No Bailout Without Big Changes in Detroit
By Examiner Editorial
- 11/12/08
The basic reason why Asian automakers make money on their U.S. plants and the Big Three don’t is because the latter must pay union wages that average $60,000 annually, plus gold-pated pension and health care benefits that double that amount per worker. A 2003 study by the Center for Automotive Research found that UAW compensation is 68 percent higher than the average for the U.S. manufacturing sector. And UAW workers who “lose” their jobs go into a jobs bank that guarantees them full salaries for doing nothing as long as they don’t accept transfers to open positions in other plants. Officials won’t say how many workers are in the Jobs Bank, but a 2005 Detroit Free Press investigation estimated the bank adds about $800 million annually to Detroit’s costs. And what about executive compensation? GM’s Rick Wagoner’s total compensation for 2007, for example, was $14.4 million, or about $40,000 per day. Those are the kinds of compensation figures that should go to successful executives, not those who come hat-in-hand to Washington for a no-strings-attached bailout. To top it all off, there are more than 540,000 UAW retirees whose pensions and health care coverage far exceed that of the average American worker.
If President-elect Obama, Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi really want to help Detroit get back on its feet, they will tell the UAW it must accept wage, benefit and pension cuts that put the Big Three’s labor costs at the same level as the Asian automakers here. That won’t guarantee the survival of the Big Three, but it will let them compete on equal terms – and give them a real chance to survive.
45 Comments
Reader Comments:
POSTED Nov 12, 2008
Carolyn: "To cut the pension and health care benefits of the retirees would be an injustice (have you ever worked in one of the plant?). For years the average workers have had to make the adjustments for the bad decisions, overpaid and greed of top executives. It's time for the cuts to start at the top. A life style of $7 million a year is still a great living."POSTED Nov 12, 2008
Robert: "Excellent Commentary!"POSTED Nov 12, 2008
Greg: "I agree with Carolyn. Lets be fair. Cut all salaries across the board including the editorial columnist here, Jay Ambrose, Congress and all executives. The auto executivies are the ones who made the decision to continued to build cars consumers don't want. You talk like these union folks are not human. Imagine if you were told to cut your salary? If you are going to cut wages, reduce the cost of living expenses too."POSTED Nov 12, 2008
jimayr: "I disagree with your opinion. the reason the big three from Detroit need help is due to a lack of vision and an abundance of greed on the executive end. Case in point - When Congress first implemented miles per gallon legislation, Toyota hired 100 engineers. Ford hired 100 lobbyists. Figure it out."POSTED Nov 12, 2008
Clancy: "I agree completely. A bailout that does not address the problem (the UAW) would be a complete waste of money. I would rather the entire industry fail than to continue to prop up their insanity. If GM/Ford/Chrysler REALLY want to help themselves, then the answer already exists. Chapter 11. The US airline industry has done it, why should the UAW be any different???"POSTED Nov 12, 2008
K T Cat: "I think the whole notion that we should cut pay and pensions is outrageous! Instead, we should take money from successful corporations and individuals and funnel it into the UAW and the big three and then put government stooges on their boards. That's the path to success! Will this work? Who is John Galt?"POSTED Nov 12, 2008
jr: "Good article. Bailouts will not make them competitive and how can anyone expect the taxpayers to continue year after year to support enterprises which lose money year after year. I know it's bad for the employees but if the companies will never be able to make enough money to pay their bills then a bailout is just the beginning of future bailouts as far as the eye can see. The country would be better off just closing the companies and keeping the current employees and retirees on the taxpayer dole doing nothing until they die. If we're going to pay welfare to workers and retirees in failing companies the cheapest way to do it is to just pay the workers directly and do away with the other costs of the failing businesses."POSTED Nov 12, 2008
ACM: "Bogus explanation 1: Executive salaries are to blame. Yes, the salaries are ridiculous, but their effect on the overall profitability of car makers is negligible. Bogus explanation 2: American car makers are dumber/less innovative. Do you really think that American car makers are less visionary or technically competent than those in other countries, when America trains the best educated engineers and is at the forefront of technology in every area there is? It doesn't make sense that America could be bad at innovating in cars but good at everything else. No, the problem is that pensions and salaries of union workers add thousands of dollars of cost to making each car. To compete against Japanese firms, American ones then have to cut costs (and quality) to make up the difference in $$."POSTED Nov 12, 2008
masstexodus: "Why can't the UAW pension fund loan some of its money to GM? They have billions. Before a dime of my tax money goes to GM the unions should pony up some of their money."POSTED Nov 12, 2008
RJ: "Whoever wrote this, you're dreaming. Yeah, Pelosi, Reid, et al will want to cut Detroit a break, but only as a payback to the unions that are crippling those companies in the first place. They know that if they don't, those unionized manufacturers are going to go under, and while millions of cars will still be made in this country, they will be made by the non-unionized workforces in the south - who, ironically, make all those nice little cars that their liberal, union-supporting voters love to buy. Isn't life strange?"POSTED Nov 12, 2008
Michigan working stiff: "That is what is needed but the unions won't like it and the unions run the Democratic Peoples Republic of Michigan."POSTED Nov 12, 2008
Steven M: "jimayr posted the same thing *four* times in a row because s/he couldn't master the comment feature on this webpage. Doesn't do much to inspire confidence in his/her mastery of other subjects."POSTED Nov 12, 2008
JackOfVA: "The more likely outcome will be for Congress to level the playing field by forcing the Japanese companies to have their workers be UAW members, thereby driving their costs up to match what used to be called "the big three." Jack"POSTED Nov 12, 2008
conserved: "Sure, cut the top salaries. Cut GM’s Rick Wagoner’s 14.4 million to zero. Now where does the rest of the cash come from? You are still $24,984,600,000 short."POSTED Nov 12, 2008
TomT: "Lets face it, this is a UAW bailout. I thought under the new sprit of unity the UAW would want to demonstrate their willingness to sacrifice for the good of everybody. I guess not. A welfare state will always consume itself. The country will look like the City of Detroit in a few years."POSTED Nov 12, 2008
TomT: "I have been hearing people complain about CEO salaries for years. I always get a kick out of this complaint. Would you want to work for a company whose CEO only makes 100k a year? How much do you think you would make? If all the CEOs were paid what you think they should be paid, would your wealth increase? Would it make any difference in your life?"POSTED Nov 12, 2008
Scottsdale Al: "Who's zooming who here? A bailout to the Big 3 will not create a single job, nor will it stop layoffs of both, white/blue collar workers. The bailout will kick the Big 3's flat tires down the road only to delay the inevitable, closure or Chapter 11. The last 30 years have been a testiment to the Big 3's inability to design, manufacture and sell autos to the American consumer. In essence the Big 3 have reduced themselves to Pension Plans that occasionally build cars. In the end, the parasitic UAW and incompetent management will have sucked the life blood out of its host and suffer the same fate."POSTED Nov 12, 2008
LogicalUS: "You are just banging your head against the wall, attempting to explain basic economics and finance to leftists, including Obama\Pelosi. They simple do not understand the concept that the COST of making a product has anything to do with its profit. Look at the first comment, talking about justice and etc. Obama doesn't understand this any better than his moronic followers, i.e. his comment in the debates about raising taxes even though that leads to less money for programs because it was only "fair". Most likely, because all his "economics" classes in college were studies on the wonders of marxism\communism. So now Obama\Pelosi are going to make US car companies build "green" cars which the markets already has said will have a net profit of (2,500) per vehicle. Plus, the market has shown that the cars are NOT going to sale, so I guess that Obama will mandate that a certain percentage of people have to buy these cars."POSTED Nov 12, 2008
TakeFive: "What good is a bailout if no one is buying their cars?"POSTED Nov 12, 2008
Greg: "No more bailouts until changes are made: (1) cut salaries and benefits for union workers(2) cut salaries and benefits for executives at the auto companies (3) stop making crappy cars (4) cut Jay's salary (5) cut all executive's and worker salaries (6) reduce the cost of living expenses (7) cut congress's salaries and benefits (8)stop blaming Democrats and realize its everyone's fault." All I hear is "cut out the unions". "Cut their salaries"."Screw the little guy." Would any of you fat cats sitting in your nice offices care to cut your salaries? I am a unionized worker and would not. So here we are."POSTED Nov 12, 2008
Ricky: "I agree with Carolyn, it more American to have the taxes of waitresses, waiters, cooks, or underpaid store clerks support the $75,000 pay and benefits of the UAW. Besides the back office entry college jobs that track the benefits of the UAW and issue their paychecks have already been moved to Mexico. This automotive bailout will have the added benefit of supporting employees in Mexico, India, and China where USA purchasing, engineering, and system support jobs have been moved to reduce labor cost."POSTED Nov 13, 2008
jimayr: "Hey stevenm, it was my first time on this site. I'm sure I will get better. Instead of criticizing me, why not write an opinion on the article or a reply to what I wrote. Besides, I only see it once below."POSTED Nov 13, 2008
jimayr: "Hey stevenm, it was my first time on this site. I'm sure I will get better. Instead of criticizing me, why not write an opinion on the article or a reply to what I wrote. Besides, I only see it once below."POSTED Nov 13, 2008
St. Denis of Virginia: "This is an excellent time to have the democrat congress take up the Fair Tax. It may be just the ticket to saving Detroit. It will save the Auto Industry millions. There is even a chance it will save them from their high paid idiots called management. Bad management cost the US Auto Manufacturers and no amount of just cash bailouts will save them. Should you think Government is any better just check on how many Pork Bills spend our money with no benefit to anyone but he recipient and the bribed member of congress. (Campaign help paid back with a special project is no better than cash in the freezer.)"POSTED Nov 13, 2008
St. Denis of Virginia: "This is an excellent time to have the democrat congress take up the Fair Tax. It may be just the ticket to saving Detroit. It will save the Auto Industry millions. There is even a chance it will save them from their high paid idiots called management. Bad management cost the US Auto Manufacturers and no amount of just cash bailouts will save them. Should you think Government is any better just check on how many Pork Bills spend our money with no benefit to anyone but he recipient and the bribed member of congress. (Campaign help paid back with a special project is no better than cash in the freezer.)"POSTED Nov 14, 2008
Lindy: "I am on a GM hourly QDRO pension UAW plan and I would gladly take a cut even though I make half of the monthly pension one would now get each month. You see I am not yet of S.S. age. I would have nothing to fall back on if I lost my pension. Not even a car to live in. Our our pensions secured in some way? sheesh"POSTED Nov 15, 2008
tony: "at the saturn plant in spring hill tennessee 2007 they laid off most of their staff to retool the plant for more than 15 months they were paid 80% of their salaries to sit home how does this make any sense when im laid off i have to draw unemploment benfits 8 to 12 weeks tops and 0 health insurance the UAW has runied the industry and as long as this monopoly stays in power a bailout will never work, it will only tell them here you go keep doing what your doing."POSTED Nov 17, 2008
Kevin O'Brien: "What the Big Two-and-a-half need is bankruptcy reorganisation under Chapter 11. That would let them dispose of the overpaid execs, the millionaire union leaders, the gold-plated contracts, and the shiftless bums at the "job bank." A taxpayer bailout means that every American man, woman and child will be paying for these welfare queens for a hundred years -- and it means that Detroit will never get any better at making cars that are worth owning. Which -- as you can see from the comments of the autoworkers and union trolls posting here -- is perfectly fine with them."POSTED Nov 17, 2008
rayct45: "Most of the people in this country DON'T have pensions, don't have platinum healthcare coverage and don't have the wages of these UAW workers. When you plead for the taxpayer to guarantee these jobs, pensions and healthcare coverage, you are asking the HAVE-NOTS to take care of the HAVES. Is anyone gonna replace people's 45% losses on their 401k's like the Pension Benefit Guaranty Fund is going to take care of these private UAW employees? What makes these private citizens more worthy than the rest of us? Government is discriminating when it takes care of one group to the detriment of the rest. Either that, or put ALL of us on the dole."POSTED Nov 17, 2008
rayct45: "Most of the people in this country DON'T have pensions, don't have platinum healthcare coverage and don't have the wages of these UAW workers. When you plead for the taxpayer to guarantee these jobs, pensions and healthcare coverage, you are asking the HAVE-NOTS to take care of the HAVES. Is anyone gonna replace people's 45% losses on their 401k's like the Pension Benefit Guaranty Fund is going to take care of these private UAW employees? What makes these private citizens more worthy than the rest of us? Government is discriminating when it takes care of one group to the detriment of the rest. Either that, or put ALL of us on the dole."POSTED Nov 17, 2008
yarassouloulah: "obama for president"POSTED Nov 17, 2008
Joe Manager: "These Companies and the Unions together entered into agreements which are not sustainable. If the UAW wants a bailout, they should propose wage cuts. The managers should also take cuts. The stakeholders at GM and Ford should "invest" more in a bailout than the rest of us."POSTED Nov 18, 2008
drkstlkr: "I think both sides are to blame. I know of people who worked in similar or even worse conditions for far less money and benefits, yet the CEO of my company, who has 800+ stores nationwide, makes about $2 million a year versus $14.4 million!!! So, greed runs on both sides."POSTED Nov 18, 2008
mylife: "Today I decided how I feel about the bailouts - after yet another phone call tied up my phone line privacy. The call was from a lobbyist paid by the "financially troubled" Ford auto company to tell me to lobby my congresspersons for the bailout. We are a retired couple in our 60's who have never had a combined income of over $50,000. We have lost 1/3 of our lifetime financial savings in the past two months. Not complaining, we have lived well by never overspending, limiting our family to one child, never charging more than we can afford to pay that month, and living frugally and simply. Maybe everyone needs to try it. Chapter 11 is already in place and available."POSTED Nov 19, 2008
yarassouloulah sy: "i hoppy for america"POSTED Nov 19, 2008
yarassouloulah sy: "i hoppy for america"POSTED Nov 19, 2008
dwl505: "I think it is about time the auto industry feels the same financial crunch as the rest of the American public. They have whined and complained long enough. It is time to stop the run away train and monitor the spending activities of the management teams. They obviously don't know how to run a business, except into the ground! They have priced themselves right out of the market."POSTED Nov 19, 2008
dwl505: "I think it is about time the auto industry feels the same financial crunch as the rest of the American public. They have whined and complained long enough. It is time to stop the run away train and monitor the spending activities of the management teams. They obviously don't know how to run a business, except into the ground! They have priced themselves right out of the market."POSTED Nov 24, 2008
yarassouloulah sy: "thank you"POSTED Nov 24, 2008
yarassouloulah sy: "thank you"POSTED Dec 6, 2008
nathan: "The unions are killing the big three.$4000 of every car sold goes into the pension fund that and greedy executives are to blame.plus their cars just are not as reliable as the asian cars"POSTED Dec 12, 2008
Harvard: "The Unions are the problem. Unions KNOW they are the problem for who they are, what they are and what they stand for. This is why the Unions are shaking in fear for the reality they face. UNIONS ARE TERRORISTS. Eliminate them and the healing process will begin."POSTED Dec 14, 2008
: "Chines wages and pensions or no deal"POSTED Dec 14, 2008
gerry: "I think all the waitresses,road workers,factory sweepers should all pool together to help their comrades or GM and Chrysler will close and those poor people will lose their 75 dollars an hour and their lovely pensions for the rest of their life"POSTED Dec 26, 2008
: "UAW is to blame it needs to GO."