We should not subsidize crippling labor costs
Even as Detroit’s Big Three teeter on collapse, United Auto Workers President Ron Gettelfinger said Saturday that the problem is not the union’s contract with the automakers and that getting the automakers back on their feet means figuring out a way to turn around the slumping economy.
Very interesting. Supposedly the Big Three “teeter on collapse” and the UAW refuses to concede anything. Auto industry shills are (falsely) telling anyone that will listen that collapse will cost all of those workers – plus more – their jobs. Are they that confident that their friendly, paid for legislators (and president elect) will transfer the heavy burden of union compensation onto the backs of the American people? Or do they not really think the crisis is all that significant – more of a manufactured cash crunch to elicit government aid and union concessions? If my livelihood was on the chopping block I wouldn’t stubbornly refuse to concede some ground on wages, benefits, or job guarantees.
Reflexively, Gettelfinger said that the culprit is the economy, not lush union compensation packages.
Instead, Gettelfinger blamed the problems the auto industry is suffering from on things beyond its control – the housing slump, the credit crunch that has made financing a vehicle tough and the 1.2 million jobs that have been lost in the past year.
“We’re here not because of what the auto industry has done,” he said. “We’re here because of what has happened to the economy.”
That is an utterly bogus argument. It reminds me of a coach whose football team just lost blaming the loss on the weather. Guess what: both teams had to play in the same weather. German, Japanese, and Korean automakers have all had to deal with the same economic conditions here in the states.
The problems at the Big Three should draw attention to the woes associated with unions.
Average compensation for UAW workers at the Big Three is over $73 per hour, while workers at Toyota receive $48 per hour. Why should we subsidize that largess? One could hardly argue that the UAW workers deserve that much more money since Toyota is able to make a superior product for far less.
The UAW struck a deal with Chrysler that forces the company to give laid off workers 90% of their pay until 2011.
Labor contracts have the Big Three and their suppliers paying 12,000 salary plus benefits to sit around in job banks doing (I kid you not) crossword puzzles. This costs car companies billions of dollars.
There are also high retiree benefit costs, job guarantees, and other such obligations (in addition to the ones mentioned above) that have distorted the labor market and helped push the Big Three to financial insolvency. Any “rescue” plan at this point must deal with the labor burden directly. A bailout written by sympathetic Democrats will do nothing to address the problem. Chapter 11, where labor contracts can be renegotiated, is likely the best bet.
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If the Democrats and Republicans in DC, who decry bailing out Wall Street at the same time outrageous bonus payments are still being handed out, want to be consistent they will also decry the outrageous union contracts forced upon the big three automakers. Sauce for the goose!
Elimination of the secret ballot for union elections will guarantee the destruction of all manufacturing industries in the US.
The article references a link to a BLS report that does not specify any particular company wage cost information. This article notes a base pay of $31 per hour for GM workers and $27 for Toyota. The difference in the number of retirees is also striking as GM has 460,000 and ToyotaNA has 1600.
The NPR article you reference cites the “Average Labor Cost per U.S. Hourly Worker” is $74 for GM vs. $48 for Toyota. I think retiree costs are included in “labor costs.” It sucks, but GM made promises that it does not appear it will be able to keep. It should never have given in to union demands for unreasonable, unsustainable retirement packages. I don’t want to pay for those bad decisions. I also like this note from the NPR comparison for GM’s average hourly salary: “Includes idle workers still on payroll and those on protected status.” Paying for idle workers is absolutely insane. That kind of absurdity has to end if GM & others want to survive.
Your post, Brian, is not accurate or honest. It is not like a coach blaming the weather. It would be accurate to say, it is a coach complaining because the refs said he could only use 3 players vs. 11 and his players had to be blindfolded and have their hands tied behind their backs.
The Big Three has the disadvantage of unfair trade and labor policies at least since 1981. In Japan, the Big 3 have to pay 40% tariffs. The Big 3 are not allowed to build factories there. Japan, Korea, China and Europe for that matter all receive government subsidies. And most foreign auto manufacturers receive subsidies from state governments here in the USA.
The wage and benefit costs between US and Japanese auto manufacturers were approximately the same. The difference was in retiree costs (pension and healthcare). Those were changed in the 2007 agreement to make the costs relatively the same (that is where the VEBA came in). In most of our competitor countries, they have national health care and government pensions.
Since our politicians and corporations are mostly anti-worker, the unions supported the worker by bargaining for health care and pensions along with other items. Prior to the unions, what was the conditions of most workers in the USA? Pitiful, at best.
It has been the UAW that has taken the most cuts in their contracts during the Bush Era, while management took the bonuses. The UAW have taken a lot of cuts in healthcare and monetary items.
It is management that makes the decisions on products and how money is spent. It is ironic how people are willing to blame the unions for managements incompentence and a bad economy. This bad economy is affecting all auto manufacturers, not just the Big 3. In early 2008, vehicle sales were projected at 16 million and if that was true today, the auto companies would be OK. Now, the auto industry will be fortunate to sell 12 million vehicles.
But, sometimes I wish you would get what you ask for. If one of the Big 3 goes down, they probably all will. Along with the parts suppliers to all automotive companies in the USA. Which means that there will be no functioning automotive manufacturers in the US–including the Japanese and European companies.
The burden of the Big3 to carry 775,000 retired workers under the UAW rules seems like a unsurmountable problem. All Big 3 should go bankrupt, put all the retiree costs on the Federal government through the Pension Benefit Guaranty Corporation, another GSE, and start over with no UAW, and no debt. Voiding the UAW deals is paramount to their survival.
Many of the suppliers that need the Big 3 to operate, and which also serve all the revered foreign-based domestic manufacturers, will not survive the loss of business.
Gregg, your IP locates you within one of the Big Three, which hardly makes you an unbiased advocate of what is best for the American taxpayers, but I’ll be glad to entertain your comment.
In your counter analogy does the union represent the blindfold and hand restraints? I get the 11 vs. 3 part since the union contract essentially forces the Big Three to pay for “workers” who aren’t even working!
Don’t act like the US doesn’t already subsidize the Big Three. I’ve decried the state subsidies for all industries, but I’m only one little voice. I’m sure if Ford chose to shutter a Michigan factory and build it here in Alabama (without union workers) the state would fall all over itself to give them a sweet deal.
Are you suggesting that if Ford was allowed to built manufacturing plants in Japan that they would suddenly start making gobs of money? That hardly seems plausible. I will heartily admit that the U.S. tax code punishes domestic manufacturers in the global market. Unfortunately politicians have convinced the public that it is best to punish companies for making money with the highest tax rate in the world. As such, US made products have taxes built into the price (and then get subjected to tariffs and more taxes overseas) while some foreign countries refund taxes paid on exported items. I’ve been screaming for this to be fixed for years, but a certain party blocks any attempt to have a sensible tax code.
Management should receive a hefty portion of the blame as well. After all, they did agree to the union contracts. They also misread the tea leaves of consumer tastes (repeatedly).
I’ll agree that unions once served a noble role. The pendulum has swung, however, and now they are impediments to agility and innovation. Their incessant demands for compensation in excess of what the work is worth have helped push jobs out of America. Now they want to play chicken with bankruptcy – possibly dealing another staggering blow to American manufacturing.