out of your ass.

Neither of your sources support the data in your chart.

 
At 11/13/2008 9:48 AM, Anonymous SarahBecker said...

No bailouts just to save Unions. Unions were instrumental in making the life of American workers much better in the late 1800s and first half of the 1900s, but since then have simply escalated wages and been a major reason companies have moved jobs overseas. NO BAILOUTS. let em burn and NO MORE UNIONS.

What part of this is so difficult? Workers are overpaid by 100%. Duh

 
At 11/14/2008 1:31 AM, Anonymous Sam said...

Let them fail. It is not fair for workers, management, shareholders of other more efficient car manufacturers.

 
At 11/14/2008 1:43 PM, Blogger tstaff said...

Wow. I never knew the wages were so high. This may be off-topic, but can't we see this as a fortuitous circumstance for the American people. We now have an opportunity to invest heavily in the big 3 and tie aggressive and specific goals to the money they will receive (kind of like bankruptcy terms). We should be asking for 50mpg on all models by 2015 and considerable advancements in technologies other than fossil fuels. This is our chance to 1)make a leap toward energy independence, 2)stimulate American business (at home and abroad) and 3)demand restructuring of the auto industry that seemingly can't run itself.

 
At 11/14/2008 1:58 PM, Blogger Thomas Blair said...

tstaff,

The government is not an investment bank where we all send our savings (taxes) and it picks who to invest in (bail out). The government, to the extent that it is needed at all, should not involve itself in the market by choosing whom to bail out and whom to let fail. Failure is the market's way of saying, "You're a dumbass. Quit doing that." This mechanism must never be tinkered with, lest it quit working.

 
At 11/14/2008 5:12 PM, Anonymous Anonymous said...

No bailout for overpaid unproductive labor force. With a New UAW labor agreement and pay tied to results, maybe. If not, nobody deserves to be subsidized, regardless of industry.
Either we become competitive or we find new industries to thrive in.

 
At 11/16/2008 5:17 AM, Blogger Bruce in Iloilo said...

"Why are you analyzing wages in the auto industry?"

Remember we are not talking about the entire auto industry, or even the entire American auto industry. We are talking about bailing out only 3 companies. All three companies could go under and still there would be hundreds of thousands of made-in-America cars.

It is legitimate to ask why these 3 companies are in such serious trouble when other car companies are not.

 
At 11/16/2008 2:35 PM, Anonymous Anonymous said...

"Why are you analyzing wages in the auto industry?"

Why focus on wages? Hmm, let me think... this "small" discrepancy (a 50% discrepancy) *within* an industry might matter in a competitive market?

How about the infamous "Jobs Bank" program? An 2007 entry in this blog quoted a Detroit Free Press estimate of an annual cost of $800 million per year!

 
At 11/17/2008 11:23 AM, Blogger marz said...

How about a comparison of the management structures and management compensation between Big 3 and the Japanese car makers?

 
At 11/17/2008 12:22 PM, Anonymous Anonymous said...

If you look at a recent red/blue map of the United States you will find that the red areas are where GM and Ford do best and the blue areas are where the foreign car makers do best. Without questioning in any way the stupid concessions to the unions, I think there is more going on here with American domestic auto consumption than meets the eye. Somehow, there is an odd anti-American tone to the discussion. And I think that animates much of the argument. If the Left in the form of Pelosi and others become the nationalists - they win.

 
At 11/17/2008 12:57 PM, Anonymous Anonymous said...

A friend of mine here in St. Louis used to work at the Ford plant in Hazelwood. That plant is now closed and they are tearing it down. A couple of years ago, when Ford began its death spiral and they started cutting back shifts, my buddy wound getting what he called "laid on", as opposed to laid off. Anyway, when he was laid on, he did not work for 9 weeks at a time and yet still made 80% of his salary. You can't tell me that is good business. Paying people to produce nothing. Time for the "Big 3" to take a dirt nap.

 
At 11/17/2008 4:18 PM, Anonymous Anonymous said...

When did having a good paying job become a crime?

 
At 11/17/2008 4:33 PM, Blogger Thomas Blair said...

Anon 4:18,

No one's talking about a good paying job being a crime.

Sowell was right - you can't argue with those who employ emotional arguments.

 
At 11/17/2008 4:36 PM, Anonymous Anonymous said...

"When did having a good paying job become a crime?"

When doing so bankrupts your company. Kind of defeats the purpose of the labor action that led those higher wages.

"good paying" is relative. If toyota can pay the amount they are and get qualified workers then it is obvious that UAW workers are overpaid. Why should a high school graduate (if even that) cost GM 73.20 an hour? Normally you acquire skills that lead to higher salaries but with UAW you just demand it ("it's a right").

 
At 11/17/2008 5:44 PM, Anonymous Anonymous said...

"If you look at a recent red/blue map of the United States you will find that the red areas are where GM and Ford do best and the blue areas are where the foreign car makers do best."

Maybe people in the red areas are just too stupid to get the best car for their money. If you want Honda and Toyota profits to stay in the US, BUY THEIR STOCK.

 
At 11/18/2008 5:36 PM, Blogger buermann said...

These are utterly dishonest numbers. They include the cost of healthcare and pensions for retirees in the numerator without including the retirees in the denominator.

Look at your own data: the hourly wage of the average GM line worker is $28/hour, which is a palace-shattering median income. The average health insurance cost for a family of four is about $13,000, that only adds another $6.50/hour to the bill, and assuming the UAW has completely eradicated the time inconsistency problem and convinced workers to accept incredibly high proportions of their compensation to come in the form of deferred pensions, say another $14/hour, that only brings them up to Toyota's labor costs.

This kind of idiocy completely misidentifies GM's legacy costs and blames it on the current workforce, which can't be held responsible for GM's 50 plus years of lobbying against meaningful healthcare reform.

 
At 11/18/2008 6:12 PM, Anonymous Anonymous said...

I'm a GM retiree, have been for 15 years. If they go bankrupt guess what happens to me. I loose my pension. I loose my health care. I can't go and get a job now. It's not my fault they went belly up and I shouldn't have to suffer because President Bush doesnt see the value in saving my pension. Who's gonna help me out? Maybe the oil companies wanna share some of there profits? Doubtful. Thanks America for caring so little for your citizens.

 
At 11/18/2008 8:51 PM, Anonymous Anonymous said...

What's wrong with the Big 3? It's the wrong business model that they are persuing; the build and sell model is being replaced by a subscription model. Instead of selling their product they should sell a "subscription mobility package" in which a driver accesses a mix of cars over a period of time to meet their transportation requirements; people don't want to own a car, they want to have access to a car. there are 220 million light vehicles in the US, enough for 1 vehicle per adult in the US..cars are lasting longer, and when times are a bit tough, people defer investment...and hold on to their cars. The auto must change its business model...it's happening in the high tech area with cloud computing and SaaS, daily of construction equipment, business jets (Netjet), cable, video (Netflix) and much more. Dealers will become service providers and OEMs will become remanufacturers to reset the value of their vehicles to rturn to their dealers

 
At 11/19/2008 8:21 AM, Blogger Thomas Blair said...

Buermann,

These are utterly dishonest numbers. They include the cost of healthcare and pensions for retirees in the numerator without including the retirees in the denominator.

Look at your own data: the hourly wage of the average GM line worker is $28/hour, which is a palace-shattering median income. The average health insurance cost for a family of four is about $13,000, that only adds another $6.50/hour to the bill, and assuming the UAW has completely eradicated the time inconsistency problem and convinced workers to accept incredibly high proportions of their compensation to come in the form of deferred pensions, say another $14/hour, that only brings them up to Toyota's labor costs.

This kind of idiocy completely misidentifies GM's legacy costs and blames it on the current workforce, which can't be held responsible for GM's 50 plus years of lobbying against meaningful healthcare reform.


These are NOT disingenuous numbers. They represent today's costs and today's workers. The reason legacy costs are included is because GM & Ford went with the defined benefit pension (including health care coverage) as a perquisite to stave off the politically unpopular risk of alienating a very large and powerful union. Retirees are not included in the denominator because they aren't working. They are included in the numerator because they represent a (not inconsequential) cost. Can you not see that?

 
At 11/19/2008 2:46 PM, Anonymous LP said...

Picked up at the Libertarian Party Web site: http://www.lp.org/blogs/andrew-davis/what-are-economists-saying-about-the-auto-bailout

 
At 11/19/2008 5:25 PM, Anonymous Anonymous said...

i would like to point out that i do not know very many people working for an hourly wage over $20.00 if they are close to that the company's switch them to salary and if they realy do the job that is expected they make less then min wage... come on people if your going to complain about numbers lets get the real numbers....

 
At 11/20/2008 12:29 AM, Blogger keith said...

This comment has been removed by the author.

 
At 11/20/2008 2:20 AM, Anonymous Anonymous said...

I guess if $28 dollars an hour is median, than I am poor, because I don't make that. And I work in health care saving lives. Since when do high school graduates deserve so much money for putting parts together?
sorry old people. maybe you should have invested all that extra wage you didn't deserve instead of expecting them to pay you forever. Why should the gov't pay you, when they are cutting benefits to military retirees? your generation is the reason the big 3 are failing now. Unions need to go.

 
At 11/20/2008 4:11 AM, Anonymous Anonymous said...

Look at all the snobbery on this board. Instead of being glad your fellow Americans are making a good living, you tear them down with resentment. "They're uneducated, so they don't deserve diddly squat!". Yeah, that's nice. Real nice. Like someone else on here posted, since when is it a crime to have a good paying job? A lot of those factory jobs are more than just putting parts togther, too. I'll be willing to bet most of the snobs on here wouldn't last ten minutes in an auto plant before they coiled up in a fetal position. No one bitches when millions of dollars are thrown at guys to play a freaking game of baseball. No one bitches when Tom Cruise or Will Smith gets $15 million for memorizing some lines and playing make-believe for a movie. But we can't have some average Americans making $35,000 to $40,000 a year working on a physically demanding job in crappy environments. How do you a-holes live with yourselves? Must be great to be so perfect.

 
At 11/20/2008 8:26 AM, Blogger Thomas Blair said...

Anon 4:11a,

Look at all the snobbery on this board. Instead of being glad your fellow Americans are making a good living, you tear them down with resentment. "They're uneducated, so they don't deserve diddly squat!". Yeah, that's nice. Real nice. Like someone else on here posted, since when is it a crime to have a good paying job? A lot of those factory jobs are more than just putting parts togther, too. I'll be willing to bet most of the snobs on here wouldn't last ten minutes in an auto plant before they coiled up in a fetal position. No one bitches when millions of dollars are thrown at guys to play a freaking game of baseball. No one bitches when Tom Cruise or Will Smith gets $15 million for memorizing some lines and playing make-believe for a movie. But we can't have some average Americans making $35,000 to $40,000 a year working on a physically demanding job in crappy environments. How do you a-holes live with yourselves? Must be great to be so perfect.

1. There is some snobbery about people with HS educations making good money. I suspect this is mostly jealousy, but I can understand it because...

2. These workers have acquired these outrageous wages because they have the full force of the US government acting as their enforcer, sometimes directly but mostly indirectly. Because there are so many, they have great political swing. This enables them to get laws passed that benefit the union. Most would feel more sympathy for workers in a company about to go under, but these workers have benefited from the state's use of force to protect them.

3. These workers aren't making $35-40k/year. The base wage (so I've read) is $28/hr, which translates to $55k+/yr before considering the excellent benefits they get.

 
At 11/20/2008 1:57 PM, Anonymous Anonymous said...

Two comments:

British Leyland, the infamous nationalised car producer of the UK, also at the mercy of the unions (what do you call them in the US--- brotherhoods or something?), and also producing really crappy cars. Lessons to be learned? The better (and more effectively produced) Japanese and German cars triumphed, no surprises.

 
At 11/20/2008 10:12 PM, Blogger Rob said...

I'm not a big conspiracy theory person, but this is one more thing that makes a sensible person wonder outloud.

Why is our government figuring out so many ways to raid the treasury and give the money to corporations that send, spend, or save it out of the country?

My dad was a conservative. But not the kind of conservative we have today. He taught us that in a capitalist society debt is weekness and assets are power. You work hard, STAY OUT OF DEBT, and collect assets(preferably income producing assets).

This formula never fails to create a strong economy and a strong personal income.

Is anyone else struck by how odd it is for our goverment to be telling us that the reason we are in an economic crisis is because the banks aren't lending money?

Or how odd it is that the conservative party in our country has been encouraging us to live like drunken sailors for the last 20 years (bigger cars more spending) while the treasury is being raided and the real assets are being sold globally?

I say let the car companies declare thier own bankrupcy, or borrow money from the unions.

In the long run, we will get cheaper and better cars.

We currently need deflation in this country, not inflation, and goverment bail outs are going to cause inflation, possibly even hyper-inflation.

 
At 11/21/2008 7:53 AM, Anonymous Anonymous said...

I used to work for Eastern Airlines. When the airlines were government regulated, everyone who worked for them was fat and happy. Then the industry was deregulated. Time to change as we now had to compete. Between terrible management and intransigent unions we soon were all looking for jobs. Bailouts were unknown back then, and they wouldn't have helped us anyway. We needed good management and a union that would understand the situation and accept change. We got neither. Now the skies are full of airlines that either changed or started anew.

From what I see the auto industry faces the same situation. The solution is to focus on the result needed. To me the only good answer to that is what Mitt Romney has come up with - dump present management and get the unions to accept change by whatever means necessary. But - NO Bailout!

 
At 11/21/2008 10:03 AM, Anonymous Joe said...

Is labor really 73.20/hr?

I clicked on your link:
"additional data source here"

In examining this source it looks to me like the hourly cost of 73.20/hr includes the pensions and health benefits paid to 84 thousand UAW retired people as well as the 47 thousand UAW-covered current workers.

I could be wrong.

If Army PFC Snuffy gets $1789.80/month, plus room (in an tent), board (MREs), combat pay, medical benefits to include his family, and a risk of battlefield injury and life-long VA benefits, how much money is he making?

Should we add in all the retirement benefits and health care currently being paid to veterans of past wars? PFC Snuffy is likely making $443/hour (my calcs, military pay, military medicine, VA). It seems to me that the $73.20 is calculated just this way.


The other thing I can't find is how many people are in JOBSbank and what the term of stay is. USA Today article indicated it's limited.

I note also that health benefits are quoted at $20/hr. (http://www.heritage.org/research/economy/images/wm2135_table1.gif)
That works out to 40K/yr. But annual per capita health care cost in US only an outrageous $6K*, and I'm sure the UAW contracts make workers pay deductibles, co-opays, and have exclusions; I also doubt the average worker has the 5.5 covered dependents my rough calculations would require.

* http://www.kff.org/insurance/snapshot/chcm010307oth.cfm

All of the latter is argument for single-payer NHI.


All that said, I agree the bailouts were generally bad ideas and thus far disastrously managed. If I were king, I'd make below-market tender offers. If accepted, I'd fire most of management and re-negotiate terms with the rest.

 
At 11/21/2008 11:09 AM, Blogger Thomas Blair said...

Joe,

All of the latter is argument for single-payer NHI.

How on earth is any of the preceding an argument for national health insurance? It seems like you're forgetting that someone has to pay for that, too. Who pays for NHI? The "government"?

 
At 11/21/2008 12:19 PM, Anonymous Joe said...

Thomas Blair:
If Big Auto are paying $20/hr for medical, and GM locates in Canada because it can save this $20, we can make US cars more affordable by having NHI, and be more likely to build cars here.

We taxpayers would all pay for NHI, of course: we are already paying (through various mechanisms) for the most expensive, least efficient health care in the world.
A good summary of financing options is at:
http://www.bipartisanpolicy.org/ht/a/GetDocumentAction/i/6323

By objective standards, from efficacy to satisfaction to avoidable hospital conditions to survival rates, we are getting far less than are the taxpayers in other industrialized nations. We ought to be as smart as the rest of the industrialized world.

The best summary article I've recently seen is:
Achieving a High-Performance Health Care System with Universal Access: What the United States Can Learn from Other Countries http://www.annals.org/cgi/content/full/0000605-200801010-00196v1

This issue has clearly been debated in greater detail than either of us can do it here.

I practiced medicine in the military and in civilian practice in Texas and in Washington state for many years, and spent some military time in Belgium and Germany and Thailand; I would swap the Europeans' medical care financing systems with ours in a healthy heartbeat. But we can design a system even better than theirs.

 
At 11/21/2008 1:17 PM, Anonymous Anonymous said...

There is no one problem that's leading to the demise of the US automakers but labor is a big one. There's no shame in making a good living and auto workers deserve fair compensation but when there are people getting paid $40/hr and up to assemble cars and the "jobs bank" is still in place, you're not going to be competitive. I believe the biggest problem facing GM is their retiree benefit obligations. The japanese automakers don't have these and that puts Detroit at a huge disadvantage as it costs them billions of dollars every year. These two problems added to the fact the big three are building cars consumers don't want and you have a recipe for disaster. One more thing, Rick Wagoner commanding $15.7M when the company is on the verge of collapse is insane. How does this guy sleep at night?

 
At 11/21/2008 3:46 PM, Anonymous Anonymous said...

My point exactly. Goodbye and good riddins to the UNION!!!!!!!!

Maybe the BIG 3 need to think about putting all of their manufacturing plants in "right to work states", just as the japanese do.

 
At 11/22/2008 3:59 AM, Anonymous Anonymous said...

The Japanese car companies pay about the same base rate that the Big 3 pay (around $28/hour). The difference is in the other benefits. While I support the autoworkers right to make a good wage, they ought to realize that their contracts need to be opened back up and some of the expensive needless crap weeded out (jobs bank, child care, school tuition reimbursement, gyms located at plants). A step in the right direction was taken with the last contract. All new hires will come in at $14/hour and work their way up to maximum $19/hour.

 
At 11/23/2008 8:59 AM, Anonymous Anonymous said...

My brother was a mechanical engineer. He worked his butt off for five years at a University and learned math and science that would most people's heads spin. He then got got a job where he made LESS than high school educated machinists working for the same company and with the same seniority. BREAK THE UNIONS!!!!! They are costing all of us money and killing our industries.

 
At 11/24/2008 12:43 AM, Anonymous Anonymous said...

...and after 20-25 years, your "brother" will be raking in the dough while the high school educated machinist will still be at the same level, dork. You college grads crack me up. You think you're all entitled to a six or seven figure income, a company car and a swanky penthouse right out of school. When reality hits and you learn that you're gonna have to climb up the ladder, you get bitter and blame the blue collar guy. Your "brother" chose to go to school. He chose not to become a laborer. He will get paid handsomely in time. Arrogant bastards! A piece of paper you paid for gives you some sense of superiority over all others. No one else is allowed to get a piece of the pie, only you. And by God and sonny Jesus, you'll do your best to keep them down. But I suspect you probably voted for Obama and buy into the middle class is being crushed theme. You're probably also the type that claims to care for the poor and downtrodden. So much so, that you want there to be more of them. Would you rather the high school educated machinist lose his job and be on the government dole? Just to satisfy your disdain for anyone you deem beneath you? Must be nice to be so perfect. Word of advice to you and your "brother". Worry about your own job, not about what others are doing.

P.S. In case anyone has missed this...these are loans, not a bail-out. They are to be paid back. This isn't the same as the AIG crap. And now, Citi wants to be bailed out. What do think of that? I find it odd that everyone has a problem with helping the auto companies get a loan, but no one's bitching much about the banks and credit card companies.

 
At 11/24/2008 11:44 PM, Anonymous E. Stewart, Automotive Consulting said...

Your headline is very misleading.Line workers are not getting $73/hr.

Line wages, installer:

GM: $27.86
Ford: $27.94
Chrysler: $28.74

These wages are competitive with nonunion Japanese assembly plants in the US.

The source for these numbers is here:

http://chryslerlabortalks07.com/Economic_Data.rtf

I understand why you're using the numbers you're using, but it would be much more honest to explain the $20/hr per worker it costs the company in healthcare and the $26/hr in other costs - like Pension and retiree benefits.

Those tens of thousands of retirees will likely have their pensions shifted to the US government Pension Benefit Guaranty Fund in bankruptcy, so the taxpayer picks up the tab one way or the other.

Your numbers also leave out the latest UAW concessions in the 2007 contract negotiations, where new union hires will make less total including benefits than older workers did in hourly wages alone.

Source: Automotive News, Oct 22, 2007.

Those newer union hires will actually undercut the nonunion assembly workers in the Honda and Toyota plants down south.

Good informaton to know if you want a more honest, complete picture.

 
At 11/25/2008 4:11 PM, Blogger CommonSenseThinker said...

It seems the CEOs of the Big Three will be headed back to Washington DC early December. And, this time they might carpool instead of flying the private corporate jets. But that does not change the fact that bailout is the wrong solution. I have written a detailed article entitled "Big Three Auto Bailout is Wrong Solution" to make my case. You can read the article in detail here:

http://commonsensetopics.blogspot.com

 
At 11/26/2008 7:58 AM, Anonymous Anonymous said...

No we shouldnt bail them, those that think we should are of course involved with them. There is no way when companies fail they should get taxpayers money. If you pay your car late do you think they are going to give you a break? So when they default on loans us tax payers that already buy their cars have to flip the bill? Its bs, sorry overpaid auto workers, hopefully you saved some money from all the years you were overpaid, dont wine to people for money that make 1/2 of what you do...no way. Its funny that foreign companies with half the workers at 1/3 the wage can build better products, and are more efficient then you with 3x the workers , shame on you.

 
At 11/26/2008 8:13 AM, Anonymous Anonymous said...

Getting access to taxpayer money would be akin to giving an alcoholic the key to a liquor cabinet.

General Motors, Ford, Chrysler and the United Auto Workers union are pouring millions of dollars into a lobbying campaign for a taxpayer bailout.

The money devoted to influence peddling in Washington would be better spent on improving quality and finding ways to reduce a bloated cost structure, but both management and UAW have decided that fleecing taxpayers is a better option.

A taxpayer bailout would be a terrible mistake. It would subsidize the shoddy management practices of the corporate bureaucrats at General Motors, Ford and Chrysler, and it would reward the intransigent union bosses who have made the UAW synonymous with inflexible and anti-competitive work rules.

most important, though, is that a bailout would be bad for the long-term health of the American auto industry. It would discriminate against the 113,000 Americans who have highly-coveted jobs building cars for Nissan, BMW and other auto companies that happen to be headquartered in other nations.

These companies demonstrate that it is possible to build cars in America and make money. Putting them at a competitive disadvantage with handouts for the U.S.-headquartered companies would be highly unjust.

A bailout also would be bad for General Motors, Ford and Chrysler. The so-called Big Three desperately need to fundamentally restructure their practices. More specifically, the car companies need to endure some short-term pain in order to restore long-term viability. But that won't happen if politicians raid the treasury.

Getting access to taxpayer money would be akin to giving an alcoholic the key to a liquor cabinet. It also would be bad for American taxpayers and the American economy.

 
At 11/26/2008 10:33 AM, Anonymous Anonymous said...

Oh, but I guess letting these three companies go under and nearly 3 million people lose their jobs in this country would GREAT for the US economy. Yea, your REAL smart. I hope it does happen, so you guys can really experience a DEPPRESSION!!!!!!!!!

 
At 11/28/2008 10:08 PM, Anonymous Anonymous said...

Yup, let them crash and burn, maybe if the sell a few private jets and their golden parachute plans, and reduce more of their over paid executive people, they will come back down to earth into the real world. Not U.S taxpayers job to pay their salaries and bail them out.. Its funny, if we went and voted on this like an election, do you really think it would pass? not a snowballs chance in hell. Its our tax money, toss it into the social security fund.

 
At 11/29/2008 12:01 PM, Anonymous Anonymous said...

Yea, let 'em crash and burn...along with the country. Hey, here's an idea...Maybe we could sell the good 'ol USA to the Japanese.

 
At 12/03/2008 2:29 PM, Anonymous Anonymous said...

I don't disagree that the big three average pay for employees is higher than the same for foreign automakers. Executive pay is also much higher, though average for companies of that size based in this country.

You have to look at the number of employees for each company within this country. Though the foreign carmakers have plants here, the big three employ far more workers in this country. Even with the foreign plants that the big three own, the big three cars/trucks still have far more US content, and build more cars here, than the foreign companies.

The Big 3 are the health care providers for over a half-million retirees. Right or wrong, these companies have been here for over 100 years, employing American workers. Yes, the unions grabbed all the power they could, and implemented ridiculous union work rules (don’t get me started), as a consequence of workers getting crapped on for a very long time - until worker's rights laws started negating the need for the union. Management for a long time rolled over and let the unions set the rules because they could pass the costs on to the consumers, and the foreign companies were not yet much competition.

You have to understand the power that the unions hold over many companies - not just in the auto industry. There are plenty of laws in place that support union activities. They strike, and what can a company do? Shut down? Hire replacements? It doesn't work. There are too many required, and many of the jobs are skilled, and quality suffers with replacement workers, not to mention the hell that the union members put replacement workers through.
Our representatives in Congress at the state and federal levels passed these labor laws, and the presidents at the time signed them. Foreign automakers build their few US plants in states where unions are optional. The unions have ingrained themselves so much in the US companies that the Big 3 can't build here without including union labor.

The unions are finally coming to grips with the fact that they may have to give some things up to make sure that they aren’t screwed in any bankruptcy-forced contract renegotiations. The unions did finally make some big concessions in 2007 (though not the Jobs Bank), which won't really be felt by the Big 3 until 2010. The companies had brighter futures (Ford was profitable in 1Q 2008) - until the credit and economic crisis set in this year.

Bankruptcy for a Big 3 automaker would be very bad for all of us - the trickle-down effect to dealers and suppliers (many of which are shared between the Big 3 AND with foreign makers) would be devastating. People won't buy cars from a bankrupt automaker. Period. Cars are long-term investments (they're typically owned for 5-7 years) and consumers want to have confidence that the company they buy from will be here until after they sell their car to the next guy. Parts suppliers - those that make parts for both the domestic and foreign brands - would be hit hard, and costs and availability of replacement parts would be slammed. Dealers, many of which own both domestic and foreign brand dealerships, would have serious trouble and many employees all over the country - big cities to small towns - would be out of jobs. Ultimately, even more of the wealth created in this country would go to foreign countries as consumers purchased more foreign cars.

The Big 3's reliance on big trucks and SUVs was a problem, yes. Who bought them? American consumers. Why? Because they wanted them. Consumers aren't stupid. Detroit built what the customers wanted. They were good at it, and they sold lots. Foreign makers focused on small cars, and they sold lots, more in big cities where smaller cars make more sense. Then gas prices shot through the roof, and SUV/truck sales plummeted. Should Detroit have had plans ready? Yes. They dropped the ball there. But as quickly as they could react (remember a typical car product cycle, from conception to dealer lots, is 3 years) the economic crisis hit faster. Houses stopped selling - homebuilders stopped building, and stopped buying trucks. Then the credit spigot turned off. Only a small percentage of consumers buy cars without credit.

I only have some knowledge of what's going on only at Ford, and I don't speak for them, but I do know that they've had a laser focus on improving quality (see Consumer Reports), decreasing costs, and increasing sales since Alan Mullaly has been there (2006). He's a fantastic leader who did great things for
Boeing. Remember when Boeing took on the European Consortium's Airbus competing for a major contract in Europe, and Boeing won? That was Mullaly's leadership. The employees at Ford look to him for guidance and he hasn't disappointed. But he's dealing with decades of mismanagement and union crap, and a single man can't turn a boat like that on a dime. But they've made great progress.

You might not have noticed that it's not just the Big 3 that have had huge drops in sale this year - none of the top 6 or 7 manufacturers, foreign or domestic, had less than a 30% drop in sales last month. Ford actually gained market share. But the legacy costs - the legacy costs of contributing to the health and welfare of hundreds of thousands of American workers - is what the Big 3 are grappling with that the foreign makers don't have to deal with.
When people take the opinion of 'forget them - let' em go bankrupt - They make crap' they're making an uninformed statement that doesn't take into account that behind those companies are their own friends and neighbors who are already teetering in a terrible economic situation.

I could go on for a long time, but I'm running out of space. The point is, we need to support these companies to get them over the economic hump. The cost of doing it is far less than what it would cost all of us if one of them failed. It sounds like a lot of money, but put it in perspective with the $700 billion to investment firms and large banks, or the $40 billion after-tax profit that one company - Exxon Mobil - made in 2007. The loans the Big 3 are asking for would protect a lot more American workers (both active and retired) than Exxon Mobil and those investment firms combined.

 
At 12/03/2008 4:13 PM, Anonymous Anonymous said...

Great perspective from that long post of anonymous but we still have to look at whether the company will be viable after a bailout. Are they moving from a large truck/svu production to more efficient/cost effective vehicles? How are they tackling their high pension/union-related costs? The Jobs Bank is absurd (you get 95% of your salary if you are laid off)? Why even work at that point. Other than insane union jobs, where can you find such benefits and protection in the U.S? You can't. Health care, most companies force employees to pay 30-40% of costs.

I blame the Company managers for conceding ridiculous concessions and the Unions for asking for them. Days of free and "we deserve it" are over, get a real job like the most of us who can't even afford health insurance.

 
At 12/04/2008 7:41 AM, Anonymous Anonymous said...

Well you can give all of the emotional arguments you like but you can't argue with the numbers.

UAW the fincial condition of this country has changed and I know you don't agree but it has to change for you too. Would you rather have no job or one that pays $35 and hour. There are millions in the US who would take that deal.

 
At 12/04/2008 8:47 AM, Anonymous Anonymous said...

As usual, your numbers are greatly misdirected. In reality, that 73 an hour, includes retirement plans, health and dental, vacation pay, etc.. in reality, they make about 30 dollars an hour, or about 55k a year, which is what you would expect for someone doing a skilled job for 20 years, the reason why the other companies dont pay as much, is because theyre workers make about 16 dollars an hour with a few perks, their take home, is around 450 a week.... probobbly less then you make I'm sure.... get the facts straight before you talk about what you dont know. The other lower companies need to offer competitive wages for thier skilled years in the field, you cant support a family at 450 a week buddy.

 
At 12/04/2008 8:56 AM, Blogger SFC_B said...

Mr. Perry,

I agree with the point you are trying to make, but why inflate the numbers? You must include the same values in the numerator and denominator.

 
At 12/04/2008 8:57 AM, Blogger Thomas Blair said...

Anonymous 12/04/2008 8:47 AM,

By definition, they are offering competitive wages as there is no shortage of people willing to work for $450/week (this number is low, btw) at Toyota.

 
At 12/04/2008 12:03 PM, Anonymous Anonymous said...

Once again, it's not the autoworker's hourly wages that is really an issue for workers hired after 2007 - it's the legacy costs of honoring promises made to hundreds of thousands of retirees, the REALLY STUPID UAW work rules (2 union workers required to change light bulbs? Filing protests against salaried workers for moving something a few feet instead of calling a union worker to do it? Geesh...) and the Jobs Bank - which has GOT to go.

Yes, management gave in on those demands. As I said before, though, the laws fully support the union activities, and hold the companies over a barrel if they decide they don't like the terms offered during contract negotiations.

If American car companies have had trouble offering quality for a competitive price, it's due to those legacy costs - that money could be used to buy higher quality stuff and have small cars that are fully competitive - or better - than import brands. But the UAW has got to be willing to force its members to actually do work - and quality work, at that. No more automatically defending a line worker if they're continually doing a crappy job, causing warranty costs to rise and reputation to drop.

It sounds like the UAW is starting to thaw on the idea that they can't get something for nothing. Let's hope that the union membership looks beyond themselves and how they impact the entire economy. NO MORE forklift operators making $100K - or even $50K. Reduce benefits to the same level that the average workers in this country make. When the car companies start making obscene profits and the cars are rated tops, THEN we can start spoiling the workers again.

 
At 12/04/2008 11:26 PM, Anonymous A. V. Oshawa, Ontario said...

How about the fat cats that make $30 million a year? You're telling me they can't survive on $2 million? I live in Oshawa, Ontario, Canada's new soon-to-be ghost town if GM goes under. My husband is employed with the contracted cleaning company inside of GM and believe me he doesn't make anywhere near even $20 an hour and he works like a dog. Without them, the line could not continuously run and production would be less, with more money lost.
I hate Jap Scrap, and imports that are impossible to find the right part (for a decent price)at your disposal when you need it. Our workers work hard, and I'm willing to bet that atleast 30% of the people posting on here drive a gm,ford or chrysler. ANd I bet you like your car too.
So before you post statistics get your facts right. The workers making $73 an hour have no doubt been there for their entire career and are high enough up in the company to control their way to frequent pay increases. While the bottom feeders, like my husband, have to work for almost 2 years to get a 25cent raise. The solution lies in GM and the government. The economy will furthermore go to shit and who knows how we will recover. Keep the plants open and decrease insane wages for the bosses in GM. Bail them out, for our future. For my children that may not have a home for much longer. Anyone else on the same page?

 
At 12/05/2008 8:25 AM, Blogger Thomas Blair said...

A. V. Oshawa, Ontario,

So, in other words, for the children?

I don't think I've heard that particular argument yet (at least in this context). Usually you hear that about throwing money into the abyss of public schools or raiding some pot-smoker's house at 3am and killing his dogs.

Kudos to you. Even bailing out GM, Ford, and Chrysler can be turned into a for the children argument.

 
At 12/06/2008 11:53 AM, Anonymous Anonymous said...

It shouldn't just be about "the children." It should be about saving America. It wasn't that long ago that the common statement was made, "If GM goes away, so goes the country." I still believe that statement holds true today. You are conceivably talking about upwards of 3,000,000,000 people out of a job within a couple of years, and potential lost local, state, and federal revenue of $150,000,000,000.00. That's right, one hundred and fifty billion dollars in lost revenue. That kind of lost income, could potentially bring down entire cities. So, the way I see it, give the American auto industry a loan, not a "bailout" like the banks, now, or use taxpayer money later to bailout towns, cities, and/or state governments.

 
At 12/06/2008 2:55 PM, Anonymous thomas blair said...

Anonymous 12/06/2008 11:53 AM,

3,000,000,000 people

So, half the world will be out of a job if GM goes under?

 
At 12/07/2008 1:15 AM, Anonymous Anonymous said...

This blog post looks like sloppy work to me. Too much confusion about the difference between "cost" and "compensation" and too many comparisons of figures with different cost bases. Your statistics put me in mind of Benjamin Disraeli.

 
At 12/07/2008 1:25 AM, Anonymous thomas blair said...

Anonymous 12/07/2008 1:15 AM,

If they're wrong, correct the numbers.

 
At 12/08/2008 4:29 PM, Anonymous Anonymous said...

Bankruptcy would not mean that the Big 3 would stop making or selling cars. It would not put all those auto workers out of work. Hopefully, it would put some of the workers out of work, reduced middle level management levels, force all the other adjustments that bankrupt companies make. Why is the Chicago Tribune able to go bankrupt? Because Sam Zell knows how to make the necessary adjustments. Good businesspeople don't need bailouts.

 
At 12/08/2008 4:33 PM, Anonymous Anonymous said...

Why do college graduates tend to make more than high school graduates? Should legacy workers continue to get the health benefits promised when the business was doing well? What is fair?

 
At 12/09/2008 3:26 AM, Anonymous jimmy said...

http://videocafe.crooksandliars.com/heather/countdown-worst-person-taking-70-hour-auto


Everyone who thinks we make $70 an hour needs to watch this video. Idiots.

 
At 12/09/2008 8:12 AM, Blogger Thomas Blair said...

Jimmy,

No one thinks you make $70/hr. What was stated (repeatedly) is that the Big 3's labor costs are $73.20/hr. This number includes your cash wages and benefits, as well as the benefits of retirees. Read a little more closely next time and think before you call others "idiots".

 
At 12/09/2008 11:27 AM, Anonymous Jim Buraczewski said...

The auto industry is vital to the health of our economy and our national security. It is also a major source of national pride and identity. That being said over the past 30 years the industry has run itself to ground and it is now time that they honestly face the reality of the world as it exists today. Line employees, retirees, management and shareholder must acknowledge that they have been milking the system for years and they either change and change now or they will be gone forever. If however they do manage to see the light we have an unprecidented opertunity to restructure the entire industry at a very unique and critical time. But it must be a win win for both sides. It will do no good to throw billions of dollars at an industry that has no viable long term strategy for survival in todays marketplace. At the same time it would be pointless to give them money only to see them run it off-shore and not creating opertunity here in the states. I support providing a short-term "Bridge Loan" only if the time is used to come up with a realistic and comprehensive long term plan that takes into account the need to align the economics of the industry with current and long term reality but also acknowledges that the day of the gas guzzling SUV that costs $50,000 is over and that the vehicle of tomorrow looks much different than the one of today.

 
At 12/12/2008 1:26 PM, Anonymous Anonymous said...

Hell with the auto workers. Who do the think they are. In this Day & time, everyone is contributing to their healthcare. Even the coal miners that risk their life everyday. And they think that they stand there and turn a few bolt on the line they shouldn’t have to contribute anything for their heathcare for putting the piece of junk cars out that they do! Not alone the rediculous rates they make. I didn’t know they had it so easy. But I’ll tell you one thing. Let them go out and find out what it is to make it without the union to back them. Management was stupid to even consider the unions offer. Bailout or not. I’ll never buy a car from these spoiled people. The steel industry didn’t get bailed out , so neither should the junk auto manufacters get bailed out. If anything bring the steel back and junk the car industry.

 
At 12/15/2008 9:53 AM, Anonymous Anonymous said...

I heard from head of the UAW that wages are only 10% of the cost of a car. If that's true then here are a couple of questions:

1- Would we buy American cars if they were 5% cheaper? I imagined 50% salary cut for auto workers to arrive at this. Is this really a
cost issue? Would we buy American cars if they were as cheap as Kia or it's reliability that we are looking for?

2- Imagine we cut the auto workers wages by 50%. How would that less money in the pocket of millions of average American families impact the economy as a whole? Can we make a guess that there would be more disclosed houses in the market?

3- Could the failure of the bailout bill by GOP members of Senate have to do with long lasting affiliation of UAW with Democrats?

4- Let's say we bailed them out this time. What guarantees they're
not coming back next year?

What we need is a clear plan for improvement of quality and reliability. Is that really possible with lazzy ass American workers?

 
At 12/17/2008 6:33 PM, Anonymous Anonymous said...

$73.20 is a totaly assinine wage figure, thrown out to the ignorate public. The cost of line workers is arround 8 to 10% of the cost of a car. The salesmanager of the dealership makes $250,000.00 to 1 million plus each year, plus a salesman that knows little or nothing about the car he's trying to rip you off, making $100,000.00 a year. You people are looking in the wrong place, to blame for the Big 3's problems. The UAW worker makes the least of all these employees. I had a brother in law that made $200,000.00 ten years ago, shuffling papers at Ford. Country Club memberships, so many perks it was insane. Get your head out of your butts, learn some real facts, not just union busting BS. We are fast becoming a third world country as far as real wages are concerned. You will see what happens to the other auto manufacters, if the Big 3 goes under and take all the little suppliers with them, there will be no autos built in the US. It will also cost far more to take over the pension obligation, than to just LOAN them the mony "loan" being the key word. Congress just threw $700 Bn to wallsstreet, talk about being over paid. Man people are just so easily brainwashed.

 
At 12/19/2008 8:42 AM, Anonymous Anonymous said...

Jeebus...you people are stoopid. That $70/hour figure includes pensions paid to friggin' retirees. Aka...people besides the gawdamn individual autoworker.Idjits...

 
At 1/03/2009 6:35 PM, Blogger Jim Fedako said...

Missing is the per hour income of federal employees. That would be a great addition to the graph.

 
At 1/03/2009 6:49 PM, Blogger Richard said...

Where can I get one (any?) of those jobs.

The most I ever made in my life was $16/hour, and I lived quite well at that time, and even saved a bit. But that job didn't last forever.

It's hard to feel sympathy for anyone who averaged such significantly higher wages over a longer time. I don't think taxing people like me to help the people who employ people like that is really gonna work.

 
At 1/04/2009 12:52 PM, Blogger madasheck said...

As a recently unemployed automotive engineer in Detroit, I say - let them fail. We should have done the same with the banks and AIG, but that's another story.

I'm finding a job far away from Michigan and far away from automotive. You see, since I paid my own money for an education which gives me mobility, I can find a job elsewhere for the same or better wages. A UAW worker generally can't, so the rest of us suckers are expected to keep them "in the style they've grown accustomed."

Big surprise the US economy is in the dump with that being the general attitude. Correct me if I'm wrong, but there was a time when the only thing we were entitled to was life, liberty, and the persuit of happiness. Not guaranteed retirement income, not free healthcare, not a great paying job that anybody, regardless of skill can do, not even "free" public schooling (with average cost per student far higher than superior private schooling). Yes - private means subject to competitive pressure - which means superior.

We wonder why we're losing our edge, it's because we expect far too much for doing far too little. We expect large rewards with absolutely no risk.

Sickening

 
At 1/16/2009 10:22 PM, Anonymous Anonymous said...

My Chevrolet truck was assembled in Mexico, If we are going to bail out GM make them keep the jobs in the US, I am a supervisor on call 24 hours, manage 26 maitenance workers. At 40 hours my salary would be $30 an hr. but end up making about $22. Wages must be part of the issue, I love my chevrolet but I want it made in the USA. Workers should be able to meke adjustments to keep their jobs. Intern the execs are making all the money and should do so only if the company is amking money and do not deserve even half of what they are making if the company if failing.

 
At 1/28/2009 11:44 PM, Anonymous Anonymous said...

I was a child when the UAW and GM came to terms on the contract that gave the hourly worker 30 and out back in the early 70's and my dad was the local union president. In the 30 plus years that have passed GM could have fully funded the retirement package they agreed to just like the teamsters did. From my view point on this it is not so much that the hourly employee is to blame for this mess but the blame lay's with the CEO's and CFO's who have not only run the company in the ground but several of them have walked away with hundred's of millions of dollars in compesation. My question out of all of this is if a hourly employee can be terminated and walk away with what ever the state say's is fair unemployment insurance why is it right for the people that made the poor choice's that took the company to bankruptcy court and walk away with a Brinks Truck full cash to set thier family's up with enough for the next 10 generations.

 
At 2/09/2009 4:22 PM, Blogger ALLSovereign said...

If we can afford to bail out Trillionaires then why complain about bailing out someone who makes a mere $80 an hour?

What do these neocons hate working America?

 

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