The $73/Hour Big Lie

We've all heard it spewed from Republican mouths, how Detroit car makers pay $73/hour to their workers. That's why we can't compete with Honda and Toyota. This NYT piece shows how that argument is putting your head in the sand, ignoring the reality.

So here’s a little experiment. Imagine that a Congressional bailout effectively pays for $10 an hour of the retiree benefits. That’s roughly the gap between the Big Three’s retiree costs and those of the Japanese-owned plants in this country. Imagine, also, that the U.A.W. agrees to reduce pay and benefits for current workers to $45 an hour — the same as at Honda and Toyota.

Do you know how much that would reduce the cost of producing a Big Three vehicle? Only about $800.

The $73/hour figure includes three parts, as suggested in the paragraph above:
1. Retiree benefits, which cost about $15/hour for each current employee. As stated in the article:

The crucial point, though, is this $15 isn’t mainly a reflection of how generous the retiree benefits are. It’s a reflection of how many retirees there are. The Big Three built up a huge pool of retirees long before Honda and Toyota opened plants in this country...These retirees make up arguably Detroit’s best case for a bailout. The Big Three and the U.A.W. had the bad luck of helping to create the middle class in a country where individual companies — as opposed to all of society — must shoulder much of the burden of paying for retirement.

2. Fringe benefits, which cost about $15/hour/worker as well.
3. The final part is actual pay for wages, overtime and vacation pay. That averages out to about $40/hour, which varies up to $43/hour.

Those numbers average out to $73/hour. The Big Lie. Which leads us back to this:

Do you know how much that would reduce the cost of producing a Big Three vehicle? Only about $800.

That’s because labor costs, for all the attention they have been receiving, make up only about 10 percent of the cost of making a vehicle. An extra $800 per vehicle would certainly help Detroit, but the Big Three already often sell their cars for about $2,500 less than equivalent cars from Japanese companies, analysts at the International Motor Vehicle Program say.

People don't want their vehicles. THAT is the problem. Should the UAW agree to lower wages, maybe. Should we give auto workers access to medicare, which would be much cheaper for the companies, sure.

But, that won't fix the problem. The problem is that Detroit couldn't keep up with the times and produce quality vehicles with better gas mileage. My last vehicle was a Ford Focus. It was complete junk. I won't buy an American vehicle anytime soon because of my experience with that car. The author of the article has a similar story.

My own family’s story isn’t especially unusual. For decades, my grandparents bought American and only American. In their apartment, they still have a framed photo of the 1933 Oldsmobile that my grandfather’s family drove when he was a teenager. In the photo, his father stands proudly on the car’s running board.

By the 1970s, though, my grandfather became so sick of the problems with his American cars that he vowed never to buy another one. He hasn’t.

So long as the solution to this problem relies on cutting costs and not on innovation, Detroit will fail.

Comments

This is all about hating unions, mostly....

Here you have a bunch of A-holes in the US Senate, who never gave any speeches about excessive executive officer compensation, railing away at the workers, like they're experts in what will work. First off, this whole fiasco started with the gov't neglecting regulation of the financial markets, and that led to a credit squeeze in business, eventually. These companies need a large amount of liquidity to keep operating. And I agree that the other problem, which has been going on since the 60s, is the lack of engineering and innovation, as you stated. The society that many of these politicians seem to want, and is coming, will be just like Mexico, who has plenty of wealth, but largely in the hands of the few 'chosen' people.

The UAW's day of reckoning is here

They done sucked that titty dry. Now they're looking for another. The writing's been on the wall for years.

http://www.businessweek.com/magazine/content/05_19/b3932001_mz001.htm

Why GM's Plan Won't Work...and the ugly road ahead

"The carmaker is saddled with a $1,600-per-vehicle handicap in so-called legacy costs, mostly retiree health and pension benefits."

"Remember the old ad slogan, "This is not your father's Oldsmobile"? Well, this is no longer your father's auto industry -- but GM is still run as if it were. Fifteen years ago management struck a deal with unions that made it all but impossible to close auto plants or lay off workers without incurring massive costs."

No way GM's going to compete. Stop trying to bail out the Titanic with a teacup. Get the bankruptcy over with now instead of later.

Those complaining about lack of innovation have never experienced what it's like to change work methods in a union shop.

p.s. The NYT is right behind them and soon will be asking to be bailed out.

I've heard about this lie on NPR

and on Olbermann.

The problem of a large pool of retirees is not going to go away - in fact, it's just going to get bigger. I think it demonstrates a need to move to a more equal way of paying for retirees. I don't have any answers, just a lot of anxiety about what will happen to me when I'm 67 or 72 or whatever the "retirement" age is at this point.

Pay/bennies for UAW workers

Ah, c'mon, y'all....this isn't a question of whether the UAW workers make ridiculously high hourly pay rates or whether laid off workers continue to receive ridiculously high pay rates without ever having to do anything but get up in the morning. This is about what the automakers have to pay for their labor contracts. It's far and away above what the foreign automakers pay overall that operate in this country. They're solvent...the American automakers aren't.

N E X T issue.

The best thinking is independent thinking.

Some facts would be helpful

just in case you were hoping to influence anyone.

:)

So, you don't believe this?

Look, Protzman, I can ask you for "facts" about everything you present on this blog and then you'd have to go to Google and get all of that and then I could question all of the "facts" you put on here and we could go back and forth like FOREVER. I know the deal and I see where you're going here. It hasn't been debated much in either the national news media or many other places whether the UAW asks more of the company than the foreign automakers. Why are you going there?

Give us a break.

The best thinking is independent thinking.

typical

When conservatives are called out and asked for facts to back up their statements, they turn it around and attack.

Typical Limbaugh/Coulter/O'Rielly tactic

The original post had numerous facts. Just in case

you didn't notice. You are really coming across as a just another hard-wired conservative for whom facts really don't matter.

As Stephen Colbert said, "Reality has a definate liberal bias." Too bad, so sad.

Until you spend some time doing some research and providing facts and links in your posts, you will continue to be viewed as just another right wing hack.

I actively oppose gerrymandering. Do you?

Facts or presentation?

That "original post" sure sounds like "facts"...but, how do we know that?

Where does that information come from? Please don't come up with some site or source that has a bias.

I'm questioning it...as I said I would. Just "facts" aren't really "facts" unless proven...correct?

The best thinking is independent thinking.

Well I counted at least 7 facts in Robert's piece....

You've posted zero. So far it's 7-0; you lose. His source is a NYT article for most of his info. What sources have you quoted? Again zero.

"That "original post" sure sounds like "facts"...but, how do we know that?"

The above quote is why I used the term "hard-wired" in my previous post.

I actively oppose gerrymandering. Do you?

I don't believe it.

Point well taken about facts. We don't need no stinkin' facts.

So yeah, I don't believe this. And it's not black and white. It matters how much "more" one group is asking for. More could be five cents or more could be five bazillion dollars. Don't you think the degree of difference counts for something?

This discussion has clearly fallen victim to the flaw of averages.

So...get ready for "fact requests".

Be careful what you put on here now, then.

The best thinking is independent thinking.

You're on

“One reason – covering the needs of its retirees costs GM more than $37,000 per active worker per year. GM has 360,000 retirees. In America, Hyundai has zero.”

It's not just one reason, it's THE reason. And I suppose you'd say, "Well fuck a bunch of retirees. Tough shit that they had a contract with their company. They shouldn't have bought into that "invest in your employer" mindset.

You know that retirement bond fund you either have or would like to have one of these days? Imagine if they said, Sorry Mr. Smitty. We said we'd give you back that money one of these years, but you know what? We aren't going to do that. New rules.

************

Thou shalt honor thy contracts.

You know the sadness of this situation

just hit me squarely after reading these posts.

There are two scenarios clashing here that can not be squared.

There is the loyal hard working union employee (or just plain worker) that not so long ago lived the American Dream, worked all those years for the company, invested in it, believed in it, raised a family when it took one person's salary to do the job.

Then there is the global economy which has no loyalty, only the greed necessary to make the next quarter's profit statement look good. Employees are not invested in these operations because there is no investment made in them.

The symbiotic bond between employer and employee has been broken.

I wouldn't say that James

Look, first of all I wouldn't use that kind of language and second of all, that article I posted a link to didn't say the automakers shouldn't make good on their contracts. I have been trashed big time here for not giving facts on my posts...and maybe I deserve some of that...but no where have I ever said the Big 3 shouldn't honor their obligations to union employees.

This is a big delemna for the Big 3, of course. How do they reorganize and come up with a profitable business model and change their commitments in an equitable way with the union membership? It's going to have to happen...no way around it. But, it's got to be done bi-laterally. They're going to have to go back to the table, much as I hate to say it.

The best thinking is independent thinking.

I get your point

I'm just not sure what you propose should be done. Current UAW workers have salaries that are more or less at parity with workers in other auto plants. The cost structure is out of whack because of pensions and health care costs.

I don't have an answer either, but I don't think damning unions as the root of all evil is either productive or accurate. (I know you're not necessarily doing that, but plenty of people are.)

J

PS Sorry about the language. I sometimes use it for effect ... and I should do so less often.

Capitalism is about competition

James, I don't have all the answers, of course. If I did, I'd be in D.C. :-)

I believe that the Detroit automakers will have to get very lean...extremely lean. They're going to have to come up with automobiles that compete with the Hondas and Toyotas and such. They're going to have to renegotiate all of their contractural obligations including but not limited to labor, suppliers and with the states that require them to have a certain number of distributerships in order to do business in their state. They have to have a completely new business plan...a new model for the way they work to make a profit. Will people get hurt? Of course. It's the nature of capitalism. It's still the best economic system in the world so far.

Yes, I do believe that retirees worked their whole life to achieve what they have now and should not have that affected. However, anyone going into retirement in the future will have to be affected to make these companies solvent and back in the black financially.

The best thinking is independent thinking.

We're on the same page

I agree with most of what you've said, and frankly, I'm not all that optimistic about the outcomes no matter how much or how little the government lends the industry. For me it's about managing risk. At this point in our economic picture, the risks associated with sky-high deficits and misdirected funds are less than the risks associated with a full-fledged global meltdown.

You are right, contracts will need renegotiatation

However, where I part ways with the Republican's plan to overthrow American unions (which is essentially what they wish do here) is that it undermines decades of progress in the American workforce. If the Union paradigm is to be discarded, where will worker advocacy come from? One person fighting for his/her own rights in the workplace is not going to replace the power brought to bear by the masses.

Again...republicans aren't planning to overthrow unions

Republicans, or at least many of them, see unions as unneeded in our country due to labor laws that protect workers and they see unions as being a drag on businesses.

Many democrats disagree with that. It's why democrats, in most cases, get union support during elections.

We could argue that all day long. But, I disagree that the GOP has a plan to end unionization in America.

The best thinking is independent thinking.

Did you see the memo?

http://thenewshole.msnbc.msn.com/archive/2008/12/12/1713569.aspx

From:

Sent: Wednesday, December 10, 2008 9:12 AM

To:

Subject: Action Alert -- Auto Bailout

Today at noon, Senators Ensign, Shelby, Coburn and DeMint will hold a press conference in the Senate Radio/TV Gallery. They would appreciate our support through messaging and attending the press conference, if possible. The message they want us to deliver is:

1. This is the democrats first opportunity to payoff organized labor after the election. This is a precursor to card check and other items. Republicans should stand firm and take their first shot against organized labor, instead of taking their first blow from it. emphasis mine - LCC

{snip}:::

The sooner you can have press releases and documents like this in the hands of members and the press, the better. Please contact me if you need additional information. Again, the hardest thing for the democrats to do is get 60 votes. If we can hold the Republicans, we can beat this.

It's pretty plain in the bolded language there. "Take the first shot" makes it clear what the intention is.

I think the original article summed this up nicely:

The Big Three and the U.A.W. had the bad luck of helping to create the middle class in a country where individual companies — as opposed to all of society — must shoulder much of the burden of paying for retirement.

A couple random thoughts pop into my head.

  1. If all these retirees were moved over to full Medicare, it would probably save the Big 3. I wonder how much they pay private insurance companies to insure these folks.
  2. Are Hyundai, Honda, and Toyota plants in the US using the same parts manufacturers as GM? I seem to remember hearing a commentator saying that the Japanese companies do NOT want the big 3 to fail because they rely on the same parts manufacturers, who would probably go out of business.
  3. Isn't it nice that if Hyundai, Honda, and Toyota use the same parts manufacturers that WE built up these plants for them to come in and use?
  4. Remember how well Midway was doing when it first started? JetBlue? I remember reading that the test of these airlines would be 5 years in, when their planes start breaking down. When they started, they all had brand new planes. Low maintenance, low repairs, low cost. What happens when they have to start replacing parts and jets like Delta and United? Same goes for Hyundai. It's great that they have no retirees, NOW. But, in 20 years they will have tens of thousands of retirees. Unless of course we let them just FIRE all the retirees.
  5. Lastly, how sad it is that libertarians seem so hell bent on throwing the elderly to the wolves.

Jesus Swept ticked me off. Too short. I loved the characters and then POOF it was over.
-me

I dont get this

GM is not selling enough cars. Do the workers design the cars? Do they sell the cars? Maybe we should think about firing some engineering or marketing executives instead.

Said another way, if you tell me what to make, and I make it, why is it my fault if you can't sell it? Unless when I make it the thing doesn't work, but I doubt thats the problem. I have a UAW car (model year 2000) and it works great, doesnt have any problems in terms of being built badly.

"Keep the Faith"

I have a Chrysler - a 2006 model

I love my car. However, our other car, a Nissan that is heavier and has a bigger engine, gets better gas mileage.

That is my issue with UAW cars.

Poor planning

I don't think fuel efficiency is why the Big 3 are dying. I really don't. I think it's quality and reliability. Most of my family now owns Japanese cars and all for the same reason - reliability. My turning point came with a 2000 Ford Focus that just kept falling apart, literally. Among those who continue to drive American Made there are only two reasons. First, brand loyalty. Second, cheaper sticker price.

Cheaper sticker price is a complete farce in most cases.

About 5 years ago my sister bought a Tahoe and my father-in-law bought an MDX. The sticker price difference is HUGE. However, the MDX gets 15 mpg MORE than the Tahoe. My sister drives about 20,000 miles a year, she lives in a rural area.

She is buying 2000 gallons of gas a year to drive 20,000 miles, while with the MDX she would be buying 800. That is a difference of 1200 gallons of gas a year. Now, for ease of math, let's say the average price of gas is $2/gallon. That means she would save $2400 a year on gas. That is about $200 a month in gas EXTRA, add that on to the car payment and it probably costs about the same to drive both vehicles for a year.

The difference, to get back to my original point, is that the Tahoe will fall apart while the MDX is still going strong.

Jesus Swept ticked me off. Too short. I loved the characters and then POOF it was over.
-me

I have a ford mustang and a toyota pickup

my mustang is the 2003 mach1, goes fast, fun to drive, etc. Would not want to take it on a long run as my back would die. The cost to replace parts on it are high. It rattles, but overall it is a good car. 26,000 total miles. I doubt this car will ever see 100,000 miles before something big happens to it that forces me to park it.

My toyota is an 88 PU. plain jane nothing fancy. That thing will just keep running. I have every convidence in the world that when I go outside and turn the key, it is going to start and is going to run. It will get me where I want to go, pick some stuff up and get me home. I can take it on a long run and will be mildly comfortable on the trip. It is beat up. It only gets washed when it rains outside and I decide not to park it in the carport. I do not have an expectation that this car will ever die. If something does break on it, I am convident that me and my friends will be able to fix it and go another 20 years. Only if the cab of this thing falls off will I have to park it. 150,000 miles but whos counting?

Remember back in the 70s when Datsun and the others where trying to break in the market? I remember folks saying ill never buy that jap crap. Well, the Japanese auto makers heard those statements and did something about it. They are not making crap. The big 3 did not hear that about their cars and have not kept pace.

It is going to be lean times for the big 3 and probably one is going to die or get merged. Cars will be bought. Consumers will buy the best product available in their opinion. Hopefully, the big 3 will learn this lesson.

Wow

This is insane in a sick sort of way.

Maybe The Car Act should come with draconian salary caps and binding contracts that put executives into servitude.

One Important Item not discussed...

is the impact to the US government (Medicare and Pensions) if these three fail. According to this article by Gregg Easterbrook http://sports.espn.go.com/espn/page2/story?page=easterbrook/081125

"Suppose General Motors, Ford and Chrysler went out of business. Medicare (and in some cases, Medicaid) spending would rise by billions of dollars. General Motors says it spends about $8 billion annually on health care and pensions; most of this cost would shift to taxpayers, indefinitely. In regard to pensions, failure of the Big Three would foist much of their obligations onto the federal Pension Benefit Guarantee Corporation, which in theory is an independent company supported by insurance-like payments but in practice is a pass-through mechanism for the national debt. Not only would taxpayer pension subsidies rise should the Big Three fail, we would reach the repulsive condition in which average workers who themselves have no special pension deals were being taxed to provide extra-sweet pensions for retired autoworkers."

F-One
I never meant to say that the Conservatives are generally stupid. I meant to say that stupid people are generally Conservative. I believe that is so obviously and universally admitted a principle...
John Stuart Mill 1866

My understanding of universal health care

was this was going to happen regardless. Once a program was established, it would quickly take on (absorb) the health care coverage of many companies. This looks like the first rounds in that and we do not have universal coverage. Folks are going to need coverage. The plan I read Sen Clinton was advocating (only one I read) "assumned" companies like the big 3 would not lose their health care and we would not get a flood of folks into the system.

I see the big 3 going into bankruptcy. When they do go, they will resettle everything at that time. Thin out the fat and only pay for what is needed. "these are tough times and its either this or we shut our doors completely". Things are going to be drastically reduced.

How the country handles these massive companies will determine how we handle the rest of the companies that are going to go down this road.

This is not the end, but the very beginning. This is why I would caution toward slow. Know what we really should do. I do not see a plan on Capitol Hill. I see lots of people running around trying to help and nothing constructive is getting done. What IM most afraid of is all this help is only going to postpone the inevitable. Washington and the US industry needs to come together to find a solution to what is happening to us. The real reason as to what got us here needs to be disclosed. Failure to do that will result in the cancer not being corrected.

Congress/the prez/industry needs to identify what got us here and implement steps to stop the down trend. No lesson learned are being derived.

Now is the time for us to come together as a country. To figure this out, not as Dems and repugs, but as Americans.

We need to stop looking for the bad in the process so we can blame someone and start fixing the bad in the process.

Great advice

Dang I miss you.

Health Care

Again, I would love to know what the Big 3 have to pay for retirees or even for active workers to be in private plans. I think they could be saved by allowing them to "buy-in" to Medicare. For all their employees and retirees. I know that Medicaid in North Carolina costs about $2500/year for each person. Imagine if every worker at the Big 3 only cost, say, $2000 to insure for the entire year. After all, Medicaid serves the poorest, least healthy among us. Even if they cost $2400, which would be $200/month. How much savings would that be? Again, not GIVING them Medicare, but allowing them to buy into the system. Heck, you could even make that the bailout. We pay for every one of their employees and retirees to be on Medicare for one year. Isn't that about $1500/car in savings?

Get the workers to agree to a few things, get the health care off their backs for one year, and instead of lowering the price of the vehicle by $1500, add $1500 in REAL value. Like better engines, better parts, better gas mileage. Use that money to retool the factories to turn out lighter, smaller SUVs that get good gas mileage and don't break down all the time.

Jesus Swept ticked me off. Too short. I loved the characters and then POOF it was over.
-me

the strain

This is a stark contrast between Dems and Repubs.

Why are the Republicans not being painted as anti-American?

I could write so much, but do not have the time.

What about American culture?

-I really wish the news would be focusing on a labor union that saved their jobs, rather than a governor!