Mayor of Lansing Defends Autoworkers

by Dollars and Sense

While we're posting items on the auto industry--here is this video from December that I missed. It's terrific. Hat-tip to Mike P.

Labels: auto industry, Fox News, General Motors, UAW, Virg Bernero

 

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6/02/2009 04:41:00 PM 1 comments

 

Goodbye, GM (Michael Moore)

by Dollars and Sense

Another statement on GM's bankruptcy (from MichaelMoore.com):

I write this on the morning of the end of the once-mighty General Motors. By high noon, the President of the United States will have made it official: General Motors, as we know it, has been totaled.

As I sit here in GM's birthplace, Flint, Michigan, I am surrounded by friends and family who are filled with anxiety about what will happen to them and to the town. Forty percent of the homes and businesses in the city have been abandoned. Imagine what it would be like if you lived in a city where almost every other house is empty. What would be your state of mind?

It is with sad irony that the company which invented "planned obsolescence" -- the decision to build cars that would fall apart after a few years so that the customer would then have to buy a new one -- has now made itself obsolete. It refused to build automobiles that the public wanted, cars that got great gas mileage, were as safe as they could be, and were exceedingly comfortable to drive. Oh -- and that wouldn't start falling apart after two years. GM stubbornly fought environmental and safety regulations. Its executives arrogantly ignored the "inferior" Japanese and German cars, cars which would become the gold standard for automobile buyers. And it was hell-bent on punishing its unionized workforce, lopping off thousands of workers for no good reason other than to "improve" the short-term bottom line of the corporation. Beginning in the 1980s, when GM was posting record profits, it moved countless jobs to Mexico and elsewhere, thus destroying the lives of tens of thousands of hard-working Americans. The glaring stupidity of this policy was that, when they eliminated the income of so many middle class families, who did they think was going to be able to afford to buy their cars? History will record this blunder in the same way it now writes about the French building the Maginot Line or how the Romans cluelessly poisoned their own water system with lethal lead in its pipes.

So here we are at the deathbed of General Motors. The company's body not yet cold, and I find myself filled with -- dare I say it -- joy. It is not the joy of revenge against a corporation that ruined my hometown and brought misery, divorce, alcoholism, homelessness, physical and mental debilitation, and drug addiction to the people I grew up with. Nor do I, obviously, claim any joy in knowing that 21,000 more GM workers will be told that they, too, are without a job.

But you and I and the rest of America now own a car company! I know, I know -- who on earth wants to run a car company? Who among us wants $50 billion of our tax dollars thrown down the rat hole of still trying to save GM? Let's be clear about this: The only way to save GM is to kill GM. Saving our precious industrial infrastructure, though, is another matter and must be a top priority. If we allow the shutting down and tearing down of our auto plants, we will sorely wish we still had them when we realize that those factories could have built the alternative energy systems we now desperately need. And when we realize that the best way to transport ourselves is on light rail and bullet trains and cleaner buses, how will we do this if we've allowed our industrial capacity and its skilled workforce to disappear?

Thus, as GM is "reorganized" by the federal government and the bankruptcy court, here is the plan I am asking President Obama to implement for the good of the workers, the GM communities, and the nation as a whole. Twenty years ago when I made "Roger & Me," I tried to warn people about what was ahead for General Motors. Had the power structure and the punditocracy listened, maybe much of this could have been avoided. Based on my track record, I request an honest and sincere consideration of the following suggestions:

1. Just as President Roosevelt did after the attack on Pearl Harbor, the President must tell the nation that we are at war and we must immediately convert our auto factories to factories that build mass transit vehicles and alternative energy devices. Within months in Flint in 1942, GM halted all car production and immediately used the assembly lines to build planes, tanks and machine guns. The conversion took no time at all. Everyone pitched in. The fascists were defeated.

We are now in a different kind of war -- a war that we have conducted against the ecosystem and has been conducted by our very own corporate leaders. This current war has two fronts. One is headquartered in Detroit. The products built in the factories of GM, Ford and Chrysler are some of the greatest weapons of mass destruction responsible for global warming and the melting of our polar icecaps. The things we call "cars" may have been fun to drive, but they are like a million daggers into the heart of Mother Nature. To continue to build them would only lead to the ruin of our species and much of the planet.

The other front in this war is being waged by the oil companies against you and me. They are committed to fleecing us whenever they can, and they have been reckless stewards of the finite amount of oil that is located under the surface of the earth. They know they are sucking it bone dry. And like the lumber tycoons of the early 20th century who didn't give a damn about future generations as they tore down every forest they could get their hands on, these oil barons are not telling the public what they know to be true -- that there are only a few more decades of useable oil on this planet. And as the end days of oil approach us, get ready for some very desperate people willing to kill and be killed just to get their hands on a gallon can of gasoline.

President Obama, now that he has taken control of GM, needs to convert the factories to new and needed uses immediately.

2. Don't put another $30 billion into the coffers of GM to build cars. Instead, use that money to keep the current workforce -- and most of those who have been laid off -- employed so that they can build the new modes of 21st century transportation. Let them start the conversion work now.

3. Announce that we will have bullet trains criss-crossing this country in the next five years. Japan is celebrating the 45th anniversary of its first bullet train this year. Now they have dozens of them. Average speed: 165 mph. Average time a train is late: under 30 seconds. They have had these high speed trains for nearly five decades -- and we don't even have one! The fact that the technology already exists for us to go from New York to L.A. in 17 hours by train, and that we haven't used it, is criminal. Let's hire the unemployed to build the new high speed lines all over the country. Chicago to Detroit in less than two hours. Miami to DC in under 7 hours. Denver to Dallas in five and a half. This can be done and done now.

4. Initiate a program to put light rail mass transit lines in all our large and medium-sized cities. Build those trains in the GM factories. And hire local people everywhere to install and run this system.

5. For people in rural areas not served by the train lines, have the GM plants produce energy efficient clean buses.

6. For the time being, have some factories build hybrid or all-electric cars (and batteries). It will take a few years for people to get used to the new ways to transport ourselves, so if we're going to have automobiles, let's have kinder, gentler ones. We can be building these next month (do not believe anyone who tells you it will take years to retool the factories -- that simply isn't true).

7. Transform some of the empty GM factories to facilities that build windmills, solar panels and other means of alternate forms of energy. We need tens of millions of solar panels right now. And there is an eager and skilled workforce who can build them.

8. Provide tax incentives for those who travel by hybrid car or bus or train. Also, credits for those who convert their home to alternative energy.

9. To help pay for this, impose a two-dollar tax on every gallon of gasoline. This will get people to switch to more energy saving cars or to use the new rail lines and rail cars the former autoworkers have built for them.

Well, that's a start. Please, please, please don't save GM so that a smaller version of it will simply do nothing more than build Chevys or Cadillacs. This is not a long-term solution. Don't throw bad money into a company whose tailpipe is malfunctioning, causing a strange odor to fill the car.

100 years ago this year, the founders of General Motors convinced the world to give up their horses and saddles and buggy whips to try a new form of transportation. Now it is time for us to say goodbye to the internal combustion engine. It seemed to serve us well for so long. We enjoyed the car hops at the A&W. We made out in the front -- and the back -- seat. We watched movies on large outdoor screens, went to the races at NASCAR tracks across the country, and saw the Pacific Ocean for the first time through the window down Hwy. 1. And now it's over. It's a new day and a new century. The President -- and the UAW -- must seize this moment and create a big batch of lemonade from this very sour and sad lemon.

Yesterday, the last surviving person from the Titanic disaster passed away. She escaped certain death that night and went on to live another 97 years.

So can we survive our own Titanic in all the Flint Michigans of this country. 60% of GM is ours. I think we can do a better job.

Yours,
Michael Moore
MMFlint@aol.com
MichaelMoore.com

Labels: bailout, bankruptcy, General Motors, Michael Moore, UAW

 

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6/02/2009 04:36:00 PM 0 comments

 

Changing the Auto Industry from the Wheels Up

by Dollars and Sense

We just posted a new web-only article on the auto industry, by Alejandro Reuss of the D&S collective. Here is the introduction to the article:

Changing the Auto Industry from the Wheels Up

The problems of the U.S. auto industry call for radical solutions.

By Alejandro Reuss | Dollars & Sense | May 13, 2009

The "Big Three" U.S. auto companies are not facing a crisis – they are facing multiple interrelated crises at once. Chrysler, General Motors, and Ford have posted tens of billions in losses over the last few years. They suffer from chronic overcapacity, producing more cars than they can sell, and have ended up selling cars at a loss. Their cars are widely viewed as lagging behind those of international competitors in quality, styling, and reliability. They have focused on fighting fuel-efficiency standards rather than developing new, fuel-efficient vehicles. They have bet heavily on large, gas-guzzling models and are playing catch-up Toyota and Honda in the development of hybrid cars. They face significant cost disadvantages compared to their main competitors, mainly due to retiree health and pension "legacy costs." And, on top of all this, a deep recession has hammered car sales.

Already operating in the red before last year, the Big Three have been burning through billions in cash reserves during the current recession. General Motors, having posted losses every year since 2005, lost over $30 billion in 2008. It has reported that, in the first quarter of 2009, it lost another $6 billion (and depleted its cash reserves by over $10 billion). Ford has posted losses since 2006, including about $15 billion in 2008. Chrysler lost $8 billion last year. With their companies teetering on the edge of bankruptcy, GM and Chrysler executives appeared before Congress last November asking for a government bailout. In December, the Bush administration announced $13.4 billion in loans for GM and $4 billion for Chrysler. (Since then, both companies have asked for billions more.) In April, the Obama administration offered additional loans of one-half billion to Chrysler and up to $5 billion to GM. Lacking private sources of financing, the two companies have managed to stay in business this long thanks only to the government loans.

The government has required both companies to submit restructuring plans, including concessions from workers and creditors, as a condition of the bailouts. At the end of March, the Obama administration rejected the submitted plans as inadequate. It gave Chrysler 30 days more to conclude a takeover deal with Italian auto giant Fiat, while GM got 60 days to submit a new restructuring plan. In late April, Chrysler appeared to have a deal with Fiat, with the Italian automaker set to take over operations and receive 20% of the company's stock (with a possible future increase to 35%). A United Auto Workers (UAW) retiree health-care trust would own 55% of the stock. The UAW accepted new concessions on wages and benefits, while the company's major creditors agreed to cancel billions in debt for about a third of its face value (plus less than 10% of the company's stock). When some creditors balked at the plan, however, the company filed for bankruptcy. Meanwhile, GM proposed a restructuring plan in which the federal government would own 50% of the stock (in exchange for the cancellation of about $10 billion in company debt), and the UAW retiree health-care trust nearly 40%, leaving the company's unsecured bondholders with just 10%. The plan included the shutdown of the company's Pontiac division and over 20,000 layoffs. Bondholders could still balk, however, in which case GM would go into bankruptcy as well.

No matter what the outcome of the current crisis, the "Big Three" are not likely to return to the heights of their post-World War II heyday. In the 1950s and 1960s, the Big Three dominated the U.S. auto market. As recently as the late 1990s, they accounted for over 70% of total U.S. sales of new cars and light trucks. Now, they account for less than 50%. In the mid 1950s, General Motors alone accounted for over 50% of U.S. new-car sales. Today, the company's market share is about 20%. Under the company's proposed restructuring plan, it would employ less than 40,000 union auto workers, less than one tenth the number the company employed at its peak in 1970. There is no way to put Humpty-Dumpty together again, and it does not seem that any of the major players in this drama—the companies' managements, the leadership of the UAW, or the government—really believe that there is. The real question is whether something new and better will be built from the wreckage of this industry.

Read the rest of the article.

Labels: auto industry, Chrysler, ford, General Motors, UAW, VEBA

 

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5/13/2009 04:36:00 PM 1 comments

 

UAW/Chrysler: How 55% = 0% (D. Henwood)

by Dollars and Sense

From Doug Henwood's blog, on the whole Chrysler/UAW/VEBA thing:

A friend sent me a copy of a brochure (click here for a copy) that the UAW is circulating to its Chrysler workers, or those of them that remain, offering details on the proposed deal with Fiat and the U.S. government. The pay and benefit cuts are nasty, but hardly a surprise. What is a surprise is that the UAW's equity stake is even less impressive a thing than it seemed on first glance. And the first glance wasn’t all that impressive to start with.

Before proceeding, a reminder: the stock would not be owned directly by the union, but by a trust established to pay medical benefits to retirees. That already puts a layer of distance between the union and the company (with the union already serving as a layer of distance between the workers and the company). Even with that in mind, the terms of the deal suck out loud.

Two points.

• Chrysler stock hasn’t traded publicly since Daimler took it over in 1998. Cerberus, a private equity firm, bought 80% of Daimler’s stake in 2007, keeping the stock in private hands. But should Chrysler recover and offer its stock to the public, and should that stock appreciate in value, and should the UAW ever choose to sell those shares for cash, it would have to turn any amount in excess of $4.25 billion to the U.S. government. The terms of the Cerberus deal valued the firm at $9.25 billion just two years ago. Obviously that was an inflated price, but it does give some idea of what a recovered Chrysler might be worth. At that level, the VEBA’s 55% stake would be worth $5.1 billion. So, basically the VEBA would be denied any serious participation in Chrysler's recovery.


• So instead of looking to make a buck, might the UAW be able to exercise some control over the company for the longer term? Ha, of course not. As I've already pointed out here, the VEBA's 55% stake in the firm would give it just one seat on the nine-member board, the same as the government of Canada, which would have a 2% stake. And, in a particularly lovely touch (quoting the brochure), "the VEBA will be required to vote its Chrysler shares in accordance with the direction of the Independent Directors on Chrysler Board [sic]."

A headline on this section of the UAW brochure reads, "New funding structure aids company viability." And the governance structure—assuming the bankruptcy court goes along with it—gives management a blank check, despite more than half the shares being held in the name of the workers. Ah, pension-fund socialism.

LBO News asked one of the VEBA trustees how they ended up with such a stinky deal. The answer: "Negotiation."

(This is the full post.)

Labels: Chrysler, Doug Henwood, UAW, VEBA

 

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5/07/2009 01:54:00 PM 2 comments

 

Workers To Control Chrysler

by Dollars and Sense

The Financial Times is reporting that under a restructuring deal for Chrysler, the United Auto Workers (UAW) will own 55% of the auto company's stock, Italy's Fiat will get 35%, and the remainder will be divvied up between the company's secured lenders and the federal government.

As part of the deal, the reformulated company will cut its contribution to the employee health care fund by half, and Fiat will contribute its "know how" and technology, but no cash.

The worker revolution seems to have come not with a bang but with a whimper.

Labels: auto industry, auto industry loans, Chrysler, UAW

 

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4/28/2009 01:55:00 PM 0 comments

 

Chrysler Headed For Bankruptcy?

by Dollars and Sense

The NYTimes is reporting that the government is preparing a Chapter 11 bankruptcy (reorganization) filing for Chrysler. The filing itself could come as soon as next week.

Union health care and pension benefits would remain protected and a potential deal with Fiat could still be worked out under the filing. A major sticking point, however, will be how to deal with the company's creditors, who hold nearly $7 billion in debt. The government has offered the creditors 22 cents on the dollar and a 5% equity stake. The lenders had earlier proposed receiving 65 cents on the dollar and a 40% equity stake. If no agreement is reached, the matter will likely head to the courts.

From the Times:

The U.A.W., Chrysler and Treasury have reached agreements in principle that would protect workers' benefits, people with knowledge of the negotiations said, and a similar agreement is expected to be reached as soon as this weekend with the Canadian Auto Workers union.

Once Chrysler emerges from bankruptcy protection, it would largely be owned by Fiat, the U.A.W., the Treasury and its lenders, these people said. A bankruptcy filing would likely wipe out existing equity stakeholders, notably Cerberus Capital Management, which took over the carmaker from Daimler in 2007.

Ron Gettelfinger, the U.A.W.'s president, issued a statement on Wednesday saying that the union was "continuing to work toward an agreement that will be in the best interest of Chrysler workers, retirees and the communities where the company does business."

People close to the talks said Wednesday that the U.A.W. had tentatively agreed to accept Chrysler stock to finance half of the company's $10.6 billion obligation to the health care trust. The balance would be paid in cash over the next decade. That money presumably could come from either the Treasury, or from Chrysler's profits, once it emerges from bankruptcy protection.

Chrysler has a $9.3 billion pension shortfall, or 34 percent of its total liability, according to the Pension Benefit Guaranty Corporation. The agency said earlier this month that it would assume $2 billion of the shortfall in the event Chrysler terminates its pension plans.

If that happened, retirees would receive sharply lower benefits than they normally would expect. But Chrysler is not obligated to terminate its pension plans while in bankruptcy, particularly if it received federal assistance to fund them.

It was not clear Thursday where Chrysler would file its bankruptcy case. On Wednesday, Mike Cox, the attorney general of Michigan, urged General Motors and Chrysler to consider filing in the state, rather than Delaware or New York. He said a locally administered case would be more convenient for creditors in Michigan.

Labels: auto industry, auto industry loans, bankruptcy, Chrysler, UAW

 

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4/23/2009 04:49:00 PM 1 comments

 

UAW Reaches Deal With Ford

by Dollars and Sense

From the wires. Ford hasn't received bailout money, but pressed the union for concessions because they didn't want to be disadvantaged if the union made concessions with Chrysler and GM. The deal still needs to be ratified by the union.

DETROIT – The United Auto Workers and Ford Motor Co. said Monday they agreed to let the automaker change how it pays for a health care trust fund for retired workers, a deal that could serve as the model for cash-starved General Motors Corp. and Chrysler LLC.

Ford said the agreement allows it to make payments to the union-managed trust with up to 50 percent of company stock instead of cash. Having the UAW take equity frees up cash for operations.

"We will consider each payment when it is due and use our discretion in determining whether cash or stock makes sense at the time, balancing our liquidity needs and preserving shareholder value," said Ford spokesman Mark Truby in a written statement.

Ford, like its Detroit and foreign competitors, is seeing a huge drop in sales as consumers shy away from purchasing new cars during a recession. However, the company has not asked for low-interest government loans. General Motors and Chrysler have asked for a total of $39 billion, and have received $17.4 billion so far.

Under terms of the government loans, the Treasury Department set targets for Chrysler and GM to exchange half their cash payments to the trusts, called voluntary employee beneficiary associations, or VEBAs, for equity in the companies. Money freed up by supporting the VEBA with equity would potentially pare down GM's and Chrysler's borrowings from the government.

For Ford, which isn't receiving government aid but is trying to cut costs, the agreement announced Monday is another in a series of concessions from auto workers.

Terms of previous deals were not announced, but they were expected to eliminate the jobs bank in which laid-off workers get most of their pay, as well as lift work rules and make other changes that the government loan terms set out. The goal is for the companies' labor costs to be competitive with Japanese rivals that have U.S. factories.

The UAW, meanwhile, said the health care trust deal helps save jobs, as a failure to help the auto companies cut costs could lead to a bankruptcy filing and massive layoffs.

Although Ford was not required to renegotiate terms of its VEBA with the UAW, the company entered talks with the union, and said it would not be "disadvantaged" as GM and Chrysler sought concessions.

The VEBAs were established as part of the landmark 2007 contract reached with the UAW. The trusts would pay health care bills for about 800,000 UAW retirees, spouses and dependents and move billions in liabilities off the companies' books. GM expects to save about $3 billion a year, while Ford says it will save $1 billion annually.
Ford owes $6.3 billion to its VEBA at the end of this year. GM has to pay roughly $20 billion into its health care trust, while Chrysler must pay around $9.9 billion.

The UAW's willingness to strike a deal with Ford first is significant, because it shows the union is acknowledging the challenges Ford is facing, said Hal Stack, director of the Labor Studies Center at Wayne State University in Detroit.

"The question is whether they make a similar agreement with GM and Chrysler," he said. "It adds a certain element of risk to the equation for the UAW at a time when most people are nervous about any (financial) risk."

The agreement between Ford and the UAW, along with other previously agreed to concessions, must be ratified by union members. The UAW is expected to meet with heads of its local branches this week. The change to the health care trust also requires court approval.

Full story here.

Labels: auto industry, auto industry loans, Chrysler, ford, GM, UAW

 

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2/24/2009 04:42:00 PM 0 comments

 

More GM Loan Fine Print: UAW Can't Strike

by Dollars and Sense

Yesterday we reported that newly disclosed details of the Bush emergency loan to GM included clauses forcing the automaker to seek massive concessions from their main union, the UAW, including pegging wages and working conditions to those at non-union U.S. plants.

One major clause that we didn't mention, however, was that the UAW and its affiliated locals are prohibited from engaging in any strike or work stoppage. If the unions take either type of action, the government can recall the loans and force the company into bankruptcy.

The terms of the government loans extends through December 29, 2011. The UAW has a "no-strike" clause in its current contract that extends though September 2011. However, local unions have different timetables for negotiating their contracts. If the UAW was forced to reopen its contract to make concessions, the no-strike clause could be set aside.

The union is reportedly pushing its allies in Congress to reopen the terms of the loan agreement once the Obama administration takes office.

Labels: auto industry, auto industry loans, bailout, GM, labor organizing, UAW

 

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1/13/2009 02:04:00 PM 1 comments

 

GM Borrows, UAW Pays

by Dollars and Sense

GM CEO Rick Wagoner says that the $13.4 billion in U.S. government loans it has received should get the company through the end of March, but it may be back asking for additional help after that.

Under the terms of the Bush-approved bailout, the automaker can only receive additional funds if it has shown that it can get tough concessions from bondholders and the United Auto Workers (UAW).

The union made major concessions in 2007, however the Bush loan deal requires GM to get the union to agree to renegotiate a promised $21 billion company contribution to a retiree trust fund that will be the UAW, and also to force the union to agree to accept wage and work conditions equal to those at non-union plants.

The union has raised loud objections to the terms of the loan, and a bill being pushed by Democrats in the House would strip the loan of these forced concessions.

Labels: auto industry, auto industry loans, GM, labor organizing, UAW

 

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1/12/2009 03:17:00 PM 0 comments

 

Destroying What the UAW Built

by Dollars and Sense

From yesterday's Washington Post:

By Harold Meyerson
Wednesday, December 17, 2008; A17

In 1949, a pamphlet was published that argued that the American auto industry should pursue a different direction. Titled "A Small Car Named Desire," the pamphlet suggested that Detroit not put all its bets on bigness, that a substantial share of American consumers would welcome smaller cars that cost less and burned fuel more efficiently.

The pamphlet's author was the research department of the United Auto Workers.

By the standards of the postwar UAW, there was nothing exceptional about "A Small Car Named Desire." In its glory days, under the leadership of Walter Reuther, the UAW was the most farsighted institution—not just the most farsighted union—in America. "We are the architects of America's future," Reuther told the delegates at the union's 1947 convention, where his supporters won control of what was already the nation's leading union.

Even before he became UAW president, Reuther and a team of brilliant lieutenants would drive the Big Three's top executives crazy by producing a steady stream of proposals for management. In the immediate aftermath of Pearl Harbor, Reuther, then head of the union's General Motors division, came up with a detailed plan for converting auto plants to defense factories more quickly than the industry's leaders did. At the end of the war, he led a strike at GM with a set of demands that included putting union and public representatives on GM's board.

That proved to be a bridge too far. Instead, by the early 1950s, the UAW had secured a number of contractual innovations—annual cost-of-living adjustments, for instance—that set a pattern for the rest of American industry and created the broadly shared prosperity enjoyed by the nation in the 30 years after World War II.

The architects did not stop there. During the Reuther years, the UAW also used its resources to incubate every up-and-coming liberal movement in America. It was the UAW that funded the great 1963 March on Washington and provided the first serious financial backing for César Chávez's fledgling farm workers union. The union took a lively interest in the birth of a student movement in the early '60s, providing its conference center in Port Huron, Mich., to a group called Students for a Democratic Society when the group wanted to draft and debate its manifesto. Later that decade, the union provided resources to help the National Organization for Women get off the ground and helped fund the first Earth Day. And for decades after Reuther's death in a 1970 plane crash, the UAW was among the foremost advocates of national health care—a policy that, had it been enacted, would have saved the Big Three tens of billions of dollars in health insurance expenses, but which the Big Three themselves were until recently too ideologically hidebound to support.

Narrow? Parochial? The UAW not only built the American middle class but helped engender every movement at the center of American liberalism today—which is one reason that conservatives have always held the union in particular disdain.

Over the past several weeks, it has become clear that the Republican right hates the UAW so much that it would prefer to plunge the nation into a depression rather than craft a bridge loan that doesn't single out the auto industry's unionized workers for punishment. (As manufacturing consultant Michael Wessel pointed out, no Republican demanded that Big Three executives have their pay permanently reduced to the relatively spartan levels of Japanese auto executives' pay.) Today, setting the terms of that loan has become the final task of the Bush presidency, which puts the auto workers in the unenviable position of depending, if not on the kindness of strangers, then on the impartiality of the most partisan president of modern times.

Republicans complain that labor costs at the Big Three are out of line with those at the non-union transplant factories in the South, factories that Southern governors have subsidized with billions of taxpayer dollars. But the UAW has already agreed to concessions bringing its members' wages to near-Southern levels, and labor costs already comprise less than 10 percent of the cost of a new car. (On Wall Street, employee compensation at the seven largest financial firms in 2007 constituted 60 percent of the firms' expenses, yet reducing overall employee compensation wasn't an issue in the financial bailout.)

In a narrow sense, what the Republicans are proposing would gut the benefits of roughly a million retirees. In a broad sense, they want to destroy the institution that did more than any other to raise American living standards, and they want to do it by using the power of government to lower American living standards—in the middle of the most severe recession since the 1930s. The auto workers deserve better, and so does the nation they did so much to build.

Labels: auto industry, Big Three, living standards, middle class, pensions, UAW

 

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12/18/2008 03:14:00 PM 0 comments

 

More on the Myth of the $73/hour Auto Worker

by Dollars and Sense

Hat-tip to D&S collective member, Dave Ryan (exiled on the West Coast) for two more responses to the claim bandied about in the MSS that auto workers make upwards of $70/hour.

First is this piece from Eric Boehlert at Media Matters for America:

The media myth: Detroit's $70-an-hour autoworker

It's been one week since New York Times financial columnist Andrew Ross Sorkin wrote that at General Motors, "the average worker was paid about $70 an hour, including health care and pension costs."

The nugget was part of a column in which Sorkin argued that the government should not bail out the ailing Big Three automakers and that they instead should embrace bankruptcy.

Sorkin's point was that labor costs were out of control -- workers enjoyed "gold-plated benefits" -- and that during bankruptcy, the auto companies could address those runaway wages.

As I mentioned, it's been one week since the column appeared, which seems like plenty of time for Sorkin and the Times to correct the misleading $70-an-hour claim. But to date, there's been no clarification from the newspaper of record or from Sorkin himself.

And he isn't alone. Appearing on NPR last week, Times senior business correspondent Micheline Maynard told listeners that the "hourly wage" of Detroit's union autoworkers had been driven up "towards $80 an hour."

Click here for the rest of the article.

The New York Times did end up debunking the myth, but it was a couple of days ago in David Leonhardt's often excellent column "Economic Scene". Here is the crucial bit from the column, $73 an Hour: Adding It Up:

Let's start with the numbers. The $73-an-hour figure comes from the car companies themselves. As part of their public relations strategy during labor negotiations, the companies put out various charts and reports explaining what they paid their workers. Wall Street analysts have done similar calculations.

The calculations show, accurately enough, that for every hour a unionized worker puts in, one of the Big Three really does spend about $73 on compensation. So the number isn't made up. But it is the combination of three very different categories.

The first category is simply cash payments, which is what many people imagine when they hear the word "compensation." It includes wages, overtime and vacation pay, and comes to about $40 an hour. (The numbers vary a bit by company and year. That's why $73 is sometimes $70 or $77.)

The second category is fringe benefits, like health insurance and pensions. These benefits have real value, even if they don't show up on a weekly paycheck. At the Big Three, the benefits amount to $15 an hour or so.

Add the two together, and you get the true hourly compensation of Detroit's unionized work force: roughly $55 an hour. It's a little more than twice as much as the typical American worker makes, benefits included. The more relevant comparison, though, is probably to Honda's or Toyota's (nonunionized) workers. They make in the neighborhood of $45 an hour, and most of the gap stems from their less generous benefits.

The third category is the cost of benefits for retirees. These are essentially fixed costs that have no relation to how many vehicles the companies make. But they are a real cost, so the companies add them into the mix—dividing those costs by the total hours of the current work force, to get a figure of $15 or so—and end up at roughly $70 an hour.

The crucial point, though, is this $15 isn't mainly a reflection of how generous the retiree benefits are. It's a reflection of how many retirees there are. The Big Three built up a huge pool of retirees long before Honda and Toyota opened plants in this country. You'd never know this by looking at the graphic behind Wolf Blitzer on CNN last week, contrasting the "$73/hour" pay of Detroit's workers with the "up to $48/hour" pay of workers at the Japanese companies.

These retirees make up arguably Detroit's best case for a bailout. The Big Three and the U.A.W. had the bad luck of helping to create the middle class in a country where individual companies—as opposed to all of society—must shoulder much of the burden of paying for retirement.

Of course, another way to address these costs would be to have universal, single-payer health care.

Dean Baker pointed out, on his blog Beat the Press, the weaknesses in the argument that the high costs of a unionized workforce is to blame for the Big Three's failure:

The U.S. auto industry is on life-support and the Post knows who the culprits are: the unions. It told readers that: "over the past three decades, they have lost ground to more agile foreign rivals that favored smaller cars built by non-unionized labor at lower wages."

Actually, many of these cars were built in unionized factories in Japan, South Korea, and Germany. Unions didn't keep foreign manufacturers from producing high-quality popular cars in these countries. Even when these companies set up shop in the U.S. they have been able to work well with unions. Toyota operated a plant in California where the workers were represented by the UAW for decades (it may still be open).

There may have been problems with the way the Big Three management dealt with unions, but other car companies have been able to operate very effectively with a unionized workforce.

Labels: auto industry, Dave Ryan, David Leonhardt, Dean Baker, Eric Boehlert, Media Matters, New York Times, UAW, unions

 

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12/12/2008 04:09:00 PM 2 comments

 

The Big Three's 1990s Corporate Welfare Grant

by Dollars and Sense

If GM, Ford and Daimler/Chrysler end up getting a big corporate welfare grant from the "U.S. Corporate Welfare State" before they begin their new wave of 2009 layoffs of UAW members, it won't be the first corporate welfare grant that the Big Three ever received.

As Mark Zepezauer and Arthur Naiman noted in the 1996 edition of their book Take The Rich Off Welfare, during the 1990s the U.S. government gave "GM, Ford and Chrysler—whose combined 1994 profits were almost $14 billion--$333 million a year to develop more fuel-efficient cars;" yet "at the same time, the Big Three" propagandized "in favor of watered-down fuel-efficiency standards." During the 1990s, Ford, GM and Chrysler also "each used accelerated depreciation to defer a billion dollars in tax payments," according to the Take The Rich Off Welfare.

The same book also recalled:

"The extent to which automobiles dominate our lives didn't just happen by accident—at least part of it was the result of a criminal conspiracy. Back in the early 1930s, most people living in cities got around on electric streetcars. Concerned that this wasn't the kind of environment in which they could sell a lot of buses, General Motors, using a series of front companies, began buying up streetcar systems, tearing out the tracks, buying buses from itself and then selling the new, polluting bus systems back to the cities—usually with contracts that prohibited purchases of `any new equipment using fuel or means of propulsion other than gas.' Sometimes the contracts required that the new owners buy all their replacement buses from GM.

"...In 1949—after these companies had destroyed more than 100 streetcar systems in more than 45 cities, including New York, Los Angeles, Philadelphia, San Francisco, Oakland, Baltimore, St. Louis and Salt Lake City—GM, Chevron and Firestone were convicted of a criminal conspiracy to restrain trade..."

With regard to the most recent corporate welfare grant to the Big Three proposal, UAW Local 2334 President David Sole in Detroit recently wrote the following:

"Handing more money to the same auto bosses who got us into this mess won't solve the problems the auto industry faces.

"...They will continue to try to eliminate jobs and cut wages and benefits. Their only concern is maximizing profits, which is what led them to concentrate on making SUVs and trucks domestically, while shipping production of fuel-efficient cars overseas...

"Since the auto bosses have brought the companies to the brink of ruin, the workers, their unions and the communities in which these factories are situated must assert their right to run the plants and replace the bloated, short-sighted executives and the big shareholders who kept them at the helm.

"Worker-community control of the Big Three is the only solution. Under worker-community control the demand for government funds to rebuild and retool the plants to make energy-efficient cars and mass transit equipment could rally wide support."

--bf

Labels: auto industry, bailout, Bob Feldman, corporate welfare, financial crisis, UAW

 

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12/11/2008 01:22:00 PM 0 comments

 

GM Chrysler Deal Would Cause Massive Layoffs

by Dollars and Sense

As sales at US automakers continue to fall through the floor, Chrysler and GM are trying desperately to hammer out a merger as their sales and cash reserves evaporate. They are currently seeking $10-12 billion dollars in government support to cover merger-related expenses. It's unclear how the merger of two money-losing companies would combine to make a profitable one.

UAW President Ron Gettelfinger has expressed alarm at the deal's potential for massive job losses. The latest estimates are that Chrysler alone would have to cut more than half of its current workforce of 67,000 employees, and an additional 50,000 jobs in related industries would be in danger, according to the consulting firm of Grant Thornton.

To complicate matters, the two cash-starved companies are currently facing payments of $7 billion each by 2010 into a the voluntary Employee beneficiary association, or VEBA, a trust fund designed to cover the future health care costs for union retirees. Any changes to the fund resulting from a merger would need union approval.

The UAW is trying to reinsert itself as a major player in the talks, and has recently hired top ex-auto industry execs to help with its lobbying efforts.

Labels: auto industry, Chrysler, General Motors, GM, Ron Gettelfinger, UAW, VEBA

 

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11/03/2008 01:30:00 PM 0 comments