If the only way to save the Big 3 is to slash wages, what have we saved?

[hedgehog]

I grew up in the Rust Belt and labor history was part of my family lore. To me, the "high wages" paid to auto workers and steel workers meant that people without a college degree could give their families a decent place to live, a dependable car, two weeks at the Lake and a shot at college if the kids were smart enough followed by a secure retirement. A year or so of overtime paid for a boat or other special purchase.

If we don't ensure that the Big 3 provide middle class wages to the people building the cars, why should we care?

[w4rma]

1. Nothing at all. The non-management employees should be getting raises, not reductions. (nt)

[lumberjack_jeff]

2. There are only two reasons to save GM

1) maintaining manufacturing expertise and capacity is a vital national interest
2) there are millions of family wage jobs (and retirees) which depend on the auto industry.

[sarcasmo]

3. Shareholders.

[madokie]

4. Its not the union wages causing the problem

nor the hourly workers its the blockheads in upper management.

[dmallind]

7. And one quick question here.

Let's say we agree (and in fact we probably do) that US auto executives have done a lousy job and received too much money for doing it. Let's say we agree (we probably don't, but not all that relevant to the present scenario) that union demands for pay and benefits and restrictions on business decisions were entirely appropriate and not at all unreasonable.

It blows, but that leaves us where we are. That's the important point.

Now I'll use GM because I already know the data. GM employs 77,000 union workers. The front line workers averaghe somewhere around $28 an hour in pure flat rate pay.

That means front line workers cost GM in pay alone (I'm exempting benefits on both sides because we have no way to quantify discrete and incremental costs per worker or executive) $4.3B a year.

GM's CEO was paid (bonus included) $5.7M last year.

It's safe to assume he's the highest paid guy.

There would have to be 800 people making that much to equal the pay rate of the labor force. Clearly there's a tiny fraction of that number.

Top executives are indeed overpaid. They indeed screwed up. There just aren't enough of them making enough money that even removing them entirely, which would by the way cause GM's stock to be entirely worthless overnight - investors kinda want companies to have SOME management, would be all that significant an expense compared to the labor force. That's entirely due to the difference in umber of executives to number of workers, and is nothing at all about whether either group is paid correctly. The biggest part of costs for a company like this will ALWAYS be direct costs - not overhead or SGA expenses. Their annual report is available online. The executive pay is not covered in COGS (worker pay is) but in SGA. See which number is the biggest by far.

[madokie]

12. Well I read here yesterday that ceo wagoner made 21 mil in '07

I don't trust any of your numbers, sorry, nor the argument you make

Oh and you're right we won't agree on cutting the union wages or number of union laborers. again sorry

[dmallind]

17. GM's annual report (audited) is available online. read it if you disbelieve.

Just sticking fingers in ear and pretending I'm wrong means bugger all. be sure that if you add in things like pension benefoits you also dfo so for workers - I used PAY.

Oh and stock OPTIONS are worthless - they can only be exercvised at a far higher rate than the stock is trading at now. Stock GRANTS are worth whatever GM stock is now.

Feel free to post your results, again fairly applied in both cases - so include pension for pension and benefits for benefits, and demonstrate that my conclusion (that labor costs far outsrip executive costs - again I make no claims about fairness) is incorrect. I will certainly accept documented correction gladly.

[unpossibles]

20. true, but it's not just the executive's pay that bothers me

it's when they get rewarded handsomely for screwing up.

Yes, the CEO's pay is far smaller than the sum of the workers' pay, but those workers do not make the decisions, the CEO does.

[dmallind]

28. No argument there

As I've said before yes unions made unreasonable pay and conditions and benefit demands, but who doesn't want to maximize their own pay, job security and working conditions so how can I blame them? Executives do too. And those in between like me.

And of course the actions of individual executives are more detrimental to the company than those of workers when they screw up. That's why they get paid a shitload of money. I don't think CEO's are any more prone to screwing up than line workers. This strange DU idea that anyone who wears a shirt with their name on it is a flawless ideal of consummate skill and proefssionalism (even more so if they pay dues so they can work there for some reason) and anyone who wears a tie is by definition a self-serving incompetent ass who couldn't find his backside with both hands is just as silly as the reverse. It's just that when executives screw up companies go in the shitter. When workers screw up a car has to get fixed. The latter has happened many times obviously. Now we are seeing the former.

[unpossibles]

30. both definitely happen. I've seen it

and actually, sometimes the consequences of bad line workers can be almost as devastating to a company's reputation, but in this instance, we are seeing problems from the top for the most part. I'm just sick of labor getting bashed as the reason the economy stinks.

When supply-side asshats cut jobs then don't understand why no one can afford to buy their products, then blame their workers and the consumers for their bad decisions, it makes me want to scream.

[ieoeja]

23. So GM, Ford, Chrysler, Toyota and Honda all have idiots running their companies?

[hedgehog]

24. Umm, maybe you might have heard that if they don't get an emergency loan,

they're going under?

[ieoeja]

26. So you agree that Toyota and Honda also have idiots running their companies?

Because their sales are down exactly the same as GM, Ford and Chrysler's. The difference is that they continually receive government subsidies from Japan. All our three want is temporary assistance to get through a bad economy not of their making.

It's the economy, not the companies.

[madokie]

25. what does toyota and honda have to do with this

In todays testimony ford looks like they are not in too much of a bind. GM and Chryler otoh, yes is the answer to your question.

[ieoeja]

27. Their sales are down virtually the exact same as our three.

They are down "at least 30%". Ours are down "approximately 30%".

The difference is that they receive gov't subsidies from Japan. Our companies just want temporary assistance during this bad economy.

[Hannah Bell]

29. US automakers also receive subsidies. It would be a job of research to find out who

receives more.


$22.5 Million Incentive Package Helps Power
GM's New $501 Million Plant into Western New York

http://www.siteselection.com/ssinsider/incentive/ti0009.htm

[unpossibles]

31. Honda is doing just fine. Not sure about Toyota

http://www.forbes.com/forbes/2006/0904/112.html

Honda has never had an unprofitable year. It has never had to lay off employees. In the fiscal year that ended in March, profit grew 12%, to $5.1 billion, on $84 billion in sales. In the U.S., which accounts for 43% of Honda's sales, vehicle sales are up 7% through July, even as the industry slipped 5%. The company sold more vehicles in July than one member of the old Big Three, the Chrysler Group.

(snip)

Gunnar Lindstrom, who is charged with marketing Honda's alternative fuel vehicles in the U.S., believes that by 2020 six fuels will split the market: gasoline, diesel, biofuels, hydrogen, natural gas and electricity, perhaps working side by side in a single vehicle. "It's risky to have just one fuel strategy," he says. "In the event of a crisis of any sort, we would like to be flexible. These are insurance policies that have some realistic assumptions behind them."

[ieoeja]

32. That article is from 2006. n/t

[unpossibles]

33. true. I noticed that after I posted it

http://www.bloomberg.com/apps/news?pid=20601087&sid=aSV3RjQXwyqU&refer=home

sorry - was not trying to give false info - I saw that elsewhere and did not notice the date right away.

[dmallind]

5. Well hypothetically

A quick question.

If the other opportunities for employment for a worker with a similar skill set pay, say, $10 an hour and we have an industry that directly employs hundreds of thousands and indirectly millions where the current pay of, say, $28 an hour is no longer economically feasible, is it better to have those hundreds of thousands and millions employed at say $15 an hour (yes indeed a big drop from $28) or out of work and thus competing with other millions who are out of work or do low paid work for the $10 an hour jobs, which by the iron nature of supply and demand will likely bcome $9 or $8 jobs as more and more skilled and experienced people are clamoring for them?

A reminder that should not be necessary but doubtless will be: I make no claim whatsoever that these numbers are accurate, or that a cut from $28 to $15 is fair or a good idea. I certainly make no claim that CEOs make appropriate salaries or have done a good job. I merely suggest a roughly approximate hypothetical about one limited subset of this issue and possible outcomes.

[madrchsod]

9. 15 dollars an hour is a minimum living wage in most of america

our wages have`t increased since the early 70`s...


will the price go down on automoblies to 7500-10000 for a 4 door sedan?

[dmallind]

16. Probably all true

But unfortunately not that relevant to the question asked. What are we keeping if we keep GM at reduced but still market level or even higher wages? We are keeping the market level or higher wages. That's the only point I answered, and the only question asked.

Do you want a job for $15 an hour or no job if those are your only choices? Do I? Pretty easy call for me. I worked in the steel industry. Not union, but when the plants close we go to the same unemployment office. Think I don't get it? Do you think the guys who worked for the steel companies would like jobs back at lower but still market level or higher wages, or would they say piss it I'd rather have no job at all and have every steel town in Appalachia turned into a ghost town like a goodly number of places in the Midwest in general and Michigan in particular will be if the big 3 can't continue.

Cars will still be made. People will still buy them. Just like steel. But they'll be made by people with lower costs (pay and benefits and restrictions) and most likely made in either the deep South or other countries. Just like steel. Forgoing $15 an hour jobs because they think it's possible to keep $28 + lifetime full benefits and pension jobs when other counties and other companies have much lower costs is flat out self-destructive.

By all means fight the pay cuts etc when the companies have money and a likelihood of continuing to have money. But understand that if they fight pay and benefit cuts now it's steel all over again. Trust me.

[hedgehog]

18. It's time for us to stand together and say that a choice between not working and

working for less than a fair wage is no choice at all. Unions fought some of their toughest fights in the middle of the Depression.

[Freddie Stubbs]

6. I suppose that depends on how much they are going to 'slash' wages

How much are wages going to be slashed? Will the workers be making significantly more than they would make if they lost their jobs and had to find employment elsewhere?

[Sadie5]

8. The reason is

only one thing, Bush. He did what he set out to do, lower the wages and revive the poor segment of society. When Clinton was in office even the local McDonald's was paying wages around $9 per hour, now they pay $6 and people who are working 2-3 jobs are glad to get their hands on extra money. The McDonald's worker today is not the teen who works after school but a mother or father who sometimes wors 2-3 part time jobs. The one area Bush had trouble with was unionized labor and he needs to finish this before he leaves office. New hires at GM make around $14 with few of the good benefits the CEO's are complaining about. Get rid of Bush and the CEOs and things might be better again. The Republicans idea is that everyone should work for $6 per hour and like it.

[rubberducky]

10. Maybe, autoworker`s wages were used for extras, but that is no longer the truth.

I speak from first hand experience, when I say that one hell of a lot of autoworkers today supplement family members wages. Your kids that can`t make ends meet on thier wages, sometimes thier kids(your grandkids) don`t have health insurance, sometimes thier car will break down, or maybe they just don`t have the right clothing to get a job. If you have a parent that is trying to live on just social security, you absolutely MUST kick in some extra money for thier basic needs each month. Autoworkers who make decent wages are not just responsible for themselves. MOST help extended family (mainly because they think we are rich, and maybe we are by thier standards). My point is, union wages don`t just care for our little insulated families so we can have a nice car or a boat or a vacation home. We don`t only support theaters, restaurants, dry cleaners, gas staitions, grocery stores,hair dressers, baby sitters, hardware stores, and many many more services and stores, utilities, homeowners taxes and charities.

[madmom]

15. Thank you rubberducky, that is an excellent point, and I know that is the case

here and with many auto worker friends.

[gollygee]

11. Nothing

But that's what'll happen. It's what happened to American Axle. They said either everyone went from their old wage, which was on average $23, to the new wage of $14 or everyone would lose their jobs. So people took the $14 an hour. What else could they do? And now people who could support their families can't. People who could afford their houses can't. Etc.

[glowing]

14. Which is why we are just at the beginning of the nightmare of forclosures

and bread lines and total collapse of society.

[hedgehog]

13. One thing the unions always stood for is the right of a working person to

a decent wage. Like I said, a decent house, dependable transportation, education for the kids, health care, secure retirement and a little extra for two weeks at the Lake, time for a hobby like gardening, etc. It is not acceptable to me that anyone who works 40 hours, regardless of whether they're working in an office during the day or scrubbing office toilets at night doesn't have those items as a bare minimum. Just because I had the good luck to be able to do math and you didn't, why should you live in a run down neighborhood while I live in a mini-mansion? As madokie noted above, the disparity in wages from the guy on the floor to the guy in the corporate office is part of the problem. Ironically, IMO, part of the problem is that top executives across the US thought that they all should live like the Fords, but they forgot that the Fords didn't just run the company, they owned the company!

[K Gardner]

19. I don't think we SHOULD care. Now that they're including Pensions in their slash and burn, I say we

adopt Michael Moore's idea, buy them out and let those who want to work build mass transit.

[Romulox]

21. I wonder if Barack Obama will be famous for breaking the UAW when this is all over

The same way Regan is remembered for breaking the Air Traffic Controller's union.

[hedgehog]

22. Somehow I don't think someone who got his start working for the unions

is going to end up a union buster!

[Romulox]

35. He hasn't come out in support of Detroit so far...so what's stopping him? nt

[hedgehog]

38. Does support for the auto workers equal support for the proposed

bailout? Right now the auto workers are hostages - help the companies or the workers will be left in the cold.

[Romulox]

39. Obama IMMEDIATELY came out in support of the Citi bailout and voted for the TARP.

Was that also a "hostage" crisis?

[SoCalDem]

34. Hubris, Laziness & Greed is what's killing GM, Ford, Chrysler

They rested on their laurels all through the 50's & 60's.. Returning soldiers boosted their sales beyond their wildest dreams in the 50's & the pent-up demand from the war years meant that people bought cars..and a LOT of them.. Then came a shit-load of 16 year old boomers..every year a whole new crop..Cars were cheap enough back then for a teenager with a job & some help from M&D, to actually BUY a car..or in most cases, they got Mom's..and MOM got a new one..

They thought the party would never end..but those factories were a half-century old, and instead of constantly upgrading, rebuilding, they just kept patching things up and thinking that since they were the only ones making cars that the world wanted, there was no rush to "waste" profits on mundane things like that..

People wanted BIG cars..MUSCLE cars..flashy cars..and the auto industry kept churning them out..even though there were people warning about the oil crisis that might be looming.. Iran nationalized the oil fields we built for them..so had the Saudis.. the handwriting was on the wall, but everyone had blinders on..

Workers who had signed on as young men returning from war, were aging..the factories kept on aging. A worker who signed on at GM as a 25 yr old returning from war..in 1946, was 51 years old in 1972, & 58 in 1979 and since they hired so many , there were a LOT of people expecting that pension they were promised during the "good times".. why would they NOT expect a company like GM to honor its promises..?

The Oil embargoes drove home the fact that OTHER PEOPLE COULD MAKE CARS TOO..(Japan)..and their cars were efficient..and their factories were NEW (compared to ours)..and Americans WOULD buy them..and DID..

Instead of immediately launching into serious competition with the Japanese cars, & modernizing their existing factories, the solution they chose, was to start busting unions and to abandon those factories , to head to "right-to-work" states that offered them bargains on land, the ability to pollute-at-will, cheap workers, and tax breaks.

and even that was not enough, because although they devastated many towns they left behind, and relocated, and had lower costs, they were still blind & greedy for too many years, and too many people got tired of waiting for them to get their act together.. The Big Three have always pretended that everyone in the world was still eager to buy American cars.. they are not..and haven't been for decades..

They still OWE their workers what was promised them.

They make too many cars that too few people want to buy, or can afford to buy.. The "smartest" people they have been hiring cannot seem to figure it out..

The workers haven't changed.. they still do the job , and keep being MORE productive, but for what? They don;t control what happens to the company..they just show up every day and work.

Bailing the companies out so they can produce a car in 2010 that costs $40K will not "save" them..

Some decent looking, fuel-efficient $12K cars might..

[rustydad]

36. I agree

But we are now at Peak Oil and an economy that is heading south at the speed of sound. We are nationalizing Wall Street and the banks. Why not nationalize the automobile industry? Why not do what we did at the outset of WW2. Make the big three produce what the country needs not what they want. How about the big three set to producing a small light diesel fueled 100 mpg car. Comes in three versions, a two seater, a stretched 4 seater and a longer stretch 6 seater. No frills at all. Now power anything. Just a motor, wheels, a body, and seat belts. One car for all America. Sell it for cost. Use the spare auto industry capacity to dismantle all the gas guzzlers and use the material saved to build the new cars. That we have hundreds or thousands of different models of cars produced, most getting less than 30 mpg is insane. We can only afford one car. bob

[hedgehog]

37. A pension is deferred pay - not a benevolent promise by a paternal

corporation but a binding contract as much as any contract with a supplier! I know you understand that, but the point needs to be driven home to the general public.,