Friday, December 5, 2008

The truth on auto workers

Last evening during a story on the proposed auto industry bailout, CBS reported that workers for the Big Three make more than $70 an hour. Having read a story two days earlier that explained that this figure is not true, I started shouting at the TV. (I do that sometimes.)

This morning I tried to remember where I saw the story that actually broke down what auto workers get paid, and I searched on Google. There are many web sites that are running the story, including the CBS web site! Are these people morons?

The average salary for a worker at GM, Ford and Chrysler is $28 an hour, and the benefits they receive work out to less than $10. The $70 figure is taken from including all medical and retirements benefits that those companies pay to all former employees as well as current ones and then diving them by the number of current employees. That isn't fair and it isn't truthful.

I'm not quite sure what to do with the auto industry, but vilifying blue-collar workers is certainly not a solution.


N.starluna said...

I see this type of misinformation as part of a longstanding attempt to vilify unions. The talking heads on the mainstream networks, and not just Fox, outright blamed the condition of the auto companies on the unions. They kept repeating over and over how union pay and benefits adds $1600 to every car off the assembly line. The average mid-size SUV, the most popular vehicle sold that year, in 2006 was $31,000. This means that the cost of the labor to make the SUV was 5% of the total cost of the vehicle. What these talking heads don't tell you is that the average profit on an SUV, again the largest proportion of car sales in the past decade, is over $15,000.

The car companies' problems are not with their labor force, it's with their management and lack of innovation.

Jimbo said...

I completely agree, N.starluna. As usual, the rich get richer and the rest of us get pitted against each other.

Anonymous said...

Let's be frank here. The issue isn't just the the cost of producing automobiles with abor..curious is the same equation being used for the Foreign car Salaries? Probably so. then really the cost of having the 'benefits' from the contracts does make it more expensive. The cost difference can also be due to many constraints one being the longevity of the US auto industry, but the fact remains that the contract obligations -life time health insurance, life time pensions, paying employees lump sum amount to retire, etc. do appear to make the cost higher. The issue i think that needs to be examined is the need for the unions to be part of the solution. Tax payers shouldn't pay for having a bad business model...and that is what is the issue here. Why make cars that consumers don't want. its apparent that the Gen Y prefer high quality cars, not that is just "made in the USA".

N.starluna said...

Anonymous raises an interesting issue regarding comparing to the foreign auto companies. The interesting thing to me, from what I've read, is that the foreign auto assembly plant in the US have virtually no union workforce. At the same time, the employees are paid union-level wages and provided union-level benefits. From what I've read in the business journals, the business model is oriented around treating the employees as if they were unionized in order to avoid the hassles (and inefficiencies) of union negotiation. As anonymous points out, it isn't the cost of labor per se. It is about producing a product that people want to buy.

I've also read that one of the Japanese auto makers approached one of the Big 3 in Detroit about buying their assembly plant. I don't know if it is true, but I wouldn't be surprised. Honda, Nissan, and Toyota have been steadily expanding their US operations for some time. My 2001 Corolla was built in the US (I think Mississippi).

Anonymous said...

Let's face it general motors will get the welfare check from the government, ford will also get the welfare check along with the surplus cheese and milk, all government agencies throughout this country have a long history of buying a fleet of ford vehicles weather it's a police car or an ambulance the government will always use ford products. In 1975 Boston police had ford gran turino's as police cars, now it's ford crown Victorias, the city of Boston medical vehicles are ford f 350's, my point is if it wasn't for the us govnt ford would have been out of business many ions ago, as for gm their bread and butter is mostly from car rental agencies, not the average joe consumer, average joe knows best not to buy gm because they don't make a good product anymore Japanese automakers appeal to the average joe, beleive it or not KIA and vw are both stronger than gm worldwide.

Anonymous said...

The truth on auto industry is that they are not profitable and have had negative bottom line for a while. Trying to save them is only a waste of taxpayers money. Unions have played their part, but there were several strategical mistakes that brought US auto industry to its knees.While I understand the democrats are trying to help their union based votes, throwing good money after bad one is not the solution. Let them fail. They all deserve it.