I was listening to a BBC talk show this evening and they broadcast something that I hadn’t heard from domestic news sources: the voice of an actual autoworker. He said “I worked for Chrysler for 10 years and I never got laid off until now.” He described how his union contract required Chrysler to pay him for 36 hours per week indefinitely even if he never went back to work. “Now I’m worried that they’ll run out of cash and stop paying me,” he plaintively concluded.
One wonders why we don’t hear from too many actual autoworkers. We hear from the union, various politicians, the managers of the Detroit automakers, but almost never the workers whose jobs are supposedly the focus of any bailout.
http://www.nytimes.com/2008/12/10/business/economy/10leonhardt.html
Is the math in this article to be believed? (The basics are that unionized auto workers of Detroit earn only slightly more than their non-union counterparts at Japanese-owned plants in the U.S., and, more importantly, that the labor costs associated with making a car are only about ten percent.) If so, one concludes that unions are not the problem and that these corporations are simply very poorly run. As a taxpayer/potential investor in these companies, I would conclude that further investment in the Big Three is a bad idea.
Alex: I have seen similar math in other places to that nytimes piece, so I think it is safe to assume it is correct. When a UAW worker is turning a wrench on a car, the cost to the company is 10-20X higher than what GM pays in Mexico, but not an unbearable business expense because the non-union factories in the U.S. are paying in the same ballpark. From what I’ve read, one of the things that is burying, GM, however, is that they spend a lot of money paying people who aren’t turning wrenches. Either the guy is retired, the guy has been laid off and they have to pay him anyway, the guy is in the factory but unusable because work rules restrict him from doing what needs to be done at that moment.
None of this means the UAW is responsible for GM’s woes. They acted in their members’ best interest (possibly short-term interest) and within the law. They extracted as much as they could out of GM. The GM management could have moved all of its production to Mexico and China if it had wanted to escape the UAW.
But really is it our responsibility as taxpayers to sort out GM’s problems? Obviously they have too many expenses and debts or they wouldn’t be running out of cash. We created the Chapter 11 process for companies just like GM. We even pay the salary for a judge who is an expert at figuring out what GM obligations can afford to meet going forward.
Here’s another take on the actual wages and motives behind the failed (so far) bail out…from the Los Angeles Times:
http://www.latimes.com/business/la-fi-gopunions13-2008dec13,0,3433168.story
Actual voices … yes, where is Studs Terkel when you really need him?! Have you noticed the further loss of “actual voices” on American TV as seen in the trend-oid for showing a news-making speaker mouthing silently in an insert-box on the screen while the commentator interprets in his or her own signature style?
And this too reminds me of Canadian broadcasting, where, last time I listened, “the news” gave people enough analysis and detail to have some real sense of cause and consequences — in hindsight and also projecting forward.
Something that would contribute substantially to the overall discussion of Chapter 11 for GM/Chrysler would be to cite some parallel cases for examination — cases of comparably major businesses that have filed, genuinely restructured and are now more robust. This hasn’t been one of my interests in the past and a glance at Google search just now looks terribly chatty. Who are the heroes of Chapter 11 restructuring?
Alex,
I don’t think the conclusion that the UAW/labor costs are not a significant part of the problem follows from the article. 800$, a figure the articles claims it could save, is all or most of the profit on a small car. I bought a 4-cyl, Honda accord for 20,500 in 2007, so 800 would be ~4% of my price. That’s huge! It’s not surprising the big three focused on larger vehicles that could be sold for higher profits. Its turns out American’s couldn’t really afford these cars in enough volume, especially when the economy goes down and gas prices go up. Nor could the compete very well with Europe and Japan for these higher profit cars.
The big three have also had their share of CEOs, so I don’t think we can find the right CEO to fix this. And the worst type of CEO, is one who knows he needs a lucky homerun to save his company.
So count this as another vote against the auto bailout (not that I will get to vote on it.
I put myself through college as a UAW worker (1960’s). The GM “pay for no-work” rules today are called the “jobs bank” (what a laugh). The original name was SUB-pay “Supplemental Unemployment Benefits” which pay the difference between Unemployment Compensation and 95% of the wage. This for the duration of the Unemployment pay.
Hard to comprehend “pay for life” if laid off. Something fishy w/this statement.
The biggest advantage the Japanese (US) plants have is vastly lower health/pension benefits, and the fact that (approx) 90% of the US plants were paid for by state “bring in jobs” programs. Mathematically, the state taxpayers got screwed (can not possibly recover the state investment).
I can assure you: An assembly line is hell. “People as robots”.
“Who are the heroes of Chapter 11 restructuring?”
The closest comparison to the collapse of the US Auto Industry would be that of the US Steel Industry thirty or so years ago.
You’ll see the “success” of bankruptcy when you drive through Allentown, Pittsburgh, or Youngstown.
“Obviously they have too many expenses and debts or they wouldn’t be running out of cash.”
Developing new cars is a very capital intensive process and it has to occur several years before a car is launched. If GM is to meet the upcoming CAFE regulations, they have to burn cash now, not later.
Presently, GM’s prospective customers can’t get loans to purchase cars. Only customers with ~720 FICO score can get a loan. It’s putting a big crimp in GM’s ability to sell cars.
I just talked with Toyota Marketing Manager last night and he said that their sales were off >35% and they were losing money in the North American market. Their expectation was that it was going to get worse, but that they had the cash reserves to outlast the competition if necessary.
Has anyone taken the time to think about the thousands of us who work in the factories that supply the parts to the Big 3? We are getting eliminated everyday, and no one seems to even care. We at Tenneco,inc.make your shocks……..and work hard….but our plants are being shut down, and layoffs are happening and we are in peril of losing our jobs……..and we are not making the big wages that you all are talking about…! We don’t have job banks and pay options thru our employer with the exception of vacation or unemployment…..and that is not a wage that helps pay any bills. I don’t mean to whine about this ,but you all seem to have options and we don’t. In Nebraska….there are few options….if any.At any rate things are getting tough everywhere, we have sister plants in Ga. and Ohio…and some others, but these three are being bantied about with plant shutdowns. We have been on pins and needles about it since Nov., and we did not get many answers , as our GM’s kept telling us that they just didn’t know anything. Thentwo weeks ago the head office told us that………..We have decided not make up our minds for another 6 months..so now we have another six months of wondering what we will do if our plant closes…..and where we would go to find another job that would at least pay us enough to be able to continue with our family obligations ……….SO PRESIDENT OBAMA……..IF THIS WHOLE THING WAS SUPPOSED TO BE A BAILOUT TO HELP US……..WHY HAVEN’T WE SEEN ANY HELP COMING TO WORKING AMERICA…….WHY DO ONLY THE UPPITY UP GET MILLIONS OF DOLLARS OF BONUS’S???????? aLL THAT MONEY CAME FROM US……….AND NONE OF US HAD ANY MONEY LEFT TO GIVE TO ANYONE…………………!