Never has $14 billion sounded like so little money. Last week, the executives of the Big Three automakers humbly drove to Washington in their hybrid cars, having been chastised by congress during their previous visit for arriving in corporate jets. They sought not bailouts, but bridge loans to get them through this difficult global economic slide.
But after allocating some $812 billion in a recent bailout package for banks and investment firms which included $112 billion in pork projects for representatives’ local constituents, the folks in congress suddenly got all question-happy when the automaker execs came into town. Senators from the south derided the car companies for making cars that no one wanted to buy and said the Big Three got themselves into their own mess. It was those damn unions — where blue-collar workers made $70 an hour — that were mostly responsible, they said. Of course, if you look at the automobiles manufactured in those representatives’ states, you’ll see that they’re in direct competition with Detroit and have an incentive to make sure no loans are given to Ford, GM and Chrysler. Yep. Lots of Toyota, Honda, Kia, Hyundai, BMW and Mercedes plants down there. Direct competition for Detroit. And hey, if they can bankrupt Detroit and kill the unions at the same time, they could be the new heroes of Republicans everywhere, and look like they’re being fiscally responsible in the process. Bankrupt the Big Three, kill the unions, show everyone they’re fiscally responsible. It’s the Republican Trifecta!
The stated reason the southern Republicans voted against the bridge loans today was because they wanted more concessions out of the UAW. They believe that it’s the Big Three’s ties to living wages for all employees that is causing the problem. It doesn’t matter that only one auto manufacturer in the world right now had sales last month that were up from a year ago. Nissan sales were down 42% in November 2008 from 2007. Honda was down 31%. Hyundai was down 40%. Even the golden child, Toyota, was down 34%. My favorite automobile manufacturer, Saab (admittedly, part of GM), was down almost 60%. Porsche, 48%. So was General Motors 41% decline really that out of line with the rest of the bad news? Is the trouble GM is facing right now really a product of its own making? Or will it just recover when the rest of the economy and the automotive industry in general recovers. Say, when banks start offering loans again instead of hoarding the money they were given from US taxpayers.
The answer is yes. GM would recover. If you read the viability plan that GM provided on its most recent visit to Washington, it creates a picture of a smaller, more nimble GM NOT in several years, but TODAY. While it was still raking in the profit from SUV sales, GM was preparing for the coming (now here) gas crunch by investing heavily in new technologies, including hybrids and the new Chevy Volt which was supposed to be out in 2010. In regard to its employees, GM had actually done the responsible thing and had slightly overfunded its pension accounts, even while it managed to cut legacy costs in regard to hourly manufacturing by almost $5 billion per year (from $5.6 billion in 2003 to $.7 billion in 2008). Overall hourly manufacturing costs were slashed from $18.4 billion in 2003 to $8.1 billion in 2008.
And yet we still hear about how much the hourly rate is for a United Auto Worker. $73 an hour we hear, right? Well the NY Times recently said that figure is totally bogus. Pennsylvania Senator Bob Casey said, “It’s a total lie. I think some people have perpetrated that deliberately, in a calculated way, to mislead the American people…”
According to the NY Times article:
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 article goes on to say, “The Big Three and the UAW 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.”
So basically, GM, Ford and Chrysler get the shaft because the new guys coming into town (Honda, Toyota, etc.) don’t have to honor promises they made to workers in the 60s and 70s, on the account of they weren’t building cars here yet. Meanwhile, Republicans in the south are saying that since the Big Three automakers — big business — have shouldered the liability for workers retirement and healthcare (instead of the government), they should now be punished because they’re not screwing over the employees they made promises to.
These folks are just sickening. They’re not above letting the rest of the country and three million more jobs go down the tubes because they didn’t want to give The Big Three a LOAN for 1/60th of the GIVEAWAY they gave to the bands and investment firms.
There’s got to be a special kind of hell for congressional representatives who would just let 2-3 million blue-collar jobs hang in the balance for their own — I don’t know what… Enjoyment? Selfishness? Ego? Misguided principles? It doesn’t seem to matter much to them that they might just be taking the whole auto manufacturing industry in the US down with them. If GM and Chrysler go down, back payments to component manufacturers don’t get paid, and many of those companies will be forced to declare bankruptcy themselves, or just liquidate their leftovers and go bye-bye. If these reps don’t think that will affect their precious Honda and Toyota plants in their own states, they’re horrendously naive.
They’re playing with nothing less than the economy of the entire country. No one in their right mind would buy an automobile from a manufacturer in bankruptcy. Who will honor the warranties? Will parts be available? Will local dealers be forced out of business due either to the company in the process itself or due to lack of sales? Forget it. Time to buy a Subaru (they were down less than 10% in November and seem stable).
But who cares? These reps have Toyota and Honda in their states, and their buddies in the banking and investment industries already got their handouts. Screw the rest of us. Screw the workers. Screw the economy. They already got what they need to wait this out. The rest of us are just blue-collar suckers who don’t know the right people or work for the right company, right?