Tuesday, November 18, 2008

Think losing the Big 3 will be a mere blip? Think again.

Why is Paulson allowing this kind of wheeling and dealing to take place with the $700 billion dollar bailout fund? It should be used to help save the jobs of hundreds of thousands of auto workers, who also happen to be productive, taxpaying consumers. You know, the same consumers Bush called on after 9/11 to help keep the economy going.

What a double-standard, one that could very well touch your life or that of someone you know. Watch the video and you'll get a good idea of just how many people's lives are affected by Detroit's auto industry.

I wanted to mention those $71 dollar an hour autoworker wages and benefits the papers keep talking about. What they don't tell you is those figures are based on old contracts and include the projected cost of lifetime health care and pensions. Under a new contract negotiated last year, union employees will make considerably less than that, some as little as $14 per hour, and benefits have been reduced too. (Another reason we should have universal health care.)

Union workers aren't the fat cats the media makes them out to be. In fact, UAW members are actually losing their edge against foreign automakers. From the Detroit Free Press, February 2007:
Workers for foreign automakers don't pay union dues, but they do share the costs of insurance and retirement plans. UAW-represented autoworkers get health insurance and a full pension after 30 years -- valuable perks they will fight to keep during contract negotiations this year.

But even accounting for Toyota employees' health care spending -- $700 per year on average, according to the company -- the [Toyota] Georgetown workers still made more in 2006.

General Motors Corp., which lost $10.6 billion in 2005 and didn't issue profit-sharing checks last year, paid its production workers an average of $27 an hour, GM spokesman Daniel Flores said. That would be a base of about $54,000 a year, based on a 2,000-hour work year. The $30 average at Toyota's Georgetown plant, which includes a bonus, equals $60,000 a year.

Ford Motor Co. and Chrysler Group representatives said GM's base pay figures are similar to theirs. Only Chrysler, which had a 2005 profit, paid a bonus last year. The $650 bonus was not enough to surpass Toyota's pay. [...]

Assembly workers for Detroit automakers last year remained a bit ahead of Honda's U.S. hourly workers, who made an average $24.25 an hour, or $26.20 with the $4,485 bonus they received. In November, Honda paid bonuses for the 21st consecutive year, the longest streak in U.S. auto history, said Ed Miller, Honda spokesman.

Nissan workers are paid $24 an hour in Mississippi and $26 an hour in Tennessee, but company officials would not disclose employee bonuses.

Hyundai Motor Co. pays its U.S. production workers less than other automakers. Wages at its Alabama plant start at $14 an hour and grow to $21 an hour after two years on the job, according to a January 2004 company release.
Detroit's automakers have been shedding workers by the thousands over the past decade and the average wages will continue to fall, but the difference between union and non-union autoworkers isn't as vast as the media makes it out to be. In fact, by 2011, Toyota's labor costs could exceed the Big 3 because they've been here for 30 years now and a growing number of their workers are paid top wages.

The domestic automakers are competitive with foreign ones, but they currently find themselves in trouble not of their own making. Credit has dried up, people can't get loans, and cars aren't selling. Don't blame the middle-class auto workers, blame those highly compensated Wall Street and Washington types who made a mess of things.

UPDATE: Dean Baker did a better job of clarifying claims that GM auto workers are paid $70 an hour than I did: "The trick is to add in GM's legacy costs, the pension and health care costs for retired workers. These legacy costs are a serious expense for GM, but this is not money being paid to current workers. The person on the line in 2008 is not benefiting from these legacy costs."


K. said...

Even if auto workers were making $71/hr, so what? No working man should have to apologize for making a good living.

This article is very informative:


For example, did you know that Charlie Wilson originally proposed the GM pension plan, and that Walter Reuther was skeptical?

Anonymous said...

If the bailout would offer some guarantee that they would retool and make a product to support lifetime pension, I would be all for it. Sadly, I am not convinced.

Jason said...

The UAW needs a little tough love. It derailed the Cerberus deal at Delphi. Today GM suffers a loss of about $2,000 per vehicle sold. On the other hand Toyota whose employees are not part of the UAW earns a profit of about $1,200 per vehicle sold. If GM was able to operate with labor prices near Toyota’s it would have pocketed an additional $29,715,200,000.

GM bailout nonsense

Kathy said...

K, you're right that working people shouldn't have to apologize for making a good living. Lower and middle-class (really middle-class, not the $5 million in earnings McCain mentioned) people should support each other in their efforts to do better instead of working against one another.

BTW, thanks for the link. I didn't know that Wilson proposed the pension plan. A CEO with heart.

Jason, as I mentioned in my post, the labor gap between Toyota and the Big-3 is shrinking and by 2011 Toyota's expenses could exceed those of the domestic autoworkers.

Also, from the EPI:

Union auto workers have already taken substantial hits on pay and benefits. For example, contracts negotiated in 2007 slashed wages for new workers by 50%. In addition, new workers will not be guaranteed any retiree health care benefits, and will not participate in the traditional defined-benefit pension plan. On top of that, the UAW agreed that the responsibility for health care benefits for existing retirees would be transferred from the auto companies to an independent trust, called a Voluntary Employee Benefits Association. Analysts now believe that the labor cost gap between the Detroit-based auto companies and the foreign transplants will be largely or completely eliminated by the end of the current contracts.

Besides, how will it help our economy to ask workers to reduce their incomes even further at this point in time? We need to put more money into people's hands so they can spend it. Part of the reason we're in this recession is because people aren't spending money.

K. said...

"BTW, thanks for the link. I didn't know that Wilson proposed the pension plan. A CEO with heart."

Read the article before you give Engine Charlie too much credit. It was part of an effort to head off both horizontal and vertical union organizing. It's too complex for me to explain here, but had the auto industry gone in the direction the unions were contemplating, they arguably would not be in such a fix today.

BTW, I may have asked this before, but have you read David Halberstam's The Reckoning? It's a must for anyone interested in the automotive business.

Kathy said...

K, I finally had a chance to sit down and read the whole article. You're right, Wilson was no hero, and had the entire country listened to Reuther, corporations and pensions would have been better off.

Gee, a union guy was smarter than the top honchos. Who would of thought? ;-)

Did you also take note of how much Wilson paid in income tax back then versus what CEOs pay today? Big difference.

I've never read Halberstam's book, but several people have mentioned it to me. I'll add it to my wish list.

K. said...

The Reckoning is one of Halberstam's best books. Like a lot of them, it ends in a rush, giving you the idea that he looked up and noticed a deadline approaching. But like his other books, it's exceptionally well written and more cohesive than a lot of them.

One thing I learned it was that when Robt McNamara was the head of Ford before becoming Kennedy's Sec'y of Defense, he badly wanted to build a fuel-efficient, reliable, no frills car. And the bureaucracy at Ford was so entrenched and the dealers had so much power that even the CEO of the company couldn't get it done! I'm oversimplifying, but this opened the door for the Japanese companies. They spent the 60's getting a foothold in the American market, and when the oil crisis of the 70's hit, they were ready and have never looked back.