(1) GM, Chrysler, and Ford are on the verge of bankruptcy. On the verge, mind you.
(2) The Big Three employ about 250,000 people.
(3) All three have been struggling for years. Years in which the economy was up. But they were struggling.
(4) They lost market share to foreign competitors.
(5) Their cash reserves and credit have dried up.
(6) GM, the largest of the three, claims to be losing $1 billion a month. GM's Rick Wagoner went before Congress and said, "..without $25 billion loan, his company, and the others, would collapse."
(7) And $25 billion would be just the start. Even the government loan would not save these companies. An additional $55-$68 billion would be needed.
(8) For years GM has been building oversized and uninspired automobiles. Is it any wonder that no one was buying?
(9) Apparently lavish employee and retiree benefits along with strict work rules pretty much guaranteed inefficiency.
(10) GM compensates its workers an average rate of $73 an hour, as their competitors compensate their workers an average $48 an hour.
My suggestion has been, bankruptcy. Let them file. Granted, in these current economic climes they'd be hard pressed to survive a Chapter 11 reorganization. But maybe with a court-appointed trustee empowered to over-see a top-down restructure, we could possibly see these three car companies start over. Start over with new models, new management, and new labor contracts.
I don't see how a bailout could possibly result in a makeover of the auto industry. It won't save Detroit, regardless of the conditions applied.
3 comments:
Well, dear Sean, the $73/hour you quote includes their benefits package (ie insurance), where their foreign competitors are in countries where health care is offered to every citizen...the number is actually on par with the $48/hour of actual hourly wage that their competitors are earning...the $73 figure has been used to help turn the public against the union workers, who, as you stated before, have not been responsible for failed policy decisions. :)
Here's a fair breakdown of the "$73/hour" the Big Three claim to be spending on their workers....
The calculations show, accurately enough, that for every hour a unionized worker puts in, one of the Big Three really does spend about $73 on compensation. So the number isn’t made up. But it is the combination of three very different categories.
The first category is simply cash payments, which is what many people imagine when they hear the word “compensation.” It includes wages, overtime and vacation pay, and comes to about $40 an hour. (The numbers vary a bit by company and year. That’s why $73 is sometimes $70 or $77.)
The second category is fringe benefits, like health insurance and pensions. These benefits have real value, even if they don’t show up on a weekly paycheck. At the Big Three, the benefits amount to $15 an hour or so.
Add the two together, and you get the true hourly compensation of Detroit’s unionized work force: roughly $55 an hour. It’s a little more than twice as much as the typical American worker makes, benefits included. The more relevant comparison, though, is probably to Honda’s or Toyota’s (nonunionized) workers. They make in the neighborhood of $45 an hour, and most of the gap stems from their less generous benefits.
The third category is the cost of benefits for retirees. These are essentially fixed costs that have no relation to how many vehicles the companies make. But they are a real cost, so the companies add them into the mix — dividing those costs by the total hours of the current work force, to get a figure of $15 or so — and end up at roughly $70 an hour.
Counting the retiree benefits into what each current worker costs seems disingenuous to me. And most of the retirees have also contributed to their own pensions, so...should they, then, after 30 or so years of working for a company, paying into their pensions with their employer, then be denied what he or she paid into?
Also, our foreign competitors, who have factories in the US, have a much smaller group of retirees that they are paying, since they've not been working in the US as long as the Big 3, hence the Big 3 having more retirees to pay for...
It partially boils down to the lack of health care offered to everyone in the country.
OK. I think I'm off my soap box on your soap box now!
This is fun, when do we get our own show?? :)
My apologies. When I stated $73 an hour I should have specified where the information came from (LA Times), and that in fact it was an average. Thanks for doing due diligence and making the matter more clear.
As much as I am anti-union, but in a very non-violent way, and yet I would like to belong to one particular writer's guild, I do not lay the car manufacturers crisis on them.
I do, in fact, blame the idiots at the helm. In a more subjective viewpoint I see it as, "Yes, we make crappy cars that are as inefficient as they are poor in quality, but we will get our money from you. One way or another."
And to that I say good riddance.
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