Auto industry....15 years later

[Hards Alumni]

Chicos, your figures a quite a bit distorted... the NY Times article (which I am only assuming that is from) uses... extreme numbers.

http://www.huffingtonpost.com/art-levine/new-york-times-still-push_b_147569.html

if you want to see how the numbers are figured and explained.

furthermore, Ford Motor Company owns and builds both Mazda and Volvos... though they are trying to sell the latter.

[Hards Alumni]

That $73 dollar figure has been tossed around everywhere, but requires context.   That includes pension and health care costs for retirees, divided by current employees.  For current employees,  UAW starts at $14, goes to $28, plus $14 per hour for bennies, plus overtime opportunities.  New hires get no pension.    $73 is the number when accounting for all of the retiree money.   When taken current dollar to current dollar, line workers for the big 3 are getting paid roughly equal to what Toyota, Honda, et al are getting.    The residual costs are what is killing the B3.    UAW offered to take over the administering of retiree benefits, but needed a big pile of money to do it, per the last contract.     I just read an article that called GM the world's largest pension and retiree health care provider, that just happens to make cars.

ok just read this as i was searching and typing my previous reply.

basically a summary of that article.

[mu_hilltopper]

From:

http://www.nytimes.com/2008/12/10/business/economy/10leonhardt.html?_r=1&partner=rss&emc=rss

[ChicosBailBonds]

That $73 dollar figure has been tossed around everywhere, but requires context.   That includes pension and health care costs for retirees, divided by current employees.  For current employees,  UAW starts at $14, goes to $28, plus $14 per hour for bennies, plus overtime opportunities.  New hires get no pension.    $73 is the number when accounting for all of the retiree money.   When taken current dollar to current dollar, line workers for the big 3 are getting paid roughly equal to what Toyota, Honda, et al are getting.    The residual costs are what is killing the B3.    UAW offered to take over the administering of retiree benefits, but needed a big pile of money to do it, per the last contract.     I just read an article that called GM the world's largest pension and retiree health care provider, that just happens to make cars.

You are correct about the $73 breakdown.  But that really is the entire point.  The Big 3 are saddled with those legacy burdens on retirees, pensions, healthcare benefits, etc and when you roll them all up, that's where the $73 cost comes in.  It is a cost that the other auto companies do not bear to that level.

GM used to own Hughes (which owned us) and sold us for billions just to help fund their pensions.  So a lot of the Finance guys here are obviously very close to it.

I don't dispute the breakdown at all, they definitely aren't making $73 in wages but when you factor in benefits, pensions, legacy items, it's a difficult situation.

[ChicosBailBonds]

Chicos, your figures a quite a bit distorted... the NY Times article (which I am only assuming that is from) uses... extreme numbers.

http://www.huffingtonpost.com/art-levine/new-york-times-still-push_b_147569.html

if you want to see how the numbers are figured and explained.

furthermore, Ford Motor Company owns and builds both Mazda and Volvos... though they are trying to sell the latter.

No, not from the NY Times, as I stated my sources were the US Labor department, the AP and the USA Today.  I also said that my numbers aren't just wages but everything included.  But on a comparison basis, the other auto manufacturers aren't carrying that albatross over their head.  That is why the number is computed in that fashion.  Those are liabilities that the Big Three have which others don't to that degree.

Now, on Mazda and Volvo, that isn't exactly true either.  Ford owns part of Mazda and has for decades.  It's a very small part. Ford owns 13% of Mazda.  At one point it was about 33% but they sold off a large chunk recently to inject funds. On Volvo, well Ford owns the Volvo nameplate but not Volvo the company. That is still owned by Volvo Industries in Stockholm.  The Volvo Group, which owned Volvo Trucks and Volvo Cars sold the cars division to Ford, but not the truck division.  So it's not really that cut and dry to say Ford owns Volvo.  And for the cars that are produced by Ford under the Volvo name, about 46% were made in Sweden.  The rest throughout Europe and North America.

Many of the automotive makers own chunks of others.  Ford owns Jaguar, used to own Astin Marton.  Toyota is the majority owner of Daihatsu and owns part of Isuzu and Yamaha.  They basically all own a piece of each other.

The fun really starts when you look into the rental fleets.  Ford owns much of Hertz.  Guess what Hertz buys?  Fords.  One of the big reason why the Big 3 have been able to put so many sales in the US on the books is through rental fleets, government fleets (police vehicles, etc).

[Hards Alumni]

thanks for the clarification

[mu_hilltopper]

Much as no one wants to see the -500 point bath that's going to happen when the market opens this morning .. I'm glad the Republicans held firm on their wage demand, which was, in short, that the UAW had to agree to lower wages by the end of 2009 to match foreign automaker hourly levels. 

The UAW didn't want a timetable (surprise!) but suggested 2011. 

Yeah, UAW, hows about we just lower your wages to zero, right now?

Basically, the Republicans are trying to do what the Big3 could never do: turn the UAW down.    Good for them.

Earth to UAW: The high labor/benefit costs are a major part of why your employers are going down the tubes, and are clearly unsustainable.  You will be making less in the future, or you will have no future.

[tower912]

Pretty sure the above graph shows the hourly wages are quite comparable already.   The legacy costs are the burden.  What do do about them?   They were all bargained by both parties in good faith.   Have the automakers completely default on them, causing retirees to be broke overnight and adding millions to Medicare?   Pawn them off on the government like AIG debt?   Let KBR take them over?    No easy answers.    How much in subsidies did Shelby negotiate to get the auto plants built in his state?    And now, no help for the domestics?   Wee bit hypocritical.

[ChicosBailBonds]

Pretty sure the above graph shows the hourly wages are quite comparable already.   The legacy costs are the burden.  What do do about them?   They were all bargained by both parties in good faith.   Have the automakers completely default on them, causing retirees to be broke overnight and adding millions to Medicare?   Pawn them off on the government like AIG debt?   Let KBR take them over?    No easy answers.    How much in subsidies did Shelby negotiate to get the auto plants built in his state?    And now, no help for the domestics?   Wee bit hypocritical.

I don't see any other answer then they have to tell the retirees, etc that the world has changed.  We can't be paying you 95% of your salary in your pension.   It's a simple choice of guaranteed death for these auto companies or restructuring to a point that they can actually survive.

But even the wages aren't exactly comparable.  That was the reason it failed in the Senate the other day.  The UAW refused to bring wages down to the level of the foreign automakers here in the States.  They wouldn't even take that cut for a temporary 2 years.

Bargaining in good faith is terrific, but if it means the company goes out of business, then everyone loses because there will be nothing left.

[tower912]

So contracts don't matter, loyalty doesn't matter, 30 years of service doesn't matter, planning your retirement around a pension doesn't matter.    Keeping a promise is passe'.    The retirees kept their end of the bargain and should now be cut loose because it is no longer convenient.   Off to the retirement camps with you!!!!   Your service is done, go die quietly!!!    Work until you are 80!   That is the only way to truly compete!!!!    And do away with those archaic child labor laws!!!   If we want to compete with the chinese, we have to have child sweat shops, too!   
     Yeah, hyperbole, over the top, I admit.   I am tired of the blame being place in the wrong place.   Poor management, poor planning, no long-term vision, greed and the guys actually getting their hands dirty actually making stuff pay the price.   America not making anything itself is going to be as large an economic threat down the road as America being dependent on foreign energy.   

[mu_hilltopper]

Well .. as you said, that was over the top.   The "guys getting their hands dirty" were also greedy, in that, they demanded (and received) wages and benefits that are, by a large margin, far better than other workers in their same industry, and far far FAR better than other workers doing similar manufacturing type work in the US. 

You could reasonably say that the reason the Big3 are close to death is because with almost every single other company in the US, there's a pyramid of wealth, with a small group at the top making wages far above the US median, supported by a large group of workers in the mid to mid-lower and lower class.  The Big3 .. sure, they had stock holders who (historically) made good money, and lots of upper management who did very well.  But their lower stratus of workers, the worker bees, they were some of the highest paid worker bees in history, not just in wages, but in superior benefits like retiring in early 50s, when about 99% of the rest of America is working into their mid-60s.

[ChicosBailBonds]

So contracts don't matter, loyalty doesn't matter, 30 years of service doesn't matter, planning your retirement around a pension doesn't matter.    Keeping a promise is passe'.    The retirees kept their end of the bargain and should now be cut loose because it is no longer convenient.   Off to the retirement camps with you!!!!   Your service is done, go die quietly!!!    Work until you are 80!   That is the only way to truly compete!!!!    And do away with those archaic child labor laws!!!   If we want to compete with the chinese, we have to have child sweat shops, too!   
     Yeah, hyperbole, over the top, I admit.   I am tired of the blame being place in the wrong place.   Poor management, poor planning, no long-term vision, greed and the guys actually getting their hands dirty actually making stuff pay the price.   America not making anything itself is going to be as large an economic threat down the road as America being dependent on foreign energy.   

Contracts are renegotiated all the time in business to accept the realities of life.  If a contract means certain death and will hurt both sides terminally, then yes, contracts need to be reworked.  Those are the realities of the situation.

It happens in my business all the time it happens the real world all the time.  They can continue to go down this path and it will mean no pensions for anyone because the companies won't exist, no more jobs, etc, or they can come to an agreement that keeps them all in business and maybe a 75% pension.

I'm trying to look at the greater good here and the realities of life.

[ChicosBailBonds]

http://www.thestreet.com/story/10453229/1/opinion-a-memo-to-the-uaw-from-the-taxpayer.html

Opinion: A Memo to the UAW From the Taxpayer

[mu_hilltopper]

http://www.thestreet.com/story/10453229/1/opinion-a-memo-to-the-uaw-from-the-taxpayer.html

Opinion: A Memo to the UAW From the Taxpayer

That is sweet.

[ChicosBailBonds]

That is sweet.

He nails most of it from my point of view.  As a taxpayer, if we are bailing out businesses, we have a right to look at those books and understand what these businesses are going to do to straighten themselves out.  How will the become competitive.  That is a legitimate question that unfortunately is not being answered.