Industry aid fails in the Senate

Manix

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As upper management has grown fat, for quite a few years now the unions have been giving concessions. Look back to the 1980's when Reagan fired all the air traffic controllers to bust their union.

The blame is typically put on the union workers when ever money comes up. It's not just automotive. Unions have been beat up and forced into giving concessions in all industries for quite a few years now. An example is the airline pilots union. As unions continue to be broken, wages all over for the blue collars goes down, while upper management get high 6 digit or even into 7 digit salaries (usually with some type of Golden Parachute).

Somehow it always seems to be the fault of the unions and the blue collar workers when a company is having profitability problems. It won't stop until health care benefits are eliminated and workers are making minimum wage or less. Even should it reach that, upper management will still find a way to blame the blue collars for the failures of upper management.


By no means in the loop enough to know the ins and outs and I am sure the unions are not wholly responsible for the situation, but I was of the impression they were part of it in term of pension liabilities?!

It does of course appear to be incompetent management!

My gripe with unions expands to all other parties involved in any industry. It's a question of divides. Unions create divides, blue collar/white collar is a divide. Upper management/rest of the org is divided.

Each division looks after it's own interests and increasingly with time these divisions are so intent on focusing on their own interests that they loose sight of what's important, the future viability of their organisations/industry. What's more they are incapable of being able to contribute to the vision required to keep the company/industry viable.

Humour me ( :D ), has a union ever been used as a powerful voice of concern in decisions made on things like a model choice or a marketing strategy? My guess is probably not but I honestly don't know? I would love to learn of examples where unions have been prepared and management have accepted the voice of their TEAM.

"Union" is a BS word in my opinion because it does not unite, it divides and although some admirable things may have come out of them, the bigger and longer term picture is rarely enhanced with the current setup. This is much to do with the companies management, blue collar, white collar, and politicians as anyone else. The model is fundamentally flawed in my opinion and a more united front during crisis and when the fields are green would be much better!!!!!!!

With the automakers, the unions and their members will all sink!!
 

Marc

Fully vaccinated are you?
Leader
Humour me ( :D ), has a union ever been used as a powerful voice of concern in decisions made on things like a model choice or a marketing strategy? My guess is probably not but I honestly don't know?
Look at the history of GM's Saturn. Yes, it has been tried but GM eventually cut off Saturn for all intents and purposes and brought Saturn into the 'standard' GM lines. Result? The end of unions being involved in decision making in Saturn.
 
D

David Hartman

With regard to the union workers not wanting to take a hit: all the GOP was asking for was parity with the employees currently working for the foreign auto manufacturers in non-union US-based plants (to eliminate the current 2X plus disparity in pay). In-fact this is an inevitability at this point as if the Big 3 file bankruptcy and the union contracts get busted the end result is the same.

As for the issue that the Big 3 were wrong to concentrate on big vehicles when they should have been developing smaller, more economical ones - What kind of vehicles were the customers wanting/buying for the past several years? (Answer: SUV's, Large trucks, and larger rear wheel drive sedans). Even Toyota, Honda, and Hyundia entered dogs in this fight (Tundra, Ridgeline, Genesis). So as I understand economics, where did the supplier/manufacturers go wrong? This is not about the wrong product line being produced, this is about corporate policies from the 50's and 60's (which we the people were more that happy to receive) to provide retirement benefits to every employee fully supported by the manufacturer.

The advantage that bankruptcy has for the manufacturers is that it will relieve them of their current financial obligations for both the union-based wages and these retirement benefits, the disadvantage for them is that it may mean the hiring of an unskilled workforce which would increase their production costs, could impact product quality, and would directly impact their current employee base.

If I were a part of the current unionized workforce I believe that I would be looking at my alternatives: accepting the inevitable by taking a parity-based wage reduction and ensuring employment making $14 - $16 an hour, or allowing the company to file bankruptcy loosing my job and attempting to get one making $6 - $12 an hour at McDonald's, Wal-Mart, et cetera.

And yes, I do recognize that the corporate management personnel need to take a parity-based cut in salary as well, but I just want to emphasis here that it has to once again directly impact the hourly folks as well.

:2cents:
 

AndyN

Moved On
I'm no conspiracy theorist, but maybe that's just what the Big # guys wanted! That way they can get out of the contract, deflect the blame and come back with a different plan.............who knows?
 

Marc

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Leader
With regard to the union workers not wanting to take a hit: all the GOP was asking for was parity with the employees currently working for the foreign auto manufacturers in non-union US-based plants (to eliminate the current 2X plus disparity in pay).
I'm not sure where you get the 2x pay disparity in this country. Foreign auto manufacturers in non-union US-based plants have an advantage because they don't have a significant number of retired workers which they have to pay retirement benefits (including medical) for. That's where the US$70 an hour figure comes in that many in the GOP and the media are chatting up. Individual workers are not making US$70 an hour. And while medical coverage for employees is an issue in the US adding to the costs, in Japan and every other major industrialized country it isn't an issue because only the US does not have some type of national health care system which eliminates private insurance company profits (which is estimated to be more than 2/3 of medical costs in the US).

Google a bit on the pay parity arguement and you will find articles like this one:
Frank James said:
by Frank James

One of the stumbling blocks that reportedly caused the Senate to fail to pass the auto-bailout legislation was Senate Republican demands that the United Auto Workers at the Detroit Three auto plants get their wages to parity with workers at Toyota and Honda. But just what is the divergence between the wages paid by the Detroit Three and those paid by the foreign transplants? It's been said often that workers at the Detroit Three make more than $70 hourly while those at the foreign transplants are somewhat north of $40 an hour. But as the New York Times' David Leonhardt recently pointed out, this is isn't true.

Let's start with the numbers. The $73-an-hour figure comes from the car companies themselves. As part of their public relations strategy during labor negotiations, the companies put out various charts and reports explaining what they paid their workers. Wall Street analysts have done similar calculations. 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. So we get $55 for a union work force versus $45 for a non-unionized labor force, a not surprising difference given that unionized workers have collective bargaining power their non-union counterparts don't. But as Leonhardt goes on to say, the Detroit Three have significant costs tied to their large army of retired workers.

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.

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. You'd never know this by looking at the graphic behind Wolf Blitzer on CNN last week, contrasting the "$73/hour" pay of Detroit's workers with the "up to $48/hour" pay of workers at the Japanese companies. 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. Here comes the critical point. What does this all mean for the price of a car? Leonhardt answers:

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. 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. Even so, many Americans no longer want to own the cars being made by General Motors, Ford and Chrysler.

That last paragraph contains important information worth repeating, that the U.S. legacy car companies sell their cars for about $2,500 less than the equivalent vehicle with a Japanese nameplate. Even so, they continue to lose market share. Small wonder they're in so much trouble. So while getting to pay parity sounds good in theory, it clearly isn't the entire answer.

Actually, it's rather interesting that Toyota and Honda aren't screaming bloody murder about the U.S. government's attempts to force the Detroit Three's to reduce their costs to levels more comparable to the transplants since that would take away the transplants' comparative advantage. Could it be that it's so important to the Japanese and German car makers with factories in the U.S. that the Detroit Three remain viable, since they all get their parts from many of the same suppliers, that the Japanese companies are willing to risk more competition in the future than have to contend with Detroit Three bankruptcies today?

But eventually this will come around to all as globalization continues. If there's someone in Mexico (or where ever) who makes 1/10th what a US worker does doing the same job that job is going to move to Mexico (or where ever). As the rest of the world starts reaching economic parity, the US will find its workers will have to meet the same terms by lowering what they earn if they want a job (which is what is slowly happening now).

Personally I don't think there is any way to stop globalization, nor am I sure its a 'bad' thing, but I will say workers in the US have done quite well for many years now and I think the future is not bright outside a few fields such as medicine (but even there, hospitals in many nations are getting business from US citizens going to places like Thailand and India for major medical procedures).

Martin Hutchinson wrote a very good article that is at the Asia Times web site titled: Worse than the Great Depression. A bit from that article
Martin Hutchinson said:
Eventually, it may become fully equal, with difficulties of geography making no difference to earnings, and a capable hardworking educated Lesothan earning the same as a capable hardworking educated American. Kumbaya!

There is one snag, at least for rich countries such as the United States, Western Europe and Japan. If the world becomes more equal more quickly than it becomes richer, then living standards in rich countries must decline. If the world were suddenly to achieve equal income levels between countries without a significant increase in output, US living standards would fall by over three quarters.

Some quantification: the GDP per capita at purchasing power parity of the United States in 2007 was $45,800, thus 4.58 times the $10,000 average GDP per capita of the world as a whole. World GDP per capita grew by 2.58% in 1960-2000, a period of gradually increasing globalization involving no global wars and no depression eras akin to the 1930s. So 2.58% per capita per annum must thus be close to the available "speed limit" of global GDP growth.

If world per capita GDP grows at 2.58% per annum, it will come to equal US GDP per capita of $45,800 in 60 years. Thus, if the globalization process attains final equality in that year, that is to say, US and Lesothan GDP per capita are equal, for instance, the Americans of 2067 will be able to enjoy just the same living standards they can today. To allow for any growth in US living standards, we must suppose that even by 2067, the world will still be unequal, so that major areas of the world (not just "pockets of poverty") have failed to integrate fully into the world economy. That is quite possible, but not inevitable - one can imagine the liberalization pressures on say a repressive, self-reliant North Korean regime if not only South Korea but also rural China and Vietnam are enjoying Western living standards.

All US workers had best be ready for a continuous decline in their income and standard of living as globalization proceeds.

As to the GM and Chrysler 'bailout', I don't really care one way or the other because I think it's a drop in the bucket. Heck, well over 9 billion US$ (one of the lower estimates) is unaccounted for in Iraq (remember the pallets of US$ bills sent there on transport planes to be doled out in canvas sacks). For wars billions and trillions are spent. And the bank (are they REALLY banks?) bailout is at US$700 billion and counting upwards fast.

And - If there is no 'bailout' for the auto companies (well, GM and Chrysler) more suppliers will fall faster, but they're going to anyway long term.
 
W

wmarhel

The advantage that bankruptcy has for the manufacturers is that it will relieve them of their current financial obligations for both the union-based wages and these retirement benefits, the disadvantage for them is that it may mean the hiring of an unskilled workforce which would increase their production costs, could impact product quality, and would directly impact their current employee base.

Dave is exactly correct. For any plan to be successful in the long-term, it must include bankruptcy. That is the only way that they will be able to successfully re-configure their business to be more competitive. Of course, with the current leadership in the Big 3, I have no confidence whatsoever that there is anyone to steer the ship safely through this storm.

Delphi a few years back suffered because of GM's attempt to offload a bunch of a poor decisions, instead of dealing with directly. Ultimately the problem stems from a bunch of idiots in leadership positions who either won't or can't make effective decisions, as well as a Union leadership (NOTE that I referred to Union leadership and not so much the average member) who can't stop their feeding at the trough.

Wayne
 

Marc

Fully vaccinated are you?
Leader
Just as a reminder, this isn't limited to the US: Auto-aid pleas are rising globally
International Herald Tribune said:
PARIS: Even as the bailout package for Detroit's Big Three falters, automakers in Europe and Asia are lining up for handouts of their own.

"It's a foregone conclusion that governments around the world are going to aid these companies," said Dennis DesRosiers, an independent auto analyst in Toronto. "It's just a matter of working through the politics."

In the European Union, carmakers have called for support worth €40 billion, or about $53 billion. Although they may not get that much, governments are planning a broad range of measures. Much of that support, as elsewhere, is meant to accelerate the development of "green" vehicles.

The European Investment Bank will provide the industry with €4 billion in low-interest loans in both 2009 and 2010 as part of the European Clean Urban Transport initiative. The European Commission, the EU's executive arm, will spend €5 billion over two years for the same ends.

National governments, including those of France, Germany, Portugal, Spain and Romania, have plans to provide hundreds of millions of euros more in research and development, tax breaks and loans. Sweden on Thursday announced support valued at more than $3 billion for its auto sector.
Read more...
 

Manix

Get Involved!!!
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Look at the history of GM's Saturn. Yes, it has been tried but GM eventually cut off Saturn for all intents and purposes and brought Saturn into the 'standard' GM lines. Result? The end of unions being involved in decision making in Saturn.

Thanks Marc. It's good to learn of the attempt, and obviously its failure.
 

Marc

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I don't know that it was a failure per se. GM just changed their 'relationship' with Saturn (which was to some degree autonomous) by talking control back and integrating it into their regular operations.
 
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