On Automakers' Deathbed Unions Finally Make Concessions

Thursday, executives from General Motors (GM), Ford (F) and Chrysler returned to Washington to seek bailout funds, loans and assistance. It remains to be seen if they will get the help they need. Sixty-one percent of Americans don’t believe they should.

It’s playing out like a twisted fairytale on Capital Hill as request amounts near $34 billion. One automaker needs a little more, one needs less, and one is about right.

The problem is that Congress is playing the role of Goldilocks - it has all the gold. And it’s risking being mauled by bears.

It’s torn between letting the auto industry die (or reform itself) with dignity, bail out failing automakers and undermine the essence of capitalism, or risk impacting one in 10 U.S. jobs. None of these choices is easy, or popular.

Wednesday, the UAW union said it would make major concessions to help the ailing automakers with whatever help they need to get federal aid.

What’s interesting is that they had no concessions: to make the automakers profitable, to produce products Americans want to buy, or ease up on crippling labor demands. The unions have severely handicapped American automakers and it’s only on their deathbed that they are willing to make minimal efforts to keep their host alive.

GM pays over $1,600 per vehicle in healthcare costs for current and retired employees, compared with about $200 at Toyota (TM). In fact, American automakers earn $2,900 less per vehicle than their Japanese counterparts - primarily from labor expenses.

Traditionally, the easiest way for a company to cut its costs is through layoffs. It’s allowed American companies to survive downturns by cutting their largest expense.

Unfortunately, even if GM wanted to close a plant, it would need to pay employees 95% of their salary, regardless of whether they worked - an indication of the financial handcuffs these companies have.

Comments

[Tim H.:]

2 POINTS: #1 The union agreed to dissolve the 95% pay for layed off workers which I agree is silly. HOWEVER the union got this pay by making concessions to GM back in the 80's. So GM agreed to this because they recieved concessions from union in 80's. Was this a good idea? Maybe union should have used concession for something else? Obviously yes. But their are reasons why these agreements are in place and it's not because GM was being a nice guy. #2 Your often repeated comment on cost of producing car versus Toyota because of health care costs is true. BUT and it's a big BUT... Toyota being in Japan. The company's healthcare costs are not as high because Japan like other foreign companies health care costs are lower because the governments of these companies have some kind of national health care system in place that takes the burden of healthcare costs off of their companies backs! Kinda sours that argument doesn't it. Maybe all companies in the USofA would benefit if this country would reform it's healthcare would they not? I see 61% poll which I just don't think Americans understand. Hey I don't like the buyouts either but what did banks do with their buyout money so far? People (human beings_ in millions will be out of work if these auto companies go under. I work in print/advertising industry and advertising in print and online will all be lost. Jobs not directly related to auto industry will all be lost. From AD agencies, suppliers to a bartender/waitress at a neighboring bar. These are people who need to eat. They will fill the unemployment rolls of States costing states money there. Yes in pure economic capitalistic theory. Auto makes should file chapter 11. But this country has never been purely capitalistic. That's why we have social security and other programs to help. This is a trying time brought on by wall street greed and government alseep at the switch. Automakers and unions seem to finally be seeing the light. Hopefully something can be worked out. But work something out don't walk away.

2008 Dec 05 07:01 AM

[Levar Berry:]

Main problem.. They should have never gotten so big.. If we had 10 or 20 auto makers... We wouldn't be in this boat. This goes for all industries... We let some companies get too big and when they screw up we have problems. AIG--TOO F'ING BIG. The size of these companies in my opinion are unamerican. Walmart & Home-Depot TOO F'ING BIG.

Divide them up... create new brands. Which will create jobs.

I hate to comment on union labor because there is pro's and con's to each side... but at some point you have to look at is a union completely needed in this day and age?? Just like Social Security.... there comes a time when you need to ask yourself "is this really needed anymore?" Do we need affirmative action anymore???

A bailout does nothing to save jobs. If cars aren't selling it doesn't matter!!! Maybe they should focus on things that sell?? How many things does Mitzi sell? How about creating high-speed trains to revolutionize our travel between regional cities?

2008 Dec 05 09:15 AM

[bobn5:]

tjirish conveniently overlooks that fact that Asian car companies make the majority of their US cars in the US, so the argument about Health care costs in Japan is completely irrelevant.

I agree that something needs to be done about health care costs in this country, but is is not a reason as to why Honda & Toyota are profitable in the US.

2008 Dec 05 11:44 AM

[American Me:]

Excellent point tjirish. Japanese automakers are subsidized by the Japanese Government which realizes the value of their industry. Also, medical benefits in this country are covered under the Japanese plan.
The "legacy " cost for American auto manufacturers exists because they have been producing vehicles in this country for 100 years, as opposed to 25 like the Japanese. On average without being unbalanced by those costs the American auto worker makes 3 dollars more per hour than the transplant counterpart, and with the perk of the benefits provided directly to the worker, makes 18 dollars more. Include production benefits and the Transplant worker makes more, than both figures.
Your take ON THE jobs BANK is RIGHT ON, they were established to keep the manufacturers from outsourcing a significant number of American jobs to Third world countries so they could make more profit. The workers assigned there were supposed to be reassigned to other facilities that needed employees, the manufacturers failed to do that.
One last point is that the Japanese transplants assemble vehicles in this country, on the most part, out of parts made in Japan. .85 cents of every dollar of profit returns to Japan. They are also subsidized by the states in which they locate.

2008 Dec 06 12:15 AM

[PeteK:]

Levar Berry;
Agree with you 100%.
Well said.

2008 Dec 06 10:27 PM

[ajmccarrell:]

The problem with your argument is that is ignores marginal revenue. The non-union automakers have marginal revenue sufficient enough to pay for these additional benefits (and no, they are US domiciled companies with US benefits, not foreign benefits for US workers, look it up bozo) by virtue of the volume discount by selling more cars. IE more profits equals more benefits.

On Dec 05 07:01 AM tjirish34 wrote:

> 2 POINTS: #1 The union agreed to dissolve the 95% pay for layed off
> workers which I agree is silly. HOWEVER the union got this pay by
> making concessions to GM back in the 80's. So GM agreed to this because
> they recieved concessions from union in 80's. Was this a good idea?
> Maybe union should have used concession for something else? Obviously
> yes. But their are reasons why these agreements are in place and
> it's not because GM was being a nice guy. #2 Your often repeated
> comment on cost of producing car versus Toyota because of health
> care costs is true. BUT and it's a big BUT... Toyota being in Japan.
> The company's healthcare costs are not as high because Japan like
> other foreign companies health care costs are lower because the governments
> of these companies have some kind of national health care system
> in place that takes the burden of healthcare costs off of their companies
> backs! Kinda sours that argument doesn't it. Maybe all companies
> in the USofA would benefit if this country would reform it's healthcare
> would they not? I see 61% poll which I just don't think Americans
> understand. Hey I don't like the buyouts either but what did banks
> do with their buyout money so far? People (human beings_ in millions
> will be out of work if these auto companies go under. I work in print/advertising
> industry and advertising in print and online will all be lost. Jobs
> not directly related to auto industry will all be lost. From AD agencies,
> suppliers to a bartender/waitress at a neighboring bar. These are
> people who need to eat. They will fill the unemployment rolls of
> States costing states money there. Yes in pure economic capitalistic
> theory. Auto makes should file chapter 11. But this country has never
> been purely capitalistic. That's why we have social security and
> other programs to help. This is a trying time brought on by wall
> street greed and government alseep at the switch. Automakers and
> unions seem to finally be seeing the light. Hopefully something can
> be worked out. But work something out don't walk away.

2008 Dec 08 01:43 AM