Should We Really Bail Out the Big Three Automakers with $73.20 Per Hour Labor?

by: Mark Perry November 10, 2008 | about stocks: F / GM / HMC / TM / VLKAY.PK    

Mark J. Perry, Ph.D.

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The chart above shows average hourly compensation for the Big Three ($73.20) and Toyota (TM) ($48.00), compared to average hourly compensation for Management and Professional Workers ($47.57), Manufacturing/Goods Producing ($31.59) and all workers ($28.48), data available here.

Should U.S. taxpayers really be providing billions of dollars to bailout companies (GM (GM), Ford (F) and Chrysler) that compensate their workers 52.5% more than the market (assuming Toyota wages and benefits are market), 54% more than management and professional workers, 132% more than the average manufacturing wage, and 157% more than the average compensation of all American workers?

Maybe the country would be better off in the long run if we let the Big Three fail, and in the process break the UAW labor monopoly, and then let Toyota, Honda (HMC) and Volkswagen (VLKAY.PK) take over the U.S. auto industry, and restore realistic, competitive, market wages to the industry. It might be the best long-run solution.

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This article has 442 comments:

  •  
    Nov 10 09:14 AM
    Just out of curiosity - How much per hour do the guys at AIG make? Oh, I forgot, AIG is a friend of Paulson's, so that's OK.
    Reply | Link to Comment
  •  
    Nov 10 09:23 AM
    NO.
    Reply | Link to Comment
  •  
    Nov 10 09:26 AM
    It is not just the hourly rate, the union has also lobbied to reduce output so that more workers are required. You would think quality would go up. They push safety as the reason, but I heard at one point a metal stamping machine operator was only punching 12 sheets a day. The management wastes money true, and they have way too many brand families duplicate models with duplicate expenses lines. But paying factory workers more professional workers is not sensible. Maybe better business leaders wound up on the assembly line because of the higher pay and benefits....
    Reply | Link to Comment
  •  
    Nov 10 09:29 AM
    You've hit the nail on the nead...Thank you
    Reply | Link to Comment
  •  
    Nov 10 09:32 AM
    Do a little research before you make a comment like that. The $73 and hour includes legacy costs. Union member don't make anywhere near that much money in reality. That number is at least $15-$20 high and includes benefits like health care. It's a shame- this guy is a Phd yet he makes off the cuff statements like he has an IQ below room temperature.
    Reply | Link to Comment
  •  
    Nov 10 09:39 AM
    Fox News reported this weekend that GM is seeking multibillions to fund their retirees' HEALTHCARE costs. BS!!!! No one is giving me a free ride on healthcare. I DO NOT WANT MY TAX DOLLARS PAYING FOR ANYTHING OTHER THAN PRODUCT INGENUITY!! Taxpayers fund Medicare--now we're supposed to give GM retirees the "cadillac" of healthcare? No way. Let them fail. This money should not go to padding pockets of overpaid employees whom the union would only allow a simple job task and no cross training. GM is never going to match the quality of Toyota or Honda as long as the focus is on what more they can do to pacify the stupid UAW. It's time to dump the UAW and infuse a dose of common sense into the domestics!!
    Reply | Link to Comment
  •  
    Nov 10 09:41 AM
    Given the fact that the CEO's and higher management makes millions to tens of millions per year, I am more concerned about their pay then those making even 70 dollars an hour (which by the way is not even near what the regular worker makes).

    Considering the CEO makes the equivalent of 100-1000 workers, that is the salary I would cut first. Then the upper management that makes 50 times or more what the average worker makes.

    I am glad that the guys that get their hands dirty, end up with physical problems from their jobs and sweat each day are making good pay - it is those guys that have the soft hands at the top that should be getting a pay cut.

    I find it amazing when people blame the workers and unions for the downfall of the auto industry. When if the CEO's and upper management merely made double or triple the average workers salary over the last 20 years, they would have saved billions.

    The problem is the greedy CEO's and upper management, not the workers and unions..
    Reply | Link to Comment
  •  
    Nov 10 09:42 AM
    Legacy costs are not calculated into the hourly rate, they are stated in a per vehicle cost. The hourly rate is wages and benefits.


    On Nov 10 09:32 AM User 294926 wrote:

    > Do a little research before you make a comment like that. The $73
    > and hour includes legacy costs. Union member don't make anywhere
    > near that much money in reality. That number is at least $15-$20
    > high and includes benefits like health care. It's a shame- this guy
    > is a Phd yet he makes off the cuff statements like he has an IQ below
    > room temperature.
    Reply | Link to Comment
  •  
    Nov 10 09:45 AM
    Let the first one fail, and the UAW will not see fit to make the necessary concesions for survival. This is utter graft. A backwards segment of the auto industry held together by taking money from the government with political threats. This is exactly the kind of problem that plagues our nation and our politics.
    Reply | Link to Comment
  •  
    Nov 10 09:48 AM
    The hourly rate is less than 30 per and benny cost about 10 grand a year. If these companies go away there is no reason for any employer to pay above min wage. How many new cars and tv's can you buy an min wage. Mc d's pays almost twice min wage to be able to keep there unskilled workforce loyal. Get off your high horse and realize that all the benny's you now have are as a result of the unions. Not to mention workplace safety rule and labor laws that prevent abuses that are in the sweat shops of asia. I don't think many of the complainers would last long in a true free market.
    Reply | Link to Comment
  •  
    Nov 10 09:49 AM
    But most of the benefits are outrageously overpriced because of the deregulation of the health and pharmaceutical companies. The article makes it sound like these people are making 150 grand a year, when it is closer to 60 or 70. To me that is a wage they deserve. The cuts should come from the top from the outrageous CEO and management pay. The gap between the average worker and CEO is the greatest it has ever been in world history. Considering you could pay 100-1000 workers on one CEO's pay, if they would have cut their salaries of the last 2 decades, they would have saved billions.

    Those guys making 60-70 thousand plus benefits deserve every cent. The CEO's making 10's of millions do not.


    On Nov 10 09:42 AM saajjata wrote:

    > Legacy costs are not calculated into the hourly rate, they are stated
    > in a per vehicle cost. The hourly rate is wages and benefits.
    Reply | Link to Comment
  •  
    Nov 10 09:51 AM
    A true free market would be a scary place - police stations run by the highest bidder, schools only for the wealthy, and the disabled left on the side of the road. Nothing is scarier than a completely free market.


    On Nov 10 09:48 AM working at ford wrote:

    > The hourly rate is less than 30 per and benny cost about 10 grand
    > a year. If these companies go away there is no reason for any employer
    > to pay above min wage. How many new cars and tv's can you buy an
    > min wage. Mc d's pays almost twice min wage to be able to keep there
    > unskilled workforce loyal. Get off your high horse and realize that
    > all the benny's you now have are as a result of the unions. Not to
    > mention workplace safety rule and labor laws that prevent abuses
    > that are in the sweat shops of asia. I don't think many of the complainers
    > would last long in a true free market.
    Reply | Link to Comment
  •  
    Nov 10 09:58 AM
    I believe that the US Govt. should have let the financial institutions fail, prosecute the hell out of the thieves and confiscate their earnings, let the sound companies pick up the pieces, and let the market adequately deal with the mess in a darwinian fashion. It was the "everyone deserves a home loan" fiasco that did this to the US markets. Socialism dabbling in the free markets will screw it up every single time. Period. Look at the bonuses that Fannie Mae and Freddie Mac executives received in the last 10 years. Some bonuses as high as $90 million, yet these facts seem to be ignored and we beat on AIG.
    There is no happy solution. Shoot em all.
    Reply | Link to Comment
  •  
    Nov 10 10:01 AM
    Who do you work for and what do they pay? If it was not for the unions setting the bar you would be making min wages and have no benny's. I think the real dose of reality is coming for all who want to play the blame game. The unions are good for everyone. If you do not like health ins. and pensions then move to China. Just don't drink the milk. Toyo and Honda are losing money a record rates and they will not keep US opps if this econ does not improve(see DHL). The US based companies are trying there best to ride it out. If it was not for the credit freeze up they would be able to borrow from the banks. Hell the banks can't even borrow money. How do you think your company is going to make it if there is no money to borrow.


    On Nov 10 09:39 AM Midas1 wrote:

    > Fox News reported this weekend that GM is seeking multibillions to
    > fund their retirees' HEALTHCARE costs. BS!!!! No one is giving
    > me a free ride on healthcare. I DO NOT WANT MY TAX DOLLARS PAYING
    > FOR ANYTHING OTHER THAN PRODUCT INGENUITY!! Taxpayers fund Medicare--now
    > we're supposed to give GM retirees the "cadillac" of healthcare?
    > No way. Let them fail. This money should not go to padding pockets
    > of overpaid employees whom the union would only allow a simple job
    > task and no cross training. GM is never going to match the quality
    > of Toyota or Honda as long as the focus is on what more they can
    > do to pacify the stupid UAW. It's time to dump the UAW and infuse
    > a dose of common sense into the domestics!!
    Reply | Link to Comment
  •  
    Nov 10 10:04 AM
    SAA

    You are wrong- that figure includes legacy costs- trust me.
    Reply | Link to Comment
  •  
    Nov 10 10:07 AM
    Why is this being cast as a choice between union busting and exorbitant manufacturing salaries.

    We all know (or should know) that unions have done immeasurable good for the country. But does that mean that everything they do is good? Does that mean there can be no imbalance on the other side?

    Further, do you think Toyota is exploiting its workers? If yes, where are the calls for boycott? If no, how can Detroit be expected to compete in a market with such divergent labor costs?

    These are the questions, not whether CEOs are overpaid a-holes. (The answer to this has been well-established already.)
    Reply | Link to Comment
  •  
    Nov 10 10:09 AM
    Let your company fail and see how you will pay the bills. Failing is not good for anyone. If kids fail at school they lose. If your favorite team fails the fans lose. If the biggest companies in the world fails the whole world loses


    On Nov 10 09:45 AM gkahn wrote:

    > Let the first one fail, and the UAW will not see fit to make the
    > necessary concesions for survival. This is utter graft. A backwards
    > segment of the auto industry held together by taking money from the
    > government with political threats. This is exactly the kind of problem
    > that plagues our nation and our politics.
    Reply | Link to Comment
  •  
    Nov 10 10:10 AM
    Why can't Ford make a car anyone wants??? If the product is so great, why ask the government for a bailout? Toyota and Honda will survive just fine, thank you very much. Both have decent management, integrity and creativity--all lacking at the likes of Ford which seems to only want to make SUV waste. Many workers across the U.S. work hard and don't expect a handout or government welfare when times are bad. Don't think the taxpayers should bail out Ford or GM when neither seems to want to make a product that can actually work! If Fox was correct and this money is for retirees' healthcare, here's an idea. Get off your butt and work in retirement like the rest of us! Workers at Ford and GM are no better than anyone else, plain and simple!
    Reply | Link to Comment
  •  
    Nov 10 10:11 AM
    "The article makes it sound like these people are making 150 grand a year, when it is closer to 60 or 70. To me that is a wage they deserve"

    Well...THERE'S YOUR PROBLEM>>>

    $65,000 a year per worker to build cars? That's insane!

    If the auto makers were rolling in dough due to the productivity of those $6k workers I wouldn't have a problem; but they're NOT!

    Pay should be cut in half for all employees as a first step and then >>>MAYBE>&... a government handout MIGHT be considered.
    Reply | Link to Comment
  •  
    Nov 10 10:14 AM
    It's more than retiree health care. It's dealerships and salary people and suppliers that have divested. Even Toyota is losing money now. They just have a lot more to lose. This is a horrible economy- that is not the fault of the unions.
    Reply | Link to Comment
  •  
    Nov 10 10:15 AM
    John

    Do you want your pay cut in half? When CEO's of most companies make $10's of millions, you have a problem with someone making $65k a year?
    Reply | Link to Comment
  •  
    Nov 10 10:16 AM
    Toyota pay comp wages as the union shops. They know if they don't want a union then the must give there employees union wages to compete for workers. Toyo has had some trouble in the new plant in Texas. Worker turnover has been tremendous. They have had to raise the bennys and pay to get worker to stay or move from other plants. The lesson to be learned here is that if you want to blame someone go look in the mirror. Otherwise be glad you have what your have and hope thing work out so you can keep it.


    On Nov 10 10:07 AM Foster J Fezziwig III wrote:

    > Why is this being cast as a choice between union busting and exorbitant
    > manufacturing salaries.
    >
    > We all know (or should know) that unions have done immeasurable good
    > for the country. But does that mean that everything they do is good?
    > Does that mean there can be no imbalance on the other side?
    >
    > Further, do you think Toyota is exploiting its workers? If yes, where
    > are the calls for boycott? If no, how can Detroit be expected to
    > compete in a market with such divergent labor costs?
    >
    > These are the questions, not whether CEOs are overpaid a-holes. (The
    > answer to this has been well-established already.)
    Reply | Link to Comment
  •  
    Nov 10 10:19 AM
    You must be a union auto worker or organizer. You obviously don't know what happens at the executive level especially during difficult times. Very few have the talents, education, experience to make it all come together and preserve the jobs of everyone involved.


    On Nov 10 09:14 AM Herbert Hoover wrote:

    > Just out of curiosity - How much per hour do the guys at AIG make?
    > Oh, I forgot, AIG is a friend of Paulson's, so that's OK.
    Reply | Link to Comment
  •  
    Nov 10 10:19 AM
    Yeah, but I hear much more complaining about workers getting 60 grand a year and labor unions, then I do about the CEO's salaries. Maybe if Fox News and Talk radio complained half as much about CEO salaries as they do labor unions, then maybe something would have been done about it along time ago.

    What I find amazing is people like my parents (who make 30,000 a year combined) complain about unions and the GM guys that make 60-70 a year because that is what they hear on Fox and Talk Radio. When the CEO's at the top make more than a thousand employees combined - their exorbitant salaries are the real problem, but lets blame the guy that is going to have back problems for the rest of their lives for making a decent wage....

    I have studied the history of corporations and find it amazing that just 200 years ago newspapers were filled with opinion pages complaining that their bosses made 3-10 times their wages - saying it is outrageous and something needs to be done.

    200 years later we seem resigned with the fact that CEO's make 100 to sometimes 10,000 times the wages of the average worker, and yet it is rarely a topic to be found - instead, let's blame that guy making 60,000 that is able to put his kids through college and retire at a good age...


    On Nov 10 10:07 AM Foster J Fezziwig III wrote:

    > Why is this being cast as a choice between union busting and exorbitant
    > manufacturing salaries.
    >
    > We all know (or should know) that unions have done immeasurable good
    > for the country. But does that mean that everything they do is good?
    > Does that mean there can be no imbalance on the other side?
    >
    > Further, do you think Toyota is exploiting its workers? If yes, where
    > are the calls for boycott? If no, how can Detroit be expected to
    > compete in a market with such divergent labor costs?
    >
    > These are the questions, not whether CEOs are overpaid a-holes. (The
    > answer to this has been well-established already.)
    Reply | Link to Comment
  •  
    Nov 10 10:22 AM
    While this is important, I think 2 to 10 times the wages of the average worker is just fine compensation. The 10's of millions of dollars they make (whether they are good at their job or not) not only is unfair, but added up over decades it is a main reason that the companies cannot afford to compete...


    On Nov 10 10:19 AM jarco wrote:

    > You must be a union auto worker or organizer. You obviously don't
    > know what happens at the executive level especially during difficult
    > times. Very few have the talents, education, experience to make it
    > all come together and preserve the jobs of everyone involved.

    >
    >
    >
    > On Nov 10 09:14 AM Herbert Hoover wrote:
    Reply | Link to Comment
  •  
    Nov 10 10:23 AM
    If you think that posting 225 times is work try changing your tire on you car 225 times a day. Then you will only begin to understand what it takes to build cars and trucks for your soft butt.


    On Nov 10 10:15 AM Tomas04 wrote:

    > John
    >
    > Do you want your pay cut in half? When CEO's of most companies make
    > $10's of millions, you have a problem with someone making $65k a
    > year?
    Reply | Link to Comment
  •  
    Nov 10 10:23 AM
    And how much does a Ph.D. get paid to write articles without any thought or reality? The key is total compensation. Where does that money go? Back into our economy in the form of cash spending, health care, retirement and more. Is this important? I guess if the government can support them when they retire and our health care system is willing to cut their costs way down to take care of us and if people earning money to spend in our great country isn't important, then let them go out of business. I'm sure Toyota and Honda will send some of their profits back to the US from Japan to support us........NOT.
    Reply | Link to Comment
  •  
    Nov 10 10:26 AM
    The new administration will soon pass the Employee Free Choice Act, eliminating secret ballot voting in favor of an open card check system. This will almost certainly lead to a significant increase in union organization and membership. How can anyone look at these statistics and argue with a straight face for an expanded labor movement when these uncompetative costs are probably the biggest single reason why Detroit is where it is today.
    Reply | Link to Comment
  •  
    Nov 10 10:26 AM
    Whether the numbers at the top are exact or not, the fact of the matter is union auto makers are losing money and market share, non union auto makers are making money and gaining market share. If the dems have their way and do away with the secret vote for unions so they can put more pressure on dissenters in order to unionize more plants such as the non union foreign manufacturers with production facilities here, I hope those automakers just close the plants. It will be cheaper in the long run to simply pay an import tax.
    Reply | Link to Comment
  •  
    Nov 10 10:30 AM
    Obviously you've never worked in one of these places. I have worked in a steel plant and was payed a lot less, while the heads of the company were paid 10's of millions. It is tough work that wears on your body and mind. 65 grand is a good salary that these workers deserve. On that salary they can put their kids through school, pay their horrific medical prices, and retire reasonably. I think that is fair - and to denigrate their work is to have never been in their shoes. I am a teacher and make much less, but I would rather be where I am then in their factories any day.

    Think about it: one 10 million dollar CEO = at least 153 employees paid a decent rate.

    The, the management staff is probably another 10 million

    Why can't we pay the CEO 500,000 a year, the management at 100,000 a year and keep those employees rates fair (so they can live a comfortable life). If we did this, the auto corporations would be able to survive...




    On Nov 10 10:11 AM John Pseudonym wrote:

    > "The article makes it sound like these people are making 150 grand
    > a year, when it is closer to 60 or 70. To me that is a wage they
    > deserve"
    >
    > Well...THERE'S YOUR PROBLEM>>>
    >
    > $65,000 a year per worker to build cars? That's insane!
    >
    > If the auto makers were rolling in dough due to the productivity
    > of those $6k workers I wouldn't have a problem; but they're NOT!
    >
    >
    > Pay should be cut in half for all employees as a first step and then
    > >>>MAYBE>&... a government handout MIGHT be considered.
    Reply | Link to Comment
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