Should We Really Bail Out the Big Three Automakers with $73.20 Per Hour Labor?

The chart above shows average hourly compensation for the Big Three ($73.20) and Toyota (TM) ($48.00), compared to average hourly compensation for Management and Professional Workers ($47.57), Manufacturing/Goods Producing ($31.59) and all workers ($28.48), data available here.

Should U.S. taxpayers really be providing billions of dollars to bailout companies (GM (GM), Ford (F) and Chrysler) that compensate their workers 52.5% more than the market (assuming Toyota wages and benefits are market), 54% more than management and professional workers, 132% more than the average manufacturing wage, and 157% more than the average compensation of all American workers?

Maybe the country would be better off in the long run if we let the Big Three fail, and in the process break the UAW labor monopoly, and then let Toyota, Honda (HMC) and Volkswagen (VLKAY.PK) take over the U.S. auto industry, and restore realistic, competitive, market wages to the industry. It might be the best long-run solution.

Comments

[herbert hoover]

Just out of curiosity - How much per hour do the guys at AIG make? Oh, I forgot, AIG is a friend of Paulson's, so that's OK.

2008 Nov 10 09:14 AM

[Fozzie]

NO.

2008 Nov 10 09:23 AM

[coastalpirate]

It is not just the hourly rate, the union has also lobbied to reduce output so that more workers are required. You would think quality would go up. They push safety as the reason, but I heard at one point a metal stamping machine operator was only punching 12 sheets a day. The management wastes money true, and they have way too many brand families duplicate models with duplicate expenses lines. But paying factory workers more professional workers is not sensible. Maybe better business leaders wound up on the assembly line because of the higher pay and benefits....

2008 Nov 10 09:26 AM

[Focus Advisory]

You've hit the nail on the nead...Thank you

2008 Nov 10 09:29 AM

[Tomas04]

Do a little research before you make a comment like that. The $73 and hour includes legacy costs. Union member don't make anywhere near that much money in reality. That number is at least $15-$20 high and includes benefits like health care. It's a shame- this guy is a Phd yet he makes off the cuff statements like he has an IQ below room temperature.

2008 Nov 10 09:32 AM

[Midas1]

Fox News reported this weekend that GM is seeking multibillions to fund their retirees' HEALTHCARE costs. BS!!!! No one is giving me a free ride on healthcare. I DO NOT WANT MY TAX DOLLARS PAYING FOR ANYTHING OTHER THAN PRODUCT INGENUITY!! Taxpayers fund Medicare--now we're supposed to give GM retirees the "cadillac" of healthcare? No way. Let them fail. This money should not go to padding pockets of overpaid employees whom the union would only allow a simple job task and no cross training. GM is never going to match the quality of Toyota or Honda as long as the focus is on what more they can do to pacify the stupid UAW. It's time to dump the UAW and infuse a dose of common sense into the domestics!!

2008 Nov 10 09:39 AM

[Jeff from PA]

Given the fact that the CEO's and higher management makes millions to tens of millions per year, I am more concerned about their pay then those making even 70 dollars an hour (which by the way is not even near what the regular worker makes).

Considering the CEO makes the equivalent of 100-1000 workers, that is the salary I would cut first. Then the upper management that makes 50 times or more what the average worker makes.

I am glad that the guys that get their hands dirty, end up with physical problems from their jobs and sweat each day are making good pay - it is those guys that have the soft hands at the top that should be getting a pay cut.

I find it amazing when people blame the workers and unions for the downfall of the auto industry. When if the CEO's and upper management merely made double or triple the average workers salary over the last 20 years, they would have saved billions.

The problem is the greedy CEO's and upper management, not the workers and unions..

2008 Nov 10 09:41 AM

[saajjata]

Legacy costs are not calculated into the hourly rate, they are stated in a per vehicle cost. The hourly rate is wages and benefits.


On Nov 10 09:32 AM User 294926 wrote:

> Do a little research before you make a comment like that. The $73
> and hour includes legacy costs. Union member don't make anywhere
> near that much money in reality. That number is at least $15-$20
> high and includes benefits like health care. It's a shame- this guy
> is a Phd yet he makes off the cuff statements like he has an IQ below
> room temperature.

2008 Nov 10 09:42 AM

[G. Kahn]

Let the first one fail, and the UAW will not see fit to make the necessary concesions for survival. This is utter graft. A backwards segment of the auto industry held together by taking money from the government with political threats. This is exactly the kind of problem that plagues our nation and our politics.

2008 Nov 10 09:45 AM

[working at ford]

The hourly rate is less than 30 per and benny cost about 10 grand a year. If these companies go away there is no reason for any employer to pay above min wage. How many new cars and tv's can you buy an min wage. Mc d's pays almost twice min wage to be able to keep there unskilled workforce loyal. Get off your high horse and realize that all the benny's you now have are as a result of the unions. Not to mention workplace safety rule and labor laws that prevent abuses that are in the sweat shops of asia. I don't think many of the complainers would last long in a true free market.

2008 Nov 10 09:48 AM

[Jeff from PA]

But most of the benefits are outrageously overpriced because of the deregulation of the health and pharmaceutical companies. The article makes it sound like these people are making 150 grand a year, when it is closer to 60 or 70. To me that is a wage they deserve. The cuts should come from the top from the outrageous CEO and management pay. The gap between the average worker and CEO is the greatest it has ever been in world history. Considering you could pay 100-1000 workers on one CEO's pay, if they would have cut their salaries of the last 2 decades, they would have saved billions.

Those guys making 60-70 thousand plus benefits deserve every cent. The CEO's making 10's of millions do not.


On Nov 10 09:42 AM saajjata wrote:

> Legacy costs are not calculated into the hourly rate, they are stated
> in a per vehicle cost. The hourly rate is wages and benefits.

2008 Nov 10 09:49 AM

[Jeff from PA]

A true free market would be a scary place - police stations run by the highest bidder, schools only for the wealthy, and the disabled left on the side of the road. Nothing is scarier than a completely free market.


On Nov 10 09:48 AM working at ford wrote:

> The hourly rate is less than 30 per and benny cost about 10 grand
> a year. If these companies go away there is no reason for any employer
> to pay above min wage. How many new cars and tv's can you buy an
> min wage. Mc d's pays almost twice min wage to be able to keep there
> unskilled workforce loyal. Get off your high horse and realize that
> all the benny's you now have are as a result of the unions. Not to
> mention workplace safety rule and labor laws that prevent abuses
> that are in the sweat shops of asia. I don't think many of the complainers
> would last long in a true free market.

2008 Nov 10 09:51 AM

[AUSSIE]

I believe that the US Govt. should have let the financial institutions fail, prosecute the hell out of the thieves and confiscate their earnings, let the sound companies pick up the pieces, and let the market adequately deal with the mess in a darwinian fashion. It was the "everyone deserves a home loan" fiasco that did this to the US markets. Socialism dabbling in the free markets will screw it up every single time. Period. Look at the bonuses that Fannie Mae and Freddie Mac executives received in the last 10 years. Some bonuses as high as $90 million, yet these facts seem to be ignored and we beat on AIG.
There is no happy solution. Shoot em all.

2008 Nov 10 09:58 AM

[working at ford]

Who do you work for and what do they pay? If it was not for the unions setting the bar you would be making min wages and have no benny's. I think the real dose of reality is coming for all who want to play the blame game. The unions are good for everyone. If you do not like health ins. and pensions then move to China. Just don't drink the milk. Toyo and Honda are losing money a record rates and they will not keep US opps if this econ does not improve(see DHL). The US based companies are trying there best to ride it out. If it was not for the credit freeze up they would be able to borrow from the banks. Hell the banks can't even borrow money. How do you think your company is going to make it if there is no money to borrow.


On Nov 10 09:39 AM Midas1 wrote:

> Fox News reported this weekend that GM is seeking multibillions to
> fund their retirees' HEALTHCARE costs. BS!!!! No one is giving
> me a free ride on healthcare. I DO NOT WANT MY TAX DOLLARS PAYING
> FOR ANYTHING OTHER THAN PRODUCT INGENUITY!! Taxpayers fund Medicare--now
> we're supposed to give GM retirees the "cadillac" of healthcare?
> No way. Let them fail. This money should not go to padding pockets
> of overpaid employees whom the union would only allow a simple job
> task and no cross training. GM is never going to match the quality
> of Toyota or Honda as long as the focus is on what more they can
> do to pacify the stupid UAW. It's time to dump the UAW and infuse
> a dose of common sense into the domestics!!

2008 Nov 10 10:01 AM

[Tomas04]

SAA

You are wrong- that figure includes legacy costs- trust me.

2008 Nov 10 10:04 AM

[Foster J Fezziwig III]

Why is this being cast as a choice between union busting and exorbitant manufacturing salaries.

We all know (or should know) that unions have done immeasurable good for the country. But does that mean that everything they do is good? Does that mean there can be no imbalance on the other side?

Further, do you think Toyota is exploiting its workers? If yes, where are the calls for boycott? If no, how can Detroit be expected to compete in a market with such divergent labor costs?

These are the questions, not whether CEOs are overpaid a-holes. (The answer to this has been well-established already.)

2008 Nov 10 10:07 AM

[working at ford]

Let your company fail and see how you will pay the bills. Failing is not good for anyone. If kids fail at school they lose. If your favorite team fails the fans lose. If the biggest companies in the world fails the whole world loses


On Nov 10 09:45 AM gkahn wrote:

> Let the first one fail, and the UAW will not see fit to make the
> necessary concesions for survival. This is utter graft. A backwards
> segment of the auto industry held together by taking money from the
> government with political threats. This is exactly the kind of problem
> that plagues our nation and our politics.

2008 Nov 10 10:09 AM

[Midas1]

Why can't Ford make a car anyone wants??? If the product is so great, why ask the government for a bailout? Toyota and Honda will survive just fine, thank you very much. Both have decent management, integrity and creativity--all lacking at the likes of Ford which seems to only want to make SUV waste. Many workers across the U.S. work hard and don't expect a handout or government welfare when times are bad. Don't think the taxpayers should bail out Ford or GM when neither seems to want to make a product that can actually work! If Fox was correct and this money is for retirees' healthcare, here's an idea. Get off your butt and work in retirement like the rest of us! Workers at Ford and GM are no better than anyone else, plain and simple!

2008 Nov 10 10:10 AM

[John Pseudonym]

"The article makes it sound like these people are making 150 grand a year, when it is closer to 60 or 70. To me that is a wage they deserve"

Well...THERE'S YOUR PROBLEM>>>

$65,000 a year per worker to build cars? That's insane!

If the auto makers were rolling in dough due to the productivity of those $6k workers I wouldn't have a problem; but they're NOT!

Pay should be cut in half for all employees as a first step and then >>>MAYBE>&... a government handout MIGHT be considered.

2008 Nov 10 10:11 AM

[Tomas04]

It's more than retiree health care. It's dealerships and salary people and suppliers that have divested. Even Toyota is losing money now. They just have a lot more to lose. This is a horrible economy- that is not the fault of the unions.

2008 Nov 10 10:14 AM