Auto Manufactor Bailout

Discussion in 'More Serious Topics' started by Joeslogic, Nov 24, 2008.

  1. Joeslogic

    Joeslogic Active Member

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    8,426
    http://www.heritage.org/Research/Economy/wm2135.cfm

    November 19, 2008
    Auto Bailout Ignores Excessive Labor Costs
    by James Sherk

    Without government intervention, one or more of the Big Three automobile manufacturers--General Motors, Ford, and Chrysler--faces restructuring in bankruptcy. Bankruptcy would not be the end of the Big Three but a new beginning. Coming out of bankruptcy, the automakers would start fresh, free of the contractual obligations that have kept them uncompetitive. The United Auto Workers (UAW) and Detroit automakers want to avoid bankruptcy and are seeking a taxpayer bailout. Such a bailout, however, is not an acceptable alternative to bankruptcy because it would delay the restructuring the Big Three need to become competitive again.

    UAW workers earn $75 an hour in wages and benefits--almost triple the earnings of the average private sector worker. Detroit autoworkers have substantially more health, retirement, and paid time off benefits than most Americans. These benefits, and a JOBS bank that pays UAW workers nearly full wages to not work, have been a major force driving the Detroit automakers' current fiscal woes. Consequently, Congress should not force all Americans to pay for high wages and benefits for UAW workers.

    UAW Workers Highly Paid

    The Big Three automakers are asking taxpayers to bail out some of the most highly paid workers in America. Chart 1 shows the average hourly compensation (wages and benefits) earned by all private sector workers and for UAW represented workers at the Big Three. It also shows the hourly compensation at Japanese plants in the United States.

    The average private sector worker earned $25.36 an hour in 2006--$17.91 an hour in cash wages and $7.45 an hour in benefits such as pensions, paid time off, and health insurance.[1] Autoworkers at Japanese plants located in the United States earn substantially more than this: between $42 and $48 an hour in wages and benefits, which amounts to over $80,000 a year in total compensation--hardly cheap labor.[2]

    The typical UAW worker at the Big Three earned between $71 and $76 an hour in 2006. This amount is triple the earnings of the typical worker in the private sector and $25 to $30 an hour more than American workers at Japanese auto plants. The average unionized worker at the Big Three earns over $130,000 a year in wages and benefits.[3]

    Generous Benefits

    Most of the Big Three's UAW workers' compensation comes as benefits, not cash. Table 1 breaks down the average hourly labor costs for a UAW worker at Chrysler in 2006. Ford and General Motors have similar compensation profiles.

    Only 38 percent of the $75.81 an hour that Chrysler's UAW workers earned came as base wages. The rest came as benefits (though some of those benefits, such as overtime premiums and paid vacation days, are paid in cash). Health care costs are the most expensive benefit, accounting for over a quarter of total compensation.

    Gold-Plated Health Care

    Health care costs the Big Three so much because the UAW negotiated gold-plated health benefits that include medical, hospital, surgical, and prescription drug coverage. These benefits also cover durable medical equipment (e.g., hearing aids), dental benefits, and even Lasik eye surgery.[4] For all this, GM workers and retirees must pay monthly premiums of $10 for an individual and $21 for families.[5] As a result, UAW workers and retirees have some of the most comprehensive and least expensive health care in America.

    Competitive Disadvantage

    These gold-plated health care benefits put the Big Three, and especially GM, at a competitive disadvantage. For example, GM has three times as many retirees as active workers, and health care costs for both groups cost the company $4.6 billion in 2007. The UAW's lavish health benefits added $1,200 to the cost of each vehicle produced in the United States.

    The Japanese automakers, by contrast, provide standard health benefits to their American employees. Consequently, health care for active workers cost Toyota $215 per vehicle in 2006.[6]

    Every American buying an auto made in Detroit pays an extra $700 to $1,000 to support health benefits far more generous than most Americans receive.

    UAW employees also receive the following extraordinary provisions:

    * 30-and-Out contracts. UAW employees work under a 30-and-Out contract that allows them to retire with generous pension benefits after 30 years on the job, irrespective of age.
    * Seven weeks' vacation. A Chrysler worker with 15 years' tenure was entitled to 34.5 paid holidays and vacation days in 2006--seven weeks in paid time off.[7] This is three weeks more paid vacation than the average private sector worker with similar tenure.
    * Paid not to work. Under UAW contracts, workers whom the automakers let go when plants close are not laid off. Instead, after exhausting regular unemployment payments from the automakers and the government, they are transferred to a JOBS bank where they are paid nearly full wages to not work.

    A Step in the Right Direction

    These affluent wages and benefits prevent the Detroit automakers from successfully competing. The Detroit automakers and the UAW have known about this competitive disadvantage for decades, but the UAW resisted making any concessions until 2007--when bankruptcy became an impending reality.

    Under the 2007 contract, the Big Three and the UAW agreed to the following:

    * To transfer, starting in 2010, retiree health care obligations to a Voluntary Employee Benefits Association (VEBA) run by the UAW. The automakers agreed to collectively pay $60 billion into the VEBA, after which time the UAW would have full responsibility for providing retiree health benefits. This agreement takes the cost of providing health benefits off the Big Three's balance sheets.
    * To limit time in the JOBS bank to two years.
    * To require workers in the JOBS bank to accept new employment offers.
    * To create a two-tiered wage structure. Detroit automakers may now hire entry-level workers for "non-core" positions (those not directly involved in manufacturing automobiles) for roughly $26 an hour in wages and benefits. Although these entry-level workers may transfer to the higher paid vehicle assembly jobs as vacancies occur, they will never receive retiree health benefits.

    Too Little, Too Late

    GM estimates the new contract will eventually cut 70 percent of their labor cost gap with the Japanese manufacturers.[8] Average compensation will fall to $54 an hour once the contract takes full effect.It will, however, take years for the Big Three to realize these cost savings. The cost reductions affect only a minority of workers and occur gradually as current workers retire.

    The vast majority of UAW workers in Detroit today still earn $75 an hour, and the Detroit automakers must still find $60 billion to finance the VEBA. Detroit's labor costs will not fall as much or as rapidly enough as the Big Three need to restore their competitive position and remain solvent.

    Had the UAW made similar concessions in the early 1990s, it might have prevented the Big Three from falling into such dire economic straits. It did not, however, and the new contract is too little, too late to keep the Detroit automakers solvent.

    Taxpayers Should Not Bail Out the UAW

    By seeking a bailout, the UAW, along with the Detroit automakers, are asking taxpayers to help keep UAW earnings at $75 an hour when the typical American takes home a third that much. The Big Three also want Congress to use taxpayers' money to pay billions of dollars into the new health care VEBA, thereby funding health care benefits for UAW retirees that are far more generous than those provided by an already under-funded Medicare system.

    UAW workers understandably want to preserve the standard of living to which they have become accustomed, but that standard is not sustainable in a competitive economy. Congress should not tax all Americans in order to maintain UAW workers' affluent lifestyles.
     
  2. phatboy

    phatboy New Member

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    6,956
    They should let them fall under. But, then again so should airlines, and the railroads that cant support themselves. The housing market failure is the same crap. If they would have given every American (working American) 100k, there would be no banking crisis and it would be more of a financial bailout than paying 700Billion to keep these crappy banks from falling. Plus giving those working Americans the money would also pick up the lending market because those idiots that cant pay their mortgages would have the money to pay them for a little while longer.
     
  3. Joeslogic

    Joeslogic Active Member

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    8,426
    You are right Phat. It would be the lesser of two evil due to the extreme inflation rate. Best to just take a hands off approach.

    Remember when the government made it easier to go to collage? The cost doubled in no time.

    Same as easy credit. Houses triple and quadrupling in cost. Those people bitch because they are over their head. But they did not bitch when they were taking advantage of that 100k equity in a few small years and refinancing every time and buying union built cars. The Auto industry made money hand over fist. Not only the American one but also the foreign industries.

    Now those cock suckers making stupid amounts of money so that I have to pay 30k for a mid size or a good truck. And that's median price.

    This is a tax in and of itself. The Unions were sucking that money right in and lobbing for or threatening strike to ask for more.
     
  4. phatboy

    phatboy New Member

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    6,956
    Yep. I understood why Unions started, and why they were needed, but they have turned into a monster that apparently nobody wants to deal with. Their dumbasses dont understand why manufacturers are moving the jobs overseas.

    30k for a car that gets crappy mileage. Thats what kills me. The technology is there. They need to start putting 4 and 6cyl diesels in compact and midsize vehicles (trucks included). I heard that Dodge was looking at putting one in the 1500 Rams, but not sure why it got scrapped.

    It would be nice if our government would tell them idiots, 'hey you lend money to broke asses, thats your bad, not ours'. Then us responsible people could buy up their abandoned houses for cheap.......

    Of course we have to get rid of the blue carpet and gold trim.
     
  5. Nauseous

    Nauseous Active Member

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    10,886
    If I were a guy, I would totally be in the union. Not a lot of unions around here that I could join being a weak female. I'm not degrading women. I am really a weak female. I could barely lift the 40 pound bag of dog food into the cart today at the store.
     
  6. Lomotil

    Lomotil Active Member

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    10,267
    Of course you would. They've got the best salesmen out there garnering support, they take their cut out of the whole ordeal, and guarantee workers make more than they're worth. Who wouldn't join one?

    The whole thing has been blown out of proportion, and this is why we see the astronomical increases in car prices versus the rate of inflation and the cost of technology combined, and we're left to suffer when we accidentally purchase a vehicle produced on a Monday or a Friday. So much for quality control.

    This is yet another of those "Don't get me started" threads... Occasionally I'll go off, but mind you, people - you've never felt the full-frontal brute force that is Lomo's rage yet.
     
  7. Joeslogic

    Joeslogic Active Member

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    8,426
    Why not make this a union country. A union for every job. we can just even the playing field. the pimple faced kid at McDonalds will make 50k and a benefits package worth 100k. Now it will cost you 25.00 for a small side order of fries. But it will all be fair.
     
  8. Nauseous

    Nauseous Active Member

    Messages:
    10,886
    I'm very well aware of how the union works. I work for a company that uses only union labor. I know exactly what the cost is. I do payroll and pay the dues every month. It's very expensive to have union labor, but in a small town with jobs being scarce, the union is a good thing for the workforce. Shit, that's everywhere these days. It's nice to have job security.

    And from a business standpoint, the union drums up business. Some companies will only use union labor, so sometimes it's a tradeoff. We don't do residential work because people can't afford us, but we do a lot of work in the plants.

    I think... I'm not 100% sure, but I think I was told this. Union labor is guaranteed. If they fuck up, the have to go back and fix it and they don't get paid. You won't find that probably anywhere else.
     
  9. Robman97

    Robman97 Member

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    754
    Hell, California has a grocery workers union......
     
  10. Lomotil

    Lomotil Active Member

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    10,267
    OK, so let me get your business model straight.

    Let's set it in the automotive industry, in keeping with the tone set by the thread itself:

    With a Union, workers are given power over their employers, right?

    A business' employee, whom might be heavily concerned about this - or not, based on their level of comprehension of economics itself, might ponder:

    The end level, most products ever made are produced on a demand of a consumer basis.

    Provide a cheaper, more reliable, alternative, and there will be demand.

    Economics thrives because China makes mass-produced copies of US designs, and we are benefited with inexpensive prices, and our producers are driven to create new ones...

    China thrives because they pay slave laborers pennies for producing goods that are sold to the Capitalistic societies at both extreme markups, and for extreme profits.

    There has to be some happy medium between the two economic models... :rolleyes:

    So, vote for Lomotil, and I'll guarantee every American an M4 assault rifle, free Coneys on Wednesdays from 10-11AM (rural areas only, within "drop zone" by armored helicopter) - and we will proudly sponsor the "Follow a trail of Cheerio's!" monthly "GET LOST" campaign. First one to eat every O on the way to the finish line gets a lifetime of "O's" from our resident Stallion.

    Oh, and pot is legal, too... in a perfect society. that is... Where people aren't forced to invest their psychological addictions into things like Rape, Burglary, Homicide, The Olympics, Mass Murder, Computer Hacking, Reality Shows, and Dial-a-Bestiality coordinators, etc... They can be comfortably engaged in staring at their bathroom wallpaper breathing... if they so see fit. and exhaling... and breathing in again... wow... check it out...
     
  11. Nauseous

    Nauseous Active Member

    Messages:
    10,886
    Treat the workers like shit, don't offer them insurance or any other incentive to keep the costs down. That's fucking great.

    Even better, take away American jobs and send them overseas.

    That's the way it is now. I don't blame Unions for this. It's the greedy corporations that don't give a damn about anything but money.

    I really hope that there is a special place in hell (if there is one) for these people.
     
  12. homer

    homer Member

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    140
    I tend to agree,the unions may have gotten greedy but the way I see it they learned it from the greediest bastards out there,the corporations they work for.When the companies were making huge profits off the backs of the workers who could blame the workers for trying to get a bigger piece of the pie.
     
  13. Lomotil

    Lomotil Active Member

    Messages:
    10,267
    I would venture to say that the average greedy union is partially responsible for outsourcing jobs more than the average greedy corporation... Get a group of "Teamsters" together, and they'll let you believe you owe your entire lifestyle to those fortunate to fall under their 'protection.' Suddenly, any average slob that can tighten a nut is guaranteed a full retirement, lifetime benefits, and health care that even the most successful businessmen are jealous of (those not in the unions, of course.) Let's face it, if we lived in a global free market, we would not only have the best products produced, but the best salaries paid. It's only because trade sanctions are typically lifted by Liberals to promote growth to countries that abide by Socialist manifestos, at the expense of the American worker, and at the benefit of the economic model that serves as a blueprint for the final destination of a group of people here in our country that want to steer society into a completely dependent faction. Enjoy your Obama vote, Comrade!

    Reward ability, talent, and achievement. Then let them, and society, reap the benefits.
     
  14. Cheezedawg

    Cheezedawg New Member

    Messages:
    724
    NO ONE is seeing the clear and simple solution here! We have too many people on this earth! We just all need to pick up some guns.... and thin the fucking herd. Period.
     
  15. Robman97

    Robman97 Member

    Messages:
    754
    For a little background I work for a company that produces down hole oil equipment. It is a Scottish owned company, but the plant I am at is the main Manufacturer of our product. We have plants all over the world, they all mostly produce the same materials but in small quantities.

    Some woman I work with came from California, she worked for Boeing in their union out there, and couldn't believe how mistreated we were here. We all laughed at her, because the company isn't perfect but they do try to make it a great place for the most part. She then was talking about maybe trying to get a union vote going. My step-dad use to work at the same place for 5 years as a materials manager, spending 2 years at our Venezuelan branch, and he laughed his ass off at that idea. He told me if they tried that, the company could shift production away from our plant effectively closing it. Then they could ramp up production at each producing plant, double is very doable, and within one years time the company wouldn't even miss us. Plus, the overhead would drop significantly even after they hired new employees overseas, the Venezuelan guys made like $400 a month and their inflation is pretty high on a lot of things. The average American guy makes that in one week. Anyways like Texas, Oklahoma is a right to work state so it wouldn't have mattered, most people wouldn't have joined. Too many union places like Dayton and GM have closed here and that leaves a real bad taste in a lot of peoples' mouths
     
  16. phatboy

    phatboy New Member

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    6,956
    The unions use strong arm tactics to manipulate the industry. Those union workers who are just 'over' the union have to get paid from somewhere, so to make themselves as much as possible they are going to try and get their 'brethren' as much as possible.

    Retired Union employees of UAW pay 10.00 a month (single) or 20.00 a month (family) for health insurance. Not crappy health insurance, but damn good 'gold level' insurance. Who foots the bill for that? The UAW? No, GM has to pay that premium. Unions had a place, prior to labor laws, now they are just greedy institutions that pray on the simple minded and lazy.

    I am in GA, another 'Right to Work' state, there are some local unions, but a lot of the members of said unions have to find work outside the union because no one hires them. A friend of mine who joined the pipe fitters/plumbers union made 50.00 an hour, when he worked. Problem was, no one wanted Union workers. Especially when you could get a more qualified and experienced worker for a lot less.

    We have a couple of mines up north that has union workers. They went on strike and demanded 150k bonus per employee. Yea, that makes a lot of sense. Their justification was that since the company was making money, instead of reinvesting that money in the company it should just give it to the union workers (yea, I wouldnt see any of that money) just those Union members, and their associated 'henchmen'.

    Oh, and they are already the highest paid 'blue collar' people in their associated areas, and they get an annual bonus based on their performance and salary.
     
  17. Joeslogic

    Joeslogic Active Member

    Messages:
    8,426
    Phat you and Lomo are both correct ... as well as Rob. Think is thought some people refuse to see the big picture.

    If all companies were union then lets say all insurance would be 10.00 for everyone right? We both know how that would end up working. But many do not they simply see the union as the smart ones around here the ones who "stuck it to the man" They are incapable of seeing that they themselves are paying for that health insurance everytime they buy a car and pay the added 2k premium just to support the overhead.

    Not only that after the bailout everyone will be paying regardless of weather they buy a car or not. This includes the non union workers trying to get by with less pay and a 200.00 health ins premium.

    I know you know all this but it just seems impossible to get through the thick skulls. It was the ignorant people who elected Obama this was proven in the Zogby poll. Like I have always said its the dumbing down of America that is enabling this.

    Pretty soon it will be out of the peoples hands to change. That stupid ass Obama is ready to give sovereignty over America to the U.N.

    Senate Bill S.2433 was introduced in 2007, sponsored by Barack Obama, on behalf of other listed names. It was brought forward in April 2008. It now needs only votes in House and Senate, and executive signature to become law.

    That S.2433 and goes to the Democrat Congress for review and signed. Then to the Democratic Senate and on to the President of the U.S.

    Even the few sensible Democrats will likely cave on this knowing it will be suicide by the media if they oppose it.
     

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