I’ll tell you what’s wrong with GM:
Total compensation per hour for the big-three carmakers is $73.20. That’s a 52 percent differential from Toyota’s (Detroit South) $48 compensation (wages + health and retirement benefits). In fact, the oversized UAW-driven pay package for Detroit is 132 percent higher than that of the entire manufacturing sector of the U.S., which comes in at $31.59.
Here’s a clue: GM is paying a shitload more per hour to build cars in Detroit than Toyota is in Indiana.
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If somebody wants to turn a nascent recession into a full-blown depression, I can’t think of a more efficient way than to tax working people to bail out major corporations.
Labor costs are only part of the picture.
What has done them in is a lack of innovation. This really started in the
50′s and 60′s when the VW Bug and the Japanese invasion of the mainland finally brought competition the Big 3 couldn’t suppress (See Preston Tucker)
A bailout will just go down a deep hole (see the first $25 Billion)
What’s needed is a re-tooling such as what took place in WWII.
The Auto manufacturers stopped making cars and started assembly lines for war machines, did it in record time and on the head of a pin.
If they focus on what we need. (fuel efficiency and energy independence) they can put their talents into a Manhattan Project to develop battery technology, and mass produce PV’s to drive down the unit cost, making it affordable for Joe LunchBucket.
Give them some money to produce something we need, and shortly will want, when the lights start to go out…………………
Leo, I don’t disagree that they have an innovation problem: if they were building cars that matched what people want, they’d sell more of them. The notion that this accounts for the problem, though, is obvious nonsense. Let’s say they came up with a new car that was so innovative that people really wanted them. unless you are suggesting that they could find an innovation so complete and so well-protected, by say IP laws, that Toyota couldn’t adapt and produce something comparable, then you end up again in the situation where the cost of a similar car from Toyota would still be substantially less. Either the car would cost less, or Toyota would be more profitable, thereby attracting more investment, and having more roon to innovate further.
The one possibility would be if an innovation were such that the proportion of labor cost could be reduced; but then they would only be able to realize the savings if they could let some of the workers go, and they can’t do that under the UAW contracts either.
I think the only real answer is for GM to go bankrupt; whoever bought the remaining assets at least would have a chance of getting a realistic cost structure.
‘Obvious nonsense’ notwithstanding, you are arguing over history, rather than what they could do at present.
There is a concept called ‘speed to market’ in which lithe and flexible co’s get the jump on the competition as to consumer insights.
An employee owned Auto Industry makes salaries and benefits negotiable, and with stock participation based upon performance, efficiencies should improve.
What I’m suggesting is one possible answer to AUTO woes. It’s an idea, not a manfiesto. What’s your solution?
Leo, whatever the solution is, it won’t be one that leaves GM paying half again as much per hour of labor. Again, think it out: if GM has to pay half again as much per hour of labor as does Toyota, and Toyota can always reverse engineer whatever GM does to reduce the contribution of labor costs, then GM will always be at a cost disadvantage to Toyota. If GM has some wonderfully innovative new idea to build cars with better batteries, Toyota will build better batteries too. GM now will be building better electric cars at half again as much per hour labor as Toyota.
We can’t protect GM manufactures from Toyota because, after all, Toyota is building the cars here — you’d be saying “we’re going to put people out of work in Indiana to save jobs in Michigan.”
I agree a bailout won’t make any difference in the long term; it’s not like the credit crunch, where the underlying business was more or less workable. The only solution is one that reset’s GM’s labor costs to be competitive.
Chaco;
I think GM workers who are faced with NO job would look seriously at that $31 National average, especially when Profit Sharing and Stock participation looms as an incentive.
Bankrupting the Industry would be an economic meltdown, squandering the operating Monolith’s assets on a penny-per-pound liquidation that will benefit only the scavengers.
Think about what occurs if we leave Iraq, tomorrow. The metaphor is not that far off.
This is gonna worry you no end but I basically agree. The only thing is that a bankruptcy wouldn’t cause GM to shut down, any more than United or Frontier stopped flying when they declared bankruptcy. There would need to be new management, and all those contracts would have to be renegotiated. UAW won’t like it a bit.
If O is half as slick at politicking as he is at campaigning, he’ll figure out a way to get it done, or on the rails, before Inauguration Day, and then blame the union meltdown on Bush.
Why would your ‘basic’ agreement worry me?
I just think re-structuring won’t do it.
What’s the layman’s definition of insanity, to keep doing what you’ve always done knowing it doesn’t work?
Taxpayer money would change (illuminate) the direction and purpose of Big Auto…
The notion that the government would be smarter than new management seems less than fully supported.
I think the notion that taxpayer money/involvement brings accountability is unsupported by experience.
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[...] Charles Martin points us to a brief but fine analysis by Larry Kudlow at National Review of the bailout biz. Kudlow point out how much the Big (shrinking) Three pay their employees versus the competition. Total compensation per hour for the big-three carmakers is $73.20. That’s a 52 percent differential from Toyota’s (Detroit South) $48 compensation (wages + health and retirement benefits). In fact, the oversized UAW-driven pay package for Detroit is 132 percent higher than that of the entire manufacturing sector of the U.S., which comes in at $31.59. [...]
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