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UAW Has Already Made Concessions Needed To Make Detroit Competitive

Posted on December 4, 2008 by Mike Bock

The staggering difference in labor costs between Detroit automakers and Japanese automakers is often given as one big reason Detroit is failing to successfully compete.

Just last night, on ABC News With Charlie Gibson, it was told that labor costs for Detroit automakers averaged $73.21 per hour and that labor costs for Japanese automakers averaged $44.20 per hour. The implication is that Detroit is disadvantaged because of the unreasonable income and benefits won by powerful auto unions.

An article in The New Republic, “Assembly Line,” by Jonathan Cohn, says the $73 per hour amount for Detroit workers, that is often cited, is “wildly misleading.” Cohn says his research shows that the average wages for workers at Chrysler, Ford, and General Motors were just $28 per hour as of 2007, and that the average wage for Japanese manufacturers was about $25.

The $73 per hour labor costs that is often cited includes all money and benefits paid to the hundreds of thousands of retired automakers, including health insurance and pensions. This amounts to more than $42 per hour. Japanese car makers don’t have these “legacy” costs. U.S. Toyota at this point has only about 1000 retirees.

Cohns article points out that the staggering difference in labor costs between Detroit automakers and Japanese automakers, has already been addressed in a watershed 2007 labor agreement, that is to start in 2010. The agreement made a two tiered wage system in which new workers would receive less compensation for the same work as established workers; it changed the health benefits for both active and retired workers; it created a private trust for financing future retiree benefits–effectively removing the legacy burden from the companies’ books — giving the union responsibility for management.

“One thing is certain,” Cohn says about the new Detroit labor agreement, “it was a radical change that promised to make Detroit far more competitive. If carried out as planned, by 2010–the final year of this existing contract–total compensation for the average UAW worker would actually be less than total compensation for the average non-unionized worker at a transplant factory … the next time you hear somebody say the unions have to make serious salary and benefit concessions, keep in mind that they already have–enough to keep the companies competitive, if only they can survive this crisis.”

Eliot Spitzer: $7.8 Trillion In Government Guarantees May Simply Perpetuate Flawed System

Posted on December 4, 2008 by Mike Bock

In a thoughtful article appearing in Slate, Eliot Spitzer says that the “$7.8 trillion in equity, loans, and guarantees so far — may merely perpetuate a fundamentally flawed status quo.”.

Spitzer says, “So far, at least, we are simply rebuilding the same edifice that just collapsed. None of the investments has even begun to address the underlying structural problems that are causing economic power to shift away from the United States, sector by sector”

Indicators of structural problems, according to Spitzer, include our $700 billion yearly trade deficit, our zero savings rate, our deteriorating intellectual advantage.

Spitzer advocates that the government encourage the breakup of institutions “too big to fail,” and, instead, stimulate more competition. He writes, “Imagine if we had never placed ourselves in a position in which so many institutions were too big to fail. The bailouts might have been unnecessary.”

He says, “It is time we permitted the market to work: This means true competition with winners and losers; companies that disappear; shareholders and CEOs who can lose as well as win; and government investment in the long-range competitiveness of our nation, not in a failed business model of financial concentration and failed risk management that holds nobody accountable.”

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Michael Moore Says No Bailout To Detroit; Wants The Government To Buy and Run Detroit Auto Industry

Posted on December 3, 2008 by Mike Bock

Rather than providing a bailout, Michael Moore wants the government to buy up the Detroit auto makers outright, and hire effective managers to restructure the industry. Moore writes, “These idiots don’t deserve a dime. Fire all of them, and take over the industry for the good of the workers, the country and the planet.”

Moore claims that the government could buy all of GM stock for less than $3 billion. Moore writes, “This proposal is not radical or rocket science. … What I’m proposing has worked before. The national rail system was in shambles in the ’70s. The government took it over. A decade later it was turning a profit, so the government returned it to private/public hands, and got a couple billion dollars put back in the treasury.”

Moore says, “This proposal will save our industrial infrastructure — and millions of jobs. More importantly, it will create millions more. It literally could pull us out of this recession.”

Moore says, “I care about what happens with the Big 3 because they are more responsible than almost anyone for the destruction of our fragile atmosphere and the daily melting of our polar ice caps.

“Congress must save the industrial infrastructure that these companies control and the jobs they create. And it must save the world from the internal combustion engine. This great, vast manufacturing network can redeem itself by building mass transit and electric/hybrid cars, and the kind of transportation we need for the 21st century.”

Moore says that any bailout money given to Detroit at this point would simply be wasted. He says, “Let me just state the obvious: Every single dollar Congress gives these three companies will be flushed right down the toilet. There is nothing the management teams of the Big 3 are going to do to convince people to go out during a recession and buy their big, gas-guzzling, inferior products. Just forget it. And, as sure as I am that the Ford family-owned Detroit Lions are not going to the Super Bowl — ever — I can guarantee you, after they burn through this $34 billion, they’ll be back for another $34 billion next summer.”