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Here is a letter from one of our great readers. She forwards
to us some Forbes Magazine quotes. We do our analysis on Forbes'
numbers in the right column Labor cost per hour,
wages and benefits for hourly
workers. Ford: $70.51 ($141,020 per year)
GM: $73.26 ($146,520 per year)
Chrysler: $75.86 ($151,720 per year)
Toyota, Honda, Nissan (in U.S.): $48.00 ($96,000 per year)
According to AAUP and IES, the average annual compensation for a college
professor in 2006 was $92,973 (average salary nationally of $73,207 +
27% benefits).
Bottom Line: The average UAW worker with a high school degree earns
57.6% more compensation than the average university professor with a
Ph.D., and 52.6% more than the average worker at Toyota, Honda or
Nissan.
Many industry analysts say the Detroit Three, must be on par with Toyota
and Honda to survive. This year's
contract, they say, must be "transformational" in reducing pension and
health care costs.
What would "transformational" mean? One way to think about
"transformational" would mean that UAW workers, most with a high school
diploma, would have to accept compensation equal to that of the average
university professor with a PhD. (next column)
13/01/2009 04:16 PM
southampton Market
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(continued)
The Saugeen Times Analysis
The figures need some analysis. They are true, but
not what one would expect. The 'devil is in the details'
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The rates quoted in the left column are what the
accounting people call burdened rates. That
means they include all the overhead of maintaining that employee,
which include not only his or her take home wages and benefits, but
the administrative costs too and in the case of the Big Three, the
pension costs. The burdened rates are dramatically different
between the BIG Three and the Japanese Three.
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The rate is computed to include the retired
employees for GM, Ford and Chrysler. That is, the hourly rate
is computed with the numerator having the hourly rate of the
present workers' hours + the cost of the pension obligation that GM,
Ford and Chrysler has. The denominator ONLY includes the
number of active employees' work hours with overtime.
hourly rate = (active workers compensation +
retired workers pensions)/number of hours worked by ACTIVE
workers only
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If the numerator had only the active employees
wages, the differential would shift to about $3/hour.
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The average UAW active employee brings home about
$57,000/year. Nissan, Honda and Toyota workers do NOT bring
home $96,000 per year as again this is a burdened rate that includes
administrative costs and other costs of doing business. The
Big Three workers are taxed on gross income that they take
home, not the burdened rate that the company uses to estimate the
cost of doing business. He or she takes a normal vacation and
buys a car and sends kids to school. They are not country club
members. Usually their spouse works too.
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In Michigan's Macomb County home of many auto
plants, the average grade school teacher after 10 years experience
makes about $70,000 per year to instruct the auto worker's children.
They are Union members.
Auto workers who work in Southern States and who are not
represented by the UAW have a lower burdened rate because their
companies do not have the obligation as yet of the pensions of retired
employees and they pay a lower hourly wage. They don't have a
retired base because they are new and have negotiated to not cover the
things that the Big Three have covered for the retired or active people.
We believe GM Saturn has some of those advantages too as
it was set up later in a southern state. Of course Mexican auto
plants have an even more pronounced advantage.
The Japanese companies also have received tax breaks and
land from the states to attract them, while the Big Three does not have
that advantage in the northern states for legacy plants. They have
received breaks in Canada and they like Ontario because of the health
care costs.
One Nissan Plant received land from a state equal in
value to the cost of the plant, plus ongoing tax breaks.
In other words, the Japanese Auto Companies are not paying out pensions
and health care for the vast number of retired people that the Big Three
must pay. It's a legacy issue again and a difficult one.
Here are some ironic side issues:
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It is unfortunate that for accounting reasons the
hourly wage is computed as shown above and it differs dramatically
from what the take home pay is before taxes. Forbes seems to
have not brought that forward.
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As a car rolls of the line for the Big 3, 10% of its
cost goes to the UAW employee. There are other unsustainable
burdens. For example, the outstanding debt of GM alone amounts
to $62 Billion, which includes pension obligations taken on by both
the Big Three and the UAW in good faith in the past..
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The Big Three now have good quality cars. GM
had the car of the year last year. The new plant in Lansing
Michigan is the most efficient and most environmentally friendly
large plant in the world.
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The Big Three have lousy marketing and have failed
to put forward the facts stated above in a way people can
understand.
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The Japanese Auto Plants take their profits back to
Japan as one would expect. They too want some considerations
due to the present economic down turn.
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The Big Three retirees spouses are losing their
health care now. For example, the Saugeen Times talked to an
83 year old widow whose husband worked for GM for 40 years. He
is was a white collar worker. She has lost her health care.
Luckily she can use Medicare and use what's known in the US as
Medigap to make up the difference. Medigap will cost her about
$2000/year. She and her husband had five children.
The present cost for health care in the US for a family of 4 is
about $12,500 per year. If she had been under 65, with no
prior medical troubles, she would have to pay about $7,000+/year or
go without medical insurance.
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