November 17, 2008 5:46PM

Why the Automakers are a Mess

By Cheryl Casone

Take a look at this chart, I found it from a Professor at Harvard’s blog after someone mentioned him to me moments ago. The chart shows you why American auto companies are struggling, and Asian automakers are faring better. (they have problems also, but not to the extent our companies do.) He is a Professor at Harvard, Greg Mankiw, and he posted this chart courtesy of another professor, who is based in Flint, Michigan of all places.

Cost Differences

105 Responses to “Why the Automakers are a Mess”

Comment by santuria orsetti

November 17th, 2008 at 6:19 pm

I am refering to the workers and their hefty wages and benefits. The auto workers are the working counter part to those fat cat CEOs. If sacrifices are to be made by other groups of workers, why not the auto workers? We seem to speak of them as if they are making minimum wages when in fact they (or most) earn 6 digit wages. It follows, the bridge money the auto industry is requesting will be used to pay already INFLATED
wage and benefits to auto workers. I do not want to have my taxes subsidise the auto worker when I must face sacrifices.
Also, I have heard about the National Security argument for keeping the auto-makers afloat. Two questions I have: Other than remembering old documentaries of tanks moving off the assembly line during WW II, do the car makers produce military equipment NOW?
Also, we are in two wars. Are we not supplying our military with equipment without restructuring the auto plants?
Santuria
Comment by Scott Bourne

November 17th, 2008 at 6:34 pm

Statistics are like bikinis what they reveal is fascinating what they hide is vital.
What that chart does not show is the foriegn three don’t hire alot of middle management. Their managers are at a ratio of 1 manager per 50 people and the big three are almost at a 5 managers to 1 person. So do be honest in actual facts here the foriegn companies tend to pay their employess better and treat them well. Notice there is no huge call for UNIONS at them. I wonder why that is? Next time before you going posting propaganda of the big 3 you might want to do more checking. I bey if you did into the so called person that did the chart had his research paid for by the big 3.
Comment by Charles

November 17th, 2008 at 6:37 pm

Theres more to this….why do you think our big 3 pays more? UNION…I talked to a union worker about 10 years ago…right before GM workers went on strick…and I ask him, “Why are you going on strick this week?” his reply…we want more money…GM is a big company they have money, and my UNION boss said…they are making big proffits and not sharing with the workers…..

Now…find someone who works with Toyota, Honday, or Nissan in the USA….ask them about the unions……
Comment by R Holbrook

November 17th, 2008 at 6:54 pm

It is very easy to come after the workers (middle class Americans) when things aren’t going right at the Big Three. There is never any mention of the other problems they face brought on by our own government and even foreign governments. Our own government gives unfair tax breaks and incentives to the foreign automakers. The Big three spend hundreds of millions of tax dollars on parts made in this country while any parts exported to this country by the foreign automakers escape this tax. Our government grants tax free zones to the foreign automakers around their plants saving them tens of millions of dollars. Japan subsidizes their automakers by making sure that the yen stays weak against the dollar, which allows them to sell their vehicles cheaper. Everyone involved in government knows this but is afraid to do anything about it for fear of starting a trade war with Japan, the Bush administration even admitted that this is true. Japan destroyed the American Steel Industry by dumping cheap steel in the USA below the price it cost them to produce it, because their country subsidized the steel producers for all of their losses. This is a clear violation of our trade laws with Japan. The Bush administration even warned the Japanese to stop doing this but never followed through with any action. Finally why don’t you compare the Big Three’s CEO’s pay with their counterparts from Japan, you will find it is not just 25% higher but tens maybe hundreds of times higher. Then take a look at what kind of import tax you pay when the Big Three import a car to Japan, it often increases the car price by 30% to 40%. Any way it is always easier to blame the American middle class worker because they do make an easy target for people who don’t want to really investigate the problem
Comment by Tom Razzoog

November 17th, 2008 at 7:17 pm

You commented while appearing with David Asman that auto workers made six figure incomes per year. Where do you get your facts ? The hourly rate for a production worker is approx 28.00 dollars per hour , depending on job. That is far less than “six figures”. If you would like I’ll send you the hourly rates so you could get your facts right . Time to find a new channel to watch , one that can get the simple facts right .
Comment by L JONES

November 17th, 2008 at 7:42 pm

Cheryl,

I would guess by this rational that any company that has been in business in the U.S.A. and has a retierment / benefits package for it’s workers is a mess when compared to new companies that have none.
Comment by Homer Feamster

November 17th, 2008 at 8:04 pm

WE HEAR ABOUT LEGACY COSTS; LIKE IT IS A BAD THING. THE PENSION FUND OF THE UAW WORKERS WAS FUNDED BY THE UAW WORKERS OVER THE YEARS IN LIEW OF A RAISE. IT BELONGS TO THE WORKERS! MANY PEOPLE RECIEVE A PENSION! IT WAS AWARDED FOR 30 PLUS YEARS OF SERVICE. THE JAPANESE CAR COMPANIES HAVE SOME YEARS TO GO BEFORE THEIR PENSION FUNDS START PAYING; IF THEY HAVE ONE! THE HUGE SPIKE IN GAS PRICES DERAILED CAR & TRUCK SALES! IT WILL TAKE MANY MONTHS TO RETOOL FOR GAS EFFICIENT VEHICLES! WE NEED TO HELP THE CAR COMPANIES WITH A LOAN, WHICH WILL BE PAID BACK! TO MANY JOBS ACROSS THE UNITED STATES ARE AT RISK! WHO WAS BEHIND THE HIGH SPIKE IN GAS PRICES? IT WASNT JUST DEMAND!! MANY IN WASHINGTON WILL READILY LOAN HUNDREDS OF BILLIONS TO BANKS, HEDGE FUNDS, ETC. WHO HAVE CAUSED THE WHOLE MESS, “LACK OF GOVERNMENT OVERSIGHT, DEREGULATION ETC.” SOME IN POWER ARE READY TO DUMP OUR BASIC INDUSTRIES OR IS IT JUST TO GET RID OF THE UNIONS??? HOPE YOU PRINT THIS!! HOMER FEAMSTER
Comment by Gary Driscoll

November 17th, 2008 at 9:16 pm

A bailout is just wasted money at the rate of several billion dollars a MONTH. Bankruptcy would allow the companies to shed those excess costs. It will allow the companies to shed taxpayer payback after the useless bailout money is spent.
Comment by B Scott

November 17th, 2008 at 9:26 pm

Your chart is not the problem,the big three are paying good salaries/benefits, are producing excellent products(I dare say better in many respects to the foreign) The problem is the American public has bought into one of the biggest scams of history…they have been brainwashed to lose confidence in their own ability to manufacture quality vehicles.This process has been aided and abetted by the media.If I were to suggest that that Joe Public take a few minutes and GOOGLE say, Nissan 2.5 engine reliability or durability or for that matter even safety,Joe would probably not do it because he “thinks” he knows it all.This engine is probably the most common engine found in Nissans for the last 8 years,and has had a disastrous history.Some foreign countries even hinder the sale of the big three in their markets (I would think if the quality of these vehicles was so bad, they wouldn,t have to legislate them out, what are they afraid of?)Listen America, wake up you,ve been taken for fools long enough.
Comment by Bradley Fluetsch, CFA

November 17th, 2008 at 9:36 pm

Giving money to Ford and GM is like spending a million dollars on a liver transplant for a person with terminal brain cancer. It just does not make sense. I would rather spend the same million dollars on well baby care for auto makers and give it to TESLA Motors. (I will take a car as payment for this capital campaign)

Don’t let this 100,000 job loss or the one in ten jobs in America depend on the Big Three impact on your thinking, it is an inaccurate assumption that is easily challenged.

Americans still need personal transportation and someone will:

* sell it to us
* fix it when it is broken
* manufacture it
* manufacture repair parts for it
* wash, vacuum, insure and even drive it for us.

I am not suggesting there will not be some economic dislocation, there will be. Even with the bailout there will be economic dislocation. Congress please read the U.S. Constitution prior to the next session keep your attention focused on what you are suppose to.
Comment by White Devil

November 17th, 2008 at 9:53 pm

What, you didn’t know. The union gangsters have been strong arming these companies since the early 60’s. They need to fail and reorganize. If you don’t want to go back to work, you want to sit down, then your fired. I know plenty of people that would kill to make 20 dollars an hour and love a job like that to death (literally). Put the union gangsters in prison with Barney Frank and his henchmen. America is turning into a cesspool where the hard working and honest are becoming the targets of discrimination and hypocrisy that has no bounds. Americans are becoming a minority.
Comment by Dennis

November 17th, 2008 at 10:12 pm

That is why we can never get out of this hole unless the UAW is run out of town. We cannot afford them anymore,sorry just the truth.And lets don’t forget the job banks that have cost the big 3 billion’s just to pay a union worker not to work, or the cost Of Viagra that is part of the UAW health care package that cost GM 17 to 20 million a year and that is GM alone!! Rick Wagners pay 14 plus million a year!! thats more then the top 5 CEO at Toyota get all together!!!And this is just the tip of the ice berg,They should go down and the taxpayer will better off without them.All this doom and bloom we are brain washed into thinking will happen if they file the big C11 is bull!Americans will buy cars, they may not be built by the big three but there will 100.000’s of new jobs that the foreign companys will have to pick up the slick that is left behind from the American Companys.I am sure they will get there bailout but I hope there will be a back lash not to buy from a Company that has taken tax payer’s money to stay in business,I will be at the front of the line.
Comment by George McMurtrey

November 17th, 2008 at 11:19 pm

We are experiencing a BUBBLE that is firmly implanted between the ears of the elitist.

The automotive news is brotherhood to the housing news; both are costing more than the “free world trade workers” can afford to pay for the goods they want to produce.

Get outside of GOVERNMENT jobs with UNION styled benefits, companies that thrive on SLOPPY GOVERNMENT contracts, CEO exeuctive suites and you find the average workers compensation below poverty levels.

We the people, awe come on, I know you have heard of that somewhere. We really do not need “BAILOUTS” or stimulus packagaes. We need a government willing to rein in WASTE and stop insulting the working mans intelligence by making believe we are in control.

Watching how the bucks are being manipulated on WALL STREET, personal pension being siphoned dry, 4o1Ks robbed, oil magninets laughing all the way to the banks, foriegn and domestic, and the JOKE that screams “CHANGE” is the great ILLUSION.

Everywhere you look someone has their hand out and the GOVERNMENT is incapable of filling the hands of the PEOPLE when, as it appears, their sole interest is serving self FIRST.

WORK-FARE OVER WELFARE . . . CITIZENSHIP OVER ILLIGAL IMMIGRANT STATUS.
Comment by Jerry DeRanzo

November 17th, 2008 at 11:42 pm

Gm and the UAW negotiated a new contract in 2007 when the results of that contract are fullfilled, we will actually have a lower cost than Toyota. UAW workers have given up alot to help out GM.
Comment by Tim Laughlin

November 18th, 2008 at 4:32 am

The cost to produce a car is just one of many reasons that Detroit is in trouble. Have you driven a GM lately? I rented a brand new Monte Carlo a few months ago, and there is NOTHING good I can say about this product. If I didn’t know it was a 2008 model I would have guessed it was built in the 80’s.

The seating was very uncomfortable, the visibility was bad, the dash was flat with gauges placed in hard to read positions, not wrapped around the driver at all. Closing the door created an ‘earthquake’ of claning and rattles - not at all like a solid well-built car from Toyota, Honda, or almost any other manufacturer.

As much as I would love to buy an American made car, I can’t see reinforcing this kind of ‘quality’.
Comment by Joe

November 18th, 2008 at 5:52 am

This is just a chart that shows the obvious……Unionized labor has the ear and power of Democrats in their pockets. If no-one sees the correlation between the Auto worker and the work force of steelworkers in the rustbelt (northeast)then they have no buisness being an Economist. And we pay people to try and keep these same problem in place. I guess we get what we pay for.
Listen to the Dem’s in congress and the UAW and they will never see the problem that chart shows.
Comment by Bruce

November 18th, 2008 at 7:08 am

The head of the UAW is among those lobbeying Congress for TARP loans. He’ll be an effective advocate!
Comment by Larry

November 18th, 2008 at 8:07 am

Why don’t you post a comparative MANAGEMENT Pay scale? What is meant by “total compensation,” medical and retirement?

What’s your point?

It wasn’t labor that decided what cars to build and market, it was the management. The managers are the ones that signed the contracts with labor and thusly, knew what it was going to cost them to make the product.

This isn’t a labor problem, it is management problem.
Comment by Ray

November 18th, 2008 at 8:10 am

If the taxpayers are going to bail out the auto industry then there should be payment in kind, i.e. the government should get autos that are not being sold and have a national lottery to give them to taxpayers or, maybe, use the vehicles in place of those that the government already buys.
Comment by Ron

November 18th, 2008 at 8:19 am

This is nothing new. I hope that the union leaders of the 70’s and 80’s that threatened to strike if the auto workers were not made the highest compensated blue collar workers are proud now. The cost of maintaining 3 workforces through current empolyment, and pensions is why the US automakers are literally making cars to lose money.
Comment by Shawn

November 18th, 2008 at 8:20 am

That gap will shrink when the little 3 start to have more workers retire and their wages increase over the years. The big 3 have more problems then just labor costs. GM just opened a plant in Russia, cost 600m. I saw almost the same cars there as you would see on a GM lot here in the US. The idea that if we don’t bail them out then it will be catastrophic to our economy is just a ploy to strike fear in the minds of Americans. Bottom line if they can spend that kind of money on a plant overseas then let Russia pay for their bailout and leave the US tax payers alone.
Comment by Rusty Savage

November 18th, 2008 at 10:39 am

* sell it to us
* fix it when it is broken
* manufacture it
* manufacture repair parts for it
* wash, vacuum, insure and even drive it for us.

Manufacturing the car and its parts is kinda a big part of the chain, and its doubtful that washing cars is considered part of the manufacturing/sales train. But hey, who cares if millions of Americans lose their jobs and become migrants? This is America, the greatest country on earth. If we want to have our economy turn into Argentina’s, we’re gonna do it, because we have nukes!
Comment by K. S. Ross

November 18th, 2008 at 10:53 am

Cheryl,
Nice provocative piece. I also enjoy all the responses so far. I grew up in the Upper Peninsula of Michigan where iron mining was a major industry. I had relatives that worked in the mining and auto industries. Yes, they were union folks. One might think that because they were and are pro union that I would be. Not so. I watched what the unions have done. I studied history, and examined my own history to conclude that the unions had a place in a time when we didn’t have the labor laws we have today. I watched the mine workers strike them selves out of work. The mining company reduced output and moved to Brazil to mine a better grade of ore with cheaper labor. I watched the auto workers strike them selves out of a plant in Flint.

Is it greed, or is it a blind faith movement in tone with union wishes? I don’t believe the unions are totally at fault here. The notion that everything should be easy and free drives the avarice of the modern day workers. Bad management is culpable in the failing industries with equal stance. Government isn’t without fault here either but a bail out will only push the inevitable to a point in the future that could be more disastrous than just letting the chips fall now.

Power hungry unions, a lemming like work force and bad advice will destroy any industry in time. Some of the most prosperous businesses in the United States today even with an upside down economy are the employee owned businesses. Take a look. They have trimmed labor by taking pay cuts if necessary, expanded when the economy supported, and provide goods and services at a reasonable cost to consumers.

Maybe the auto industry could rethink the ownership process accept bankruptcy and retool as an employee owned company.
Comment by john

November 18th, 2008 at 10:53 am

let the automakers fail and go into chapter 11 for reorganization.
That is the only way to bring the cost of labor down.
Also, fire the management of the automakers who agreed to these levels with the unions in the first place.
NO BAILOUT OF ANYONE, EVER!!!
Comment by Stroker Ace

November 18th, 2008 at 11:02 am

Let them file chapter 11 and restructure. This way that can get out of the Union contracts. Then they should rehire without using any Unions. If they Unions make a big deal then relocate the plants to places that don’t have unions. The manufacture should be responsible in have a benefits plan for there workers. The big three are to heavily controlled by these unions and have ruined the companies.
Comment by Ed

November 18th, 2008 at 11:03 am

R Holbrook, you either don’t know or don’t understand what you are talking about.
1. Those “tax free” zones you are talking about are actually “Foreign Trade Zones,” and what they do is enable the manufacturer to defer duties on foreign parts until the product is actually imported into the country. These are available to domestic manufacturers as well, but the Detroit 3 are too incompetent to be able to use them (this is not an opinion — I have industry knowledge).
2. Detroit’s dirty little secret is they are shipping jobs overseas as fast as they can, and one reason is because they won’t learn how to use Foreign Trade Zones (the other is to get the parts made at nonunion prices).
3. Yen cheaper than the dollar? Surely you jest — the dollar has tanked most of this year because of the rising price of oil and is now rising mainly because of the falling price of oil.
4. The US steel industry destroyed their own market with inferior goods. I have personally consulted for steel fabricators who buy foreign steel because domestic manufacturers don’t clean the aluminum, etc. out of their scrap, causing the steel to be inferior. I think the USW had soemthing to do with the price also.
4. CEO pay? Yeah, it is too high, especially for the fools who gave away the farm to the UAW over the years.
Comment by Ray in PA

November 18th, 2008 at 11:19 am

Reality Check…

RE: Job Losses
If the Big 3 aren’t making as many cars, the suppliers will be impacted anyway unless they also get bailouts UAW workers are paid even when they don’t produce cars, so it has no impact on them. Why are we giving special treatment to UAW workers than other workers making far less money and with less generous benefits? If they want to keep their jobs they need to take serious wage and benefit cuts just like their fellow workers are being forced to do.

RE: Bridge to the future
The argument is that GM will have new cars they can sell world-wide (to markets like India & China). Does anyone really believe that they will build cars for the Asian markets in the US and not in Asia? I think the bailout money will go to develop the new cars that will ultimately be built in Asia with Asian workers.

RE: Pension / Benefits Burden
Wow, do we really think the Big 3 are the only companies with this pending problem? Expect a massive wave of companies / government organizations not being able to cover their pension obligations…. And don’t even talk about Social Security / Medicare obligations…
If we provide a Cadillac solution for the Big 3 (and maybe 2 million folks), what are we going to have left for the other tens of million folks that will also need our help?
Comment by Jeff Anderson

November 18th, 2008 at 12:41 pm

I have always bought american vehicles, (mostly GM) and will continue to do so. But the big 3 and the unions both have to make concessions and get the cost of doing business to a competitive level. Too many pensions and health care packages at stake.
Comment by mebpm

November 18th, 2008 at 12:56 pm

What I see.., is the labor force saying “I won’t work for less than 100 an hour, management saying I won’t work for less than 125 an hour, and investors feeling that they should be getting 100 in dividends per share.It’s a lot like 3 vampires sucking the life out of the industry, and now they want a “transfusion” so that they can keep on feeding. They have reached a point, where a 20,000 dollar car ( exagerations ) has to be sold for 47,000, just so everybody gets their share.Since it won’t sell at 47,000, the only solution is to make it cheaper by lowering the “quality”.
I feel they need the “shock” of bankruptcy, to make them aware of just how RIDICULOUS they look to all the rest of us. I have no sympathy for any of them. This entire mess is all of their own doing. They are public / private
companies and are not DESERVING of our hard earned tax dollars. I ( and everyone else I know ) has to live within a budget.., or WE WOULD have to file bankruptcy. Why should I have to bail out the “elite” , that don’t seem to realize the most basic of economic principles ? Their greed got them all where they are today.., so let their greed take them into tomorrow ( WITHOUT me being taken along for the ride ). If I’d have wanted to invest in the big three, I’d either buy stocks or one of their cars. I haven’t.., and I don’t care to now.
Comment by JD

November 18th, 2008 at 1:14 pm

The little 3 automobiles basically suck. Especially those manufactured by GM. In addition to some serious cost cutting, they need to produce better products.
Comment by Bob M

November 18th, 2008 at 1:28 pm

Cheryl, I watched your comments today on FoxNews regarding the U.S. automotive industry. It was apparent that you do now know the facts (e.g. the $74 per hour amount in fact does include benefits). And you are unaware of the plan in place to reduce this amount that was part of the historic contract signed last year with the UAW, which will drastically reduce labor costs in 2010 and will offload most of the pension and health care costs to the union. Please check the facts (e.g at minimum, review the recent contract). Ignorance and mininformation are the greatest obstacles facing automakers this week. Few in the media and the congress have their facts right. Together Ford, GM, and Chrysler spend $12billion annually on R&D, most of it spent in the U.S. to develop fuel efficient vehicles of the future. No other industry matches automakers in product developement spending (not even big oil or the finance sector). While the industry initially lagged Honda and Toyota in fuel efficiency, GM has 18 models in its portfolio today that get 30 mpg or more. American automakers are leaner, greener, and offering exciting product line-ups. But have been overwhelmed by the global credit crunch and one of the worst downturns in history.
Comment by Tom

November 18th, 2008 at 1:36 pm

I’ll get behind a plan that uses my taxes to bail them out when Ford forgives my car loan, otherwise im paying twice for my car! The unions need to go! why do they think they should have it better then the rest of us. Then we wonder why, the first chance companies get to send all the jobs out of the country, they do it.
Comment by Gregory

November 18th, 2008 at 1:39 pm

I am recently retired from Chrysler. When I retired I was making $27.00 an hour. I paid into the pension fund for 25 years and I feel that I am entitled to receive my money in a monthly check.If autoworkers were making $70.00 an hour plus benefits, I missed out and Chrysler owes me a lot of back pay.
Comment by Larry

November 18th, 2008 at 1:44 pm

Hey Stroker Ace!

It wasn’t the Unions that got the automakers into this mess. It was the management.

Get it?

The unions just make the cars. Management decides what cars to make and how to service them. Management also signed the contracts with the unions so they knew in advance what the costs would be. Perhaps when the share holders realize the board of directors has screwed them maybe they will fire those truly responsible for failure: MANAGEMENT!
Comment by chuck

November 18th, 2008 at 2:05 pm

First the UAW contracts should share the blame here. Second the auto execs should’ve look ahead ten years ago; reshape thier business model. Not to mention to look at cars with alternate energy sources. If the execs and the unions look ahead with thses issues they’re weren’t be in this problem. Last thing: they should’ve seen the Japanese and euro competition coming.
Comment by Big V

November 18th, 2008 at 2:26 pm

I actually know how to save the US auto industry. The auto companies should start building cars and trucks people want, and those vehicles should cost far less than half the average consumer’s annual income. They need to make nice, safe attractive cars we can all pay off in two years instead of six. They could instantly sell tens of thousands of well appointed high-quality full-size trucks if priced less than $11,000. Computers, TV and cell phones all cost less than they used to, let’s see some massive price reductions in US autos and while at it let’s see the fat, and old lazy Michiganders lose some weight and shut the heck up, the constant oinking is making the rest of us deaf.
Comment by Dawn Hall

November 18th, 2008 at 2:28 pm

Hi Cheryl,

I saw you earlier today on Fox News. At the time, you commented that you thought General Motors hourly workers were paid approximately $70 per hour. My husband has worked for GM for 13+ years, and his currently hourly wage is $28.71. I doubt that his wages and benefits together come close to this $70/hr. figure. He has a 401(k) with no company match, standard health and dental benefits, and pension (which, as you can imagine, we never expect to see). There is already too much misinformation out there, as evidenced by some of the earlier comments to this post. My hope is that you will go back on Fox News and clarify your statement.

We are not driven by greed. We are not the “working counter part to those fat cat CEOs”. We have never seen six figures. We are just a middle class family trying to raise our kids and pay our bills. Like everyone else, we have seen our 401(k) savings practically vanish in the past few months. We are now faced with a very uncertain future.
Comment by Marc

November 18th, 2008 at 3:00 pm

Those individuals that seem to be posting in favor of supporting the workers may rally sympathy, but are making the argument to subsidize the UAW/big three more untenable. In the real world those of us that are not too big too fail suffer consequences for bad decisions and are bestowed praise and profit for decisions that work out well. Sometimes what looks good for now will eventually turn bad. If I accept cost that cannot be recouped, I should expect to fail as a business. The Big three have been banking on being “Too big to fail”. Let them bankrupt. Let someone pick-up the manufacturing facilities and equipment at a liquidated price and let a better industry emerge. If I were spontaneously endowed by god to serve as a benevolent dictator, my first priority would be to end the cycle of “too big to fail”, as far as I am concerned all companies that presently fit the “too big to fail” criteria–Whatever that is. Should be forced into separate competing entities. If those entities can make a profit offering, pensions, health insurance, and other lavish benefits. But Stop telling me, the small business man that after loosing good employees to “better benefit packages” for years, that I now have to subsidize those benefit packages that I can’t offer my own employees because if did, I would go bankrupt which is what “too big to fail” have done. If you want to stay big, fine. You now pose in anherent risk to the economy of the USA, as such you shall pay a “too big to fail” tax of 15% Gross revenue. Which will then be allocated to a TARP subsidization fund.
The prevailing logic of UAW beneficiaries is to let the CEO’s “fail” thereby forego compensation beyond what the average employees is entitled. I have no problem with the compensation model. What they fail to understand is there is not enough money to cover all the individuals affected by this crisis. The terms of the deal were misunderstood at the time they were signed for and remain misunderstood today. Nobody will understand the impact of obligating future earnings for benefit packages until this house of cards falls over and everyone is left out in the cold.
Here is another option, give the company to the entitlees that “refuse any more concessions” to manage and let them keep whatever is left. Of course by January, they will all have to move into those factories because there won’t be any money to get out of them.
GM in particular has been privately lobbying right wing talk show host to percolate some sympathy and attempt to weave hope of the public percieving their products as durable and reliable, an accolade now unshakably granted to Honda and Toyota. (Above references to Nissan are moot as that company was bought by Renault, a pillar of socialist societal productivity with the reliability parallel to Octobers DJI). The years of turning out vehicles (with planned obsolescence while dispensing bumper stickers hailing the “BUY AMERICAN” slogan) have taken their toll. Saving Detroit means saving a substandard product line that has exploited the economy, the patriotism, and the resources of Americans since their inception. We will all suffer tragic consequences when they fail. But they are already off the cliff, Its time to plan for the aftermath of the crash.
Comment by mike frick

November 18th, 2008 at 3:09 pm

Bailouts.

Principals

What principal is it that allows the robbing of Peter to pay Paul?

Things are not black and white you may say.

Principals are black and white.

You believe in a principal or you don’t.
You hold, stand, fight for a principal, or you don’t.

If you compromise your principal you have lost.

Individual freedom, I thought, was The United States of America’s principal.

The right to life, liberty, and the pursuit of happiness principal.

The rule of law and the Constitution principal.

Robbing Peter reduces the life, liberty, pursuit, the individual liberty of Peter.

What principal is it that allows the robbing of Peter to pay Paul?

I would like to see more talk about principal, about philosophy,
in the talks on bailouts.

Mike Frick
Yorkville, Illinois
Comment by Rusty Savage

November 18th, 2008 at 3:56 pm

This is all so rich. Those lazy folks in Michigan (and California, and North Carolina, and so on and so forth) must be employed to have real estate prices stay up at some sort of respectable level, to purchase goods in a consumer driven economy, and so on. Everyone here points out the obvious: foreign companies often make better cars. True! Problem: You take the money the blue and white collar folks currently make in the automotive industry out of the equation and you’ll see tons of other related ventures collapse as you effectively eliminate America’s last vestige of industrialism. After all, who’s gonna fund a chapter 11 reorganization when banks have no money?

USA is #1! 17% unemployment, we are on our way!
Comment by Neil

November 18th, 2008 at 3:59 pm

$28 per hour equals 56k per year no overtime, no benefits, health, retirement etc etc……..the professors model might not be so far off…..
Comment by MarkB

November 18th, 2008 at 4:50 pm

Hey Homer Feamster…. you state:
WE HEAR ABOUT LEGACY COSTS; LIKE IT IS A BAD THING. THE PENSION FUND OF THE UAW WORKERS WAS FUNDED BY THE UAW WORKERS OVER THE YEARS IN LIEW OF A RAISE. IT BELONGS TO THE WORKERS! MANY PEOPLE RECIEVE A PENSION! IT WAS AWARDED FOR 30 PLUS YEARS OF SERVICE
_______________
Ever hear of the problem with Social Security. This is Social Welfare in the form of bailing out the UAW and poor management, nothing more, nothing less. The UAW cries they have given so much in the 2007 contract negotiations, really, well surprise, they should have started decades ago instead of garnering more and more and killing their golden goose.

Let them file bankruptcy, then tear up the contracts and start over, this time with a plan that is truly fair and gives the UAW workers a company to work for that has a hope of success, throw out current management, cut unprofitable vehicle platforms and downsize them to the 20% market share that they currently hold, not the dinosaurs that they have become.
Comment by charles knight

November 18th, 2008 at 5:37 pm

Giving the big three money would be like giving a alcoholic a drink.
Comment by Bruce

November 18th, 2008 at 7:32 pm

I have an idea. Since the labor unions negociate contracts for their rank & file, and benefit by charging more in dues, government should tax the unions. They will have to charge more for union dues, the membership will have to pay more. Let’s see - cost/benefit.

This may convince the membership that they do not need that “leach” any more.

Just a thought.
Comment by Marshall

November 18th, 2008 at 7:35 pm

I think the UAW workers who are looking at the $70 figure are forgetting that they are only the working half of that $70. The other half isn’t working, but getting paid anyway. This is rolled into the price of the labor on each car. I’d be angry if non working labor was taking as much and more than the working labor too.
Comment by Marshall

November 18th, 2008 at 7:39 pm

The management needs to go on a strict financial diet as well. If the UAW takes a 50% pay cut, I think middle management should take it as well and executives should take a 90% cut until profitability is restored.
Comment by Martha

November 18th, 2008 at 7:41 pm

For the last time…autoworkers do NOT make $70.00 per hour or $100.00 per hour.
This is part of the problem…public opinion is often based on inaccurate information
released by the news media. Again: seniority workers make about $28.00 per hour before
benefits, lower “tier” workers (those with less seniority) make about HALF that amount.
Please, Please get the facts straight! It is vital that reporters are accurate.
Also, think about this: How would you feel if your hourly wage was being broadcast
around the world, and was being reported inaccurately as well?
Autoworkers are real people with real families, not numbers with dollar signs in front of them. If you want to be fair and balanced, invite some autoworkers and their families to your show to tell their side of this story and how a collapse of the auto industry and the subsequent loss of their jobs would affect them.
Comment by Bruce Castleberry

November 18th, 2008 at 7:41 pm

I work in the auto industry. I have done so for almost 40 years. The big three have a management issue more than a union issue. CEO’s that are paid astronomical salaries and bonus’. And for what, to put the company in the tank. These people along with upper management are the sole cause of their own problems. They look only at the bottom line and don’t care about their workers their customers or their dealers. It’s pure greed and nobody in the media wants to say it becuse their run the same way. To h%$%#$% with our employees or our customers or our dealers we want it all. The Japanese know if you have customer service and a quality vehicle and treat your employees with dignity and respect most consumers will over look minor issues with their auto’s because they are being treated right. It’s not brain washing by them but pure greed and the lack of careing by the big three that’s gotten them in this mess. By the way Ford has for the last few years tryed to turn around by doing things the right way but they still are lacking in customer service by treating their dealers like sh&*. If instead of building a better auto you cut the labor rate payed to mechanics for doing warranty work what do think will happen to customer satisfaction when mechanics don’t want to work on a car or truck that’s under warranty. That’s just one of a hundred example I could come up with. So NO BAIL OUT TO THE BIG THREE—THEY ARE REEPING WHAT THEY SEWED!!!!!!!
Comment by Mike Terrill

November 18th, 2008 at 9:19 pm

Unions have outlived their need and usefulness in American industry. Yes there was a time that they were welcomed, needed and necessary. It was a time when federal regulation was none existent and workers were forced to work excessive hours on regular pay and in extremely dangerous conditions. Unions have created themselves as an entrenched part of the auto industry to get fat along with everyone else.

Compare the auto industry to any other large employer in the US and you will find that things are pretty good. Get rid of the greedy, ineffective and unneeded unions, move the factors to places that are cheaper to live for employees and create a management structure that is affective and you will begin to see the auto industry begin to move forward.
Comment by Larry

November 18th, 2008 at 9:33 pm

Marc,

Who is it that determined what to produce? The CEOs and BOD. They had no vision. They were only motivated by that quarterly earnings number that makes the institutional investors happy. Short term vision for short term gain. The employees are there for the long term. That is why they seek health care and retirement. The two goals are opposed for the success of the company. The CEOs pay is based on the short term performance.

As a small business owner you need motivated, loyal employees to produce the “widgets.” Unfortunately there is no corporate loyalty anymore and it has festered it’s way into the employee morale. Small businesses can’t get loyal employees because they know they will get burned at the drop of the hat. They have seen it happen to their friends at the big corporations.

So, now, we have the auto makers coming to congress to have the taxpayers throw good money after bad decision making. This will only delay the inevitable trip to bankruptcy. Better now than later. Will the employees be hurt? Yes. But with the new bankruptcy laws the CEOs and other top execs won’t be able to walk away with a bucket of cash for being incompetent.
Comment by Dennis

November 19th, 2008 at 12:43 am

If these Companys really were in great shape and just needed a little help”cash” then there would be the private sector lining up to invest in them. With GM having a cap value of a little over 2 Billion Dollars, where is Warren Buffett? he could buy GM that is change for him.The answer is these Companys are losers and no one will touch them other then Uncle Sam. I think there will be a back lash to some degree in this country against the big three and they have it coming.
Comment by Johannes

November 19th, 2008 at 1:52 am

Dear Cheryl,

I’ve had the opportunity and pleasure to work for both a Japanese and US manufacturing company during my long career, in both cases in a management capacity.

Besides, the obvious cultural differences there was one thing that really stuck out :

Japanese companies think and act long-term, US companies think and act short-term. The implications for the company strategy AND the way the blue-collar workforce is treated are obvious.

Best regards,

Johannes
Belgium
Comment by Alan - Georgia

November 19th, 2008 at 7:59 am

It’s not like the Big 3 didn’t see this coming. America has had plenty of warnings that their dependency on oil was going to be a big problem in the near future. Instead of the Big 3 designing the next cool exterior or interior look, why weren’t they working on better fuel efficiency. The Big 3 stay in check with Washington’s laws for better fuel efficiency to just be slightly ahead or inline. Has anyone heard of market leadership? How many markets are flourishing where demand is high for product improvement(much better fuel efficiency rather than a mile or two per gallon), but the suppliers only provide mediocre improvements? If we can land men on the moon almost 30 years ago, why can’t we make significant improvements in fuel efficiency without having a high price tag on the vehicle purchase for this improvement? Handing the Big 3 money to keep doing what they have been doing is the true definition of insanity (doing the same thing everyday and expecting different results). Set some strict rules on what any loan money is for. There have been a number of great companies started during tough times and any Big 3 management blaming outside sources for their predicament is just foolish. If they didn’t have the foresight to see these issues coming, then perhaps there needs to be a change in management. There should be a mandate to produce cost effective alternative fuel vehicles (not ethanol) so we are investing in getting ourselves off foreign oil dependence. Let’s take an opportunity here to assist someone in trouble while laying the ground work to help the entire country. After all most of these issues are linked and if we don’t attack multiple ones at once, then we are just band aiding a problem.
Comment by Jeff

November 19th, 2008 at 11:11 am

The single biggest reason for the failure of the Big Three is QUALITY. I’ve driven Hondas and Toyotas for the last 26 years and NEVER (I mean NEVER) had a major mechanical problem of ANY kind. Just normal maintenance. In contrast, some of my friends and relatives own American cars and are constantly complaining about breakdowns and bad service. I gave up on American-made crap back in 1982 I had 3 American cars in a row give me trouble, and I’ve never looked back. I don’t plan to either. I’m a patriotic American with a son in Iraq, but I’ll be darned if I’m going to throw away my hard-earned money on second-rate quality. Message to the Big Three: File for bankruptcy and deal with your own mess. Message to the auto-workers: You’re not worth the money you’re being paid. Come out here in the real world with the rest of us non-union people and find out how it is to perform every day and work hard. No more bailouts!!! We’re driving our nation into the ground. Quit whinin’ and start workin’!
Comment by Dan

November 19th, 2008 at 11:50 am

I find it amusing that all three company CEOs took private planes to D.C. to ask for money.
Comment by philosopherkingtomas

November 19th, 2008 at 11:55 am

use the 25 billion for american car purchases only, 10,000$ credit for high mpg cars, lets get rid of inventory; then, impose a 10 cent per galloon tax to pay for retooling the industry (10 billion a year plus some added conservation).
Comment by DeBrat Dukeson

November 19th, 2008 at 12:20 pm

Let’s talk about quality, Ford is Crap, Gm is crap, Crysler is Crap. The big three are cranking out crappy cars. Crappy cars that suck gas faster then college students chugging beer. So it no suprise when the American crappy car reached the end of life 100,000-120,000 miles during the high gas prices, Americans started looking for cars that got better gas milage. My 10 year old Toyota Truck with 200,000 miles still gets an average of 28 MPG on the freeway and 25 MPG in the city.

Fords best is 29 MPG and dies at 120,000
Chevy best is 22 MPG and dies at 120,000
Does crysler even make a truck worth talking about?
Comment by jim

November 19th, 2008 at 12:24 pm

the big three are done !!! we can blame whoever we want, but, in the end it doesn’t matter. bad products, bad mangement, overpaid union workers, who cares? i will vote against any of my senators or congressman who give one dime to these band of thieves. let them sink !!! michigan people, you have cast your lot with the democrats for years, now live with it.
Comment by Missi

November 19th, 2008 at 12:26 pm

My opinion in a nutshell. Honda, Toyota & Nissan have STRIVED to make energy efficient cars that people WANT to buy. Why you ask? Just go back in time a short while and remember how much you paid to fill up your car vs what you pay now. Don’t get excited because it won’t last. They planned ahead and they also make a car that will last. My Honda lasted 13 years with 330,000 miles with original engine. My (2) Fords that I had, well the first one the transmission went at 48,000 miles and 2nd one at 53,000 miles -but that was ok because it was a recall issue. Sorry but I think I will stick to the well made fuel efficient vehicles from now on. The BIG 3 knew a long time ago that this storm was heading their way and they did NOTHING about it. Oh wait they did they built more GAS GUZZLERS. Shame on them!! Why should we have to carry them for their ill planning. If any other company made those bad decisions they would not be in business anymore. Could it be that the BIG 3 have their hands in the same pockets as the oil companies? Gee I wonder. I think there is more than engines being greased over in Michigan.
Comment by joebamain08

November 19th, 2008 at 12:36 pm

I have had 4 Mazdas that have lasted over 200,000 miles. I have a Ford truck with less than 100,000 miles that has had both window motors replaced, front differential seal replaced, 5 new coils and now it has an exhaust manifold leak that is going to be over $500 to fix. The Mazdas have had nothing but oil changes and brake pads. So don’t tell me we are being sold a bill of goods that the American cars lack in quality, the just do. Couple that with the age old work rules, unrealistic wages and seniority rules built into the union contracts and you get the current mess. The US companies put in robotics but can’t eliminate any positions, so you have a bunch of UAW guys standing around watching the robots work, the manipulate the system so they don’t work during the week and come in on the weekends to finish work since it is at the OT rate. While the base rate may be $28 per hour, the vast majority make far more than that with the OT and because they have been there so long (you can’t get rid of anyone with seniority). My brother is a mechanic and he says there is no comparison in quality of workmanship between the foreign makes and the US makes. The US companies should look at Hyundai and copy what they did, the went from one of thw worst in quality to one of the best. They listened to their customers and made cars that they want, that have great warranties, that get good gas mileage and are very inexpensive. The only way to fix it is with drastic meassures and that takes them going bankrupt and reorganizing under bankruptcy. Will it hurt yes, but they will be better companies for doing it. That assumes they bring in agents of change that will make the tough calls, tough cuts and be a tough negotiator with their creditors and unions. BTW if you heard the UAW president on Hannity the other day he said that the union would make no concessions to aid the ailing companies. Hopefully Obama will keep his promises to all those union employees that voted for him….
Comment by xeno

November 19th, 2008 at 12:41 pm

Six figures… let’s see how that works out.

$70/hour x 40 hours = $2800/week.

52 weeks/year x $2800/week = $145,600.

One, two… three… yeah, that’s six figures.

Contrast that with the Japanese / foreign transplants:

$47.6/hour x 40 hours = $1904/week.

52 weeks/year x $1904/week = $99,008.

That’s $50,000 a year less, approximately, but I’d bet NO-ONE has the balls to say that getting paid NINETY-NINE THOUSAND DOLLARS A YEAR is “getting screwed.”

Especially considering most other manufacturing jobs - even most unionized manufacturing jobs - get around $40K a year.

The American auto companies are paying their workers nearly four times what workers in other industries are getting.

So, let’s look at the executives, hmmm?

Let’s say there’s 300 execs at each company making - call it $100 million a year.

That’s 900 execs, for a total of $90 billion a year. A bit high, hmmm? Clearly I’m exaggerating the number and amount of executive compensation, but I’m really tired of this argument.

So.

3 million jobs, the auto execs say; 3 MILLION manufacturing jobs will be lost if the Big Three go under. so, 3 million-900 = 2, 999,100 jobs that will be eliminated that are non-executive.

So, how expensive are all those line workers?

Well, using the obviously false math of the people supporting the unions, those workers are costing $436, 668, 960, 000 a year.

I seriously doubt that any of the figures for this, in this article or anywhere else are close to accurate.

But based on the knowledge that the auto industry doesn’t make 436 billion dollars a year, and that both worker costs and executive costs must be much lower than the figures I’ve given here, I can say: executive compensation is a drop in the bucket.

If you’re after the execs for bad leadership, yaaaaaaaay! Go, you!

But if you’re thinking you can afford the workers, by cutting off the execs, you’re flatly wrong.
Comment by Chuck Rothman

November 19th, 2008 at 1:24 pm

Interesting chart. Where do you fit on it?
Comment by marc

November 19th, 2008 at 1:32 pm

I just keep wondering why nobody is asking the question “Will a bailout prevent any layoffs?”. The argument I keep hearing about the bailout is that there are thousands and millions of jobs at stake. But, as soon as the automakers get the bailout won’t they start laying off workers and closing plants to become more competitive?
Comment by Darlene

November 19th, 2008 at 2:33 pm

It’s obvious most of you don’t have a clue about the BIG 3. Trust me! I don’t make 6 figures as most of you think. I have 32 years of service with GM and have enjoyed every year of it.

Cheryl needs to confirm her facts and figures before reporting incorrect information.

The BIG 3 aren’t asking for a bailout.

Myth No. 1
Nobody buys their vehicles.

Reality
General Motors Corp., Ford Motor Co. and Chrysler LLC sold 8.5 million vehicles in the United States last year and millions more around the world. GM outsold Toyota by about 1.2 million vehicles in the United States last year and holds a U.S. lead over Toyota of about 560,000 so far this year. Globally, GM in 2007 remained the world’s largest automaker, selling 9,369,524 vehicles worldwide — about 3,000 more than Toyota.

Ford outsold Honda by about 850,000 and Nissan by more than 1.3 million vehicles in the United States last year.

Chrysler sold more vehicles here than Nissan and Hyundai combined in 2007 and so far this year.

Myth No. 2
They build unreliable junk.

Reality
The creaky, leaky vehicles of the 1980s and ’90s are long gone. Consumer Reports recently found that “Ford’s reliability is now on par with good Japanese automakers.” The independent J.D. Power Initial Quality Study scored Buick, Cadillac, Chevrolet, Ford, GMC, Mercury, Pontiac and Lincoln brands’ overall quality as high or higher than that of Acura, Audi, BMW, Honda, Nissan, Scion, Volkswagen and Volvo.

Power rated the Chevrolet Malibu the highest-quality midsize sedan. Both the Malibu and Ford Fusion scored better than the Honda Accord and Toyota Camry.

Myth No. 3
They build gas-guzzlers.

Reality
All of the Detroit Three build midsize sedans the Environmental Protection Agency rates at 29-33 miles per gallon on the highway. The most fuel-efficient Chevrolet Malibu gets 33 m.p.g. on the highway, 2 m.p.g. better than the best Honda Accord. The most fuel-efficient Ford Focus has the same highway fuel economy ratings as the most efficient Toyota Corolla. The most fuel-efficient Chevrolet Cobalt has the same city fuel economy and better highway fuel economy than the most efficient non-hybrid Honda Civic. A recent study by Edmunds.com found that the Chevrolet Aveo subcompact is the least expensive car to buy and operate.

Myth No. 4
They already got a $25-billion bailout.

Reality
None of that money has been lent out and may not be for more than a year. In addition, it can, by law, be used only to invest in future vehicles and technology, so it has no effect on the shortage of operating cash the companies face because of the economic slowdown that’s killing them now.

Myth No. 5
GM, Ford and Chrysler are idiots for investing in pickups and SUVs.

Reality
The domestic companies’ lineup has been truck-heavy, but Toyota, Nissan, Mercedes-Benz and BMW have all spent billions of dollars on pickups and SUVs because trucks are a large and historically profitable part of the auto industry. The most fuel-efficient full-size pickups from GM, Ford and Chrysler all have higher EPA fuel economy ratings than Toyota and Nissan’s full-size pickups.

Myth No. 6
They don’t build hybrids.

Reality
The Detroit Three got into the hybrid business late, but Ford and GM each now offers more hybrid models than Honda or Nissan, with several more due to hit the road in early 2009.
Comment by Bruce

November 19th, 2008 at 3:25 pm

Here’s my reply to Tim Laughlin, who commented @ Nov 18th, 2008 at 4:32 am.

How about checking out what GM actually makes instead of just an uninformed opinion.
You said the last GM car you drove was a brand new 2008 Monte Carlo.

Too bad there is no such thing. The last Monte Carlo was made on June 19, 2007. This was a car that was basically designed for the 2000 model year and had mo major changes since then. The current vehicles sold by GM are mostly new designs, no more than a few years old. Don’t compare last generation vehicles to the current generation.

Chevrolet Aveo - current generation introduced in 2005.
Chevrolet Cobalt - introduced 2005 model year. Will be replaced by Chevrolet Cruze in 2009 & 2010.
Chevrolet Corvette - current generation introduced in 2006.
Chevrolet HHR - Introduced 2006 model year.
Chevrolet Impala - Current generation introduced 2006 model year.
Chevrolet Malibu - Current generation introduced 2008 model year.
Comment by Barney

November 19th, 2008 at 3:34 pm

Please, some of you stop knocking the big three vehicles and acting as if we would not miss them. I drive a 1990 Mercury with over 100,000 miles and have two 1994 Ford pickups with plenty of miles and have had practically no problems with any of them, so don`t give me that story about them not being good vehicles. Also, complain about overpaid executives that are not doing their jobs and are making hundreds of times what the workers are that are at least doing something productive. Remember, we usually do not appreciate what we have until we lose it.
Comment by jim

November 19th, 2008 at 5:18 pm

darlene, the ‘klunkers’ they built in the 80s and 90s are the reason for the decline in business. i never got 100,000 miles on my chevy, but on my hondas no problem. now why should i go back to chevy? they ripped me off for years. now, at one time GM sold 65% of all cars in america, now its below 30%. and they did it to themselves. as for ford or whoever outselling honda, honda sells every car they can make, they don’t have the capacity of ford. don’t play that statistics game with us, the big 3 are crap companies and have been for 30 years. let them fold, and let them take detroit and michigan with them. you can thank bad management and bad government for this. to lend these companies any money is worse then a bank lending a gambling addict money. at least the addict might win, and pay the bank back. the big 3 are so over its not even funny.
Comment by Kent Aabye

November 19th, 2008 at 10:15 pm

The only hope for us to has US cars built in the US by US comapnies is:

reduce the labor cost that would be labor (unions), the number and pay of middle management, and have upper management take hughe pay cuts and have the pay be based on profits (if you can’t make the company work you earn very little).

invest in product. People buy cars based on feeling and looks ect. only buy materials from the best most competively priced suppliers. make great product.

control distribution…Toyata has less than 2000 dealers, GM has over 6000. GM’s worst competition is the other GM dealer down the street

get rid of the fat…yes the fact that GM has 6 private jets is an issue…not just the cost of those jets but more the mind set that it is not seen as a problem by management. this just shows they are not focused on cutting to the bone. everyone flys coach (even ceo/pres/management they can use laptops and black berrys while waiting for flights to remain producitve like the rest of the business travelers)
Comment by Joe the plumber

November 20th, 2008 at 12:28 am

I am not a plumber yet but I want to be one so I will call myself one.

I am shocked that the people that this country elected to represent us to distribute our taxes don’t show a little bit more anger towards the nonchalant attitude that the 3 CEO’s and mister “gold-digger” displayed while sitting in front of them demanding 25 billion dollars of our hard earned money. You have to admit they are good….. I couldn’t even see the guns they were holding as they threatened the future of America.

Does anyone at the white house even know how to use the internet? You can go on line and see the outrageous saleries the upper management is taking down. Private jets to fly to DC is nothing compared to Ford CEO flying from Detroit to Florida every Monday and Friday because he works in Detroit and has is mansion in Florida. After enough bad press he finally gave up the Ford private jet (and pilot) and now flies commercial. Why wasn’t the run for the border for cheap labor to build cars a bigger issue? I am not going to get into all of the details but I will say that only one of the people questioning the panel today brought up the fact that Ford, GM and Chrysler have set up plants in Canada and Mexico and are building cars in those countries to be sent back to the USA to be sold to us that are footing the bill. Why couldn’t those plants have been built in America and those jobs given to Americans? The imports are dying to set up plants in America and put Americans to work.

As for the Chevy “Volt” this is going to be the biggest joke of the century for a new car launch. The price tag on this car is expected to be 40,000.00 (batteries included). In the 2010 model year this car won’t sell due to the fact that the American people won’t have enough money to buy one because of the higher taxes we will be paying to recover from the bail-out.

In short I don’t know what is worst, the car companies begging for 25 billion, the unions crying about how poor they are or the lazy government officials that don’t want to spend a little time reseaching what it is they are actually spending our tax dollars on.
Comment by Wishful thinker

November 20th, 2008 at 2:20 pm

Six figures…I know someone that earned a high of 70k until the early 90’s when she took an early buy-out and left GM. That is more than a lot of us thirty-something college grads have ever earned per year. AND, this was 15 years ago!!! Then there’s the benefits.
Comment by Patricia

November 20th, 2008 at 2:40 pm

The chart above does not reflect an apples to apples comparison of wages. The Foreign Auto Companies do not pay for health care and for pensions which are included in the USA Auto Companies hourly wages as an expense. And it does not reflect the consessions that the UAW has agreed to beginning and to be effective within a year.

How much longer will the Big 3 Companies be asked to compete with Countries?

The Big 3 pays for health care, pensions, R & D, higher corporate taxes, operate under protectionism and currency manipulation. No wonder they cannot get out from under the weight of the $$$$$ gorilla.

The Foreign Transplants are propped up by their Country Goverments who fund health care, pensions, R & D, provide cheaper money, and basically keep knocking down competiton coming into their countires.

How can we expect the Big 3 to compete in the US market or any other market WITHOUT A USA 21ST CENTURY MANUFACTURING STRATEGY? We cannot and we will continue to lose manufacturing jobs as the result of Congressional short sight.

Am I the only person concerned about this?

And for the love of all that is right and just, a bankruptcy of any of the Big 3 will bring down the entire food chain……BUYING AN AUTO IS A RELATIONSHIP…..BUYING AN AIRLINE TICKET IS A ONE NIGHT STAND. A Gov’t backed warranty system means nothing except problems to the auto owner.
Comment by CPA-4-15yrs

November 20th, 2008 at 3:37 pm

I have been a working as a CPA in the Detroit area inside the realms of the Big 3 for 15 years now. I know exactly how every dollar is spent and how every budget is developed. So that there is no confusion, every single employee at the Big 3 is overpaid by 20-60% depending on their job description. On average, they are overpaid by 40%. If the government wants to bail them out so to speak, then the only viable solution is that the government place restrictions on the money just like a bank. All the following would be in effect as long as any portion of the debt remains unpaid.

1) No more layoffs. You can fire someone only with good cause (the unions can help with this to ensure fairness). This will help the economy from worsening.
2) Union strikes are against the law.
3) All employees will have to take a 40% decrease in pay. Did you know the janitors are making over $25 per hour to work for 4 hours a day but get paid for 8 hours a day? Then the Big 3 gives them overtime when they need extra help!!!
4) All sub-contractors and all vendors (except utility companies) will have to take a 20% reduction in pay with all new contracts or contract renewals. Believe me they can afford it also as I have audited their books as well.
5) No debt forgiveness for any reason ever.
6) Pay increases are never to exceed current CPI (there is a very complicated formula which I will not bore you with now but it does exist).
7) No new job creations within management to simply get around any of the above items including #3. You can change the job descriptions, titles, add more positions available, but you can not simply “create a new position with a new pay scale”.
Unions will have to take a 40% decrease in pay. Believe me they can afford it also. Benefits may have to be cut, but most of America is having to tighten belts and the unions should help by doing their part as well and not just asking for more and more.
9) The Big 3 are not allowed to “move” operations overseas unless the move is a requirement of that foreign country to sell into that country. In which case, that division of the Big 3 would not be able to sell into the US since it was began post bail-out.
10) No more “early retirement” packages. I know several employees that are past retirement age, are still working, making over $75,000 per year, with an opportunity to get over $100,000 in early retirement if they take it now. To pay a worker $100,000 simply to quit seems foolish to me considering they are over the retirement age anyways. If they want to work then see #3 above. If they want to retire then let them.

None of the above is unfair considering other businesses do these things everyday to survive. Furthermore, until the wages for the Big 3 employees comes way down and is a closer match to everyone else in this country, I will be buying foreign to save ME and ONLY ME money. Why should I help fund early retirement for someone that already makes too much money in my opinion?
Comment by CPA-4-15yrs

November 20th, 2008 at 3:49 pm

One more thing, do not trust anyone who actually works for the Big 3 or the unions or the government. They all have something to gain if this money gets lent out.

The comments from Darlene are just propaganda. She does not want to lose her job. The Big 3 have had unfair hiring practices for years now. They preference family workers for jobs over everyone else (so to speak). You know who else does that? - The mafia!

As an auditor, my job is to go into a company and report on the facts. I do not get paid more money or less based on how well or how much money the Big 3 gets. My job is to deliver fair results to everyone. And no, I never worked at or with the crooks at Arthur Anderson.
Comment by Vincent Finn

November 20th, 2008 at 4:32 pm

Congress and the Senate know very well the majority of the intelligent American people do not want this bailout given without a major restructuring. The US Auto is a money pit in need of a major overhaul that only bankruptcy can impose. Bankruptcy doesn’t mean lost jobs it means restructuring to become profitable again. Let the Bankruptcy Court take down the UAW and the private jets!
Comment by S T

November 20th, 2008 at 4:55 pm

Auto makers are a mess because they can’t compete.
They can’t compete because they waste too much money.
Management is overpaid and are showered with perks.
Unions are overpaid, and often don’t work when they are paid.
They expect to be paid like a doctor but have the skills of a high school graduate. Too many on the payroll who are not working, whether in job banks, light duty, or due to having too many classifications to justify more people.
All of this is ok with me until you ask me, the TAXPAYER, to bail you out.
We should learn from our foreign counterparts: How to make quality vehicles, and how to stay in business. You must eliminate the word “WASTE” from your operation.
Comment by Steve in Colorado

November 20th, 2008 at 4:59 pm

The big three should have been taking lessons from the upstarts in the 60’s. I think its pride that has blinded them over the years and the arrogance of the union officials. We should be looking into the unions business model and expose them for what they have become and who they associate with.
It seems that the autoworkers have benefits and wages that no other industries have and have been insulated from the affects of an economy in the downsizing mode by agreements that are not sustainable.
Giving or loaning to a business with these issues is just bad business and we should let them restrucutre and renegotiate their contracts with the unions or else let them wither on the vine and let the natural process of quanity supply and quanity demand takes its course.
Comment by Heinz

November 20th, 2008 at 5:23 pm

I am driving American cars since decades. How about being patriotic and buy American cars. Why do I see bumper stickers ” Obama/Biden” on 95% of foreign cars? The same people who want to bail out the American car manufacturers, support the Unions who created the above hourly rates in the first place and advertise job creation? If they would be serious to save the jobs that might be lost they would not buy foreign cars and nobody had to put up their hard earned $’s to bail out any American car manufacturer. How many Asian people have you seen on the road not driving an Asian made car? They even rent preferably Asian made cars!! They are loyal to their own workers, treat them well, do not need Unions and do not have to bail out their car manufacturers! How about forming a strong consumer group instead of corrupt Unions, demanding the type of products the consumers want, tell the stock holders to fire the failed management and make the earnings of the new management attractive but dependable upon the success of the business (remeber Iacoca?). In return the consumers would pledge to buy American cars as long as they are competitive. Automatically the workers had to be treated well by the management because they are a big part of the success of a new management. This would be the real change we all could live with!!!
Comment by floyd

November 20th, 2008 at 5:30 pm

DISBAND THE UNIONS OR MAKE THE USA A RIGHT TO WORK COUNTRY. THOSE WHO WANT A UNION ARE FREE TO JOIN, THOSE WO DO NOT CHOOSE TO JOIN ARE NOT REQUIRED TO DO SO, IS THAT NOT AMERICAN?
Comment by Getback2work

November 20th, 2008 at 9:44 pm

For the uneducated worker.. the wages above represent fully burden rates. That means the wages shown include an average of all the benefits the workers receive ( what it actually costs the company to employee the hourly worker). The fact that some of you don’t know this just demonstrates that you’re uneducated about the facts of this debate. Regarding the “great strides” in quality pertaining to the big three.. get a copy of the latest Consumer Reports buyers guide. Go to the auto section and read the part titled “best of the best” and “worst of the worst”. The ration of big three ( worst of the worst) to the Japanese auto makers ( best of the best) tells the story. Big three products are clearly inferior. Aside from the burden that the UAW and executive compensation has saddled the US auto industry with, their product basically sucks. Wake up people. Produce a quality product at a competitive price and you will have more than your market share. Chapter 11, however painful will allow the big three to clean house and shed some of the excess that makes them uncompetitive. A commitment to producing a quality product, not just a slogan, will lead to your success. The Toyota plant in Texas recently closed down for three months and continued to pay the work-force. They will re-open in December, having spent the time re-tooling to produce a different ( more fuel efficient)model. Will any of the big three be able to accomplish such a task in three months ? in six ? in a year ? The answer is no. Do not throw good taxpayer money after bad. Clean house and start over. Sooner or later, it will happen.
Comment by john smith

November 20th, 2008 at 9:57 pm

I know you better get an updated chart, that one is form about 2006
Comment by Rick Fischer

November 20th, 2008 at 10:05 pm

Great thread! More light than heat. Here’s a few thoughts. First, American cars are not as bad as some are saying. I donated my Town and Country to charity at 240,000 miles and still running well. My second one has 108,000 miles and is just broken in. It gets 26+ highway, and I like it much better than any foreign minivan I’ve been in. Second, unions richly deserve our criticism. Restrictive work rules and over-generous defined-benefit pensions have to disappear. But they are not the whole problem. Third and most important, management is the largest part of the problem. My golf buddy has had dozens of consulting contracts with auto companies. His judgement is that GM has the worst factory management of all. Executives are responsible for much of the high manufacturing costs, poor product mix, weak designs, and all the rest. I say, no bailout unless we get to shoot the executives first.
Comment by Michael Everett

November 21st, 2008 at 8:31 am

Your graph is spot on to what one of the main issues is with the Big 3 auto firms. Labor cost are not the only problem B3 auto’s have. Let’s not forget unfunded manidates
from Congress and poor economic conditions also are contributing to their weak position.

Labor costs that are 40% above marketplace conditions and outdated work rules that
kill productivity, are and continue to be the main problem with B3 Auto’s. The heck of
it is B3 executives and the head of the UAW want us to believe that the pancea to all
of this is comming in 2010. I say BS to that kind thinking.

The UAW can take a 40% reduction is wages, salaried workers from the B3 can do the
same and all executives making more than $150,000 per year (including the President of the UAW) can take a 50% cut in their compensation. That puts them equal to the
transplants.

If they do that and Congress can suspend some or most of these unfunded manidates for
a couple of years so the B3 can get back on their feet. The $100b in funds that they
will really need, won’t be needed from the tax payers.

Lets start telling it like it is and stop tap dancing around the real problem and that
is LABOR COSTS.
Comment by Michael

November 21st, 2008 at 10:54 am

It is interesting that congress will make scape goats out of the big three auto makers but no one in congress will address the fannie mae and freddie mac failure and what they did to bring about its failure. A business or industry that is both top heavy with highly compensated employees and a union that represents a work force that is unwilling to face global competition does not need the government to bail them out but instead that business and industry need to come to grips with how they are structured and remake themselves through restructuring with the focus on quality, pricing and profitablility. There is plenty of blame with management and unions to go around that the last thing is for government to come in and side with one side or the other and promote the government’s agenda by using political blackmail as leverage to gain political support. Anyhthing congress has been involved with in the private sector has always lead to disaster, bigger government , higher cost to the public, and lessor competition. When senator Harry Ried announced that congressman Barney Frank and senator Chistopher Dodd are very skilled and are capable in fixing this problem made me sick because these two are the ones behind the mortgage criss and now want to lead the auto bailout, go figure. The new administration should quickly distance themselves from these three failures in congress and move to throw them out of office. This would go a long way in proving the new administrations leadership and credibility.
Comment by Andrew J Batz

November 21st, 2008 at 12:10 pm

Why???????? They sent the US jobs over seas for the quick dolor; they didn’t look long term again. Well that is the main reason, and the second reason is the members at the little 3 make to much money. Fix theses two problems and everything will be ok. There is no other way. It is this simple!!!!!!!!
Comment by wendell km

November 21st, 2008 at 1:47 pm

GM and the union did it all to themselves. I had 13 years in gm production and i took the last buyout this past februrary. I could’nt believe the things that went on there. The sense of entitlement that workers and union reps have is the take all for little as possible work is true. The skilled trades workers get pissed if they have to get out of their chair to fix something, they sleep most of thier shift especially thrid shift when the made up beds come out and don’t get them pissed if they can’t get sunday work when they watch the sports channel all day long. I had a production job where could sleep half the night. I would get my work done and be out in the parking lot sleeping the rest of the shift, or shopping. No need to go down the street to the bar, there’s plenty of drink and drugs inside, anything you want, including prostitutes. Taking $850 home a week wasn’t enough money for them, they want more more more. Management takes no questions during the business quarterly information meetings. We’ve asked about electric or hybrid cars over 10 years ago. Deaf ears they have. Stuck in the 50s. The union is in bed with gm, taking bounuses for shutting up the employees. EVERYTHING THEY TELL IS A LIE. Union reps make 120,000 year. They only look out for themsleves. They are more crooked than management. Along with the sexual harrasment from my own committee man and gm cancelling my health insurance 11 times in the last two years (had no health insurance for the whole last year) I decided to jump that ship. They been living in their own fairyland for too long. I hope (for the execptions for a few really good people i’ve met in there)that they go way under. They deserve it.
Comment by Al Sloan

November 21st, 2008 at 2:47 pm

GM, Ford, Chrysler,
You’ve mismanaged your business for over 30 years. The UAW, Govermenment intervention, Corporate management, all have a stake in your failure.

There is no easy solution for businesses and management that cannot learn from their mistakes. So, you get the tough solution.
The UAW is going to tell their members that their pensions and health benefits won’t be funded because their great benefactors, the Automakers are no longer viable companies.

GM has to kill Buick, Pontiac,Saab, Hummer, and GMC.
Ford, say goodby to Lincoln and Mercury
Chrylser, just say goodby.

US auto dealers, if you sell any of the big 3 products, think seriously of getting into another line of work.

That’s the reality of your situation. That’s the cost of doing the wrong thing for too long.

Goodby and Good Luck!
Comment by Dan Texas

November 21st, 2008 at 11:26 pm

Heinz said: “I am driving American cars since decades. How about being patriotic and buy American cars.”

You do realize that this is the most ridiculous argument anyone could use, right? What will be my incentive as a consumer to spend money on an inferior product? Right, I would do it so that some guy at GM can have 96% of his salary paid while he sits in a closed GM facility doing nothing because his UAW buddies made sure there will be no layoffs. Pick up any Consumer’s Report and check out the most and least recommended cars; also read what problems people face when they buy most cars produced by the Big 3. Being patriotic has nothing to do with how I choose to invest/spend my money (even so, if I buy a Toyota am I not supporting an American citizen who worked on this car somewhere in the US?). Bringing patriotism in discussion shifts the focus to areas that have nothing to do with reality. The only real question is: why are they in this situation? And the answer should be clear: poor management, lack of reliability and innovation, huge production costs and unreasonable union contracts. There is no guarantee that any of these companies will manage to change and pull themselves out of this mess even with a hand out from the government. Allow them to file for Chapter 11. Let them struggle, take pay cuts, work more hours for less in order to pull themselves up. Help them (and us) take pride in and ownership of the product they create. I am sure that, as soon as the word on the perfect quality if American cars will get out, everybody will rush to buy them. Myself included.
Comment by fyifin

November 22nd, 2008 at 6:27 pm

Let the automakers and the unions go into bankruptcy and reorganize. The unions were needed at one point in time because of the abused taken place in the corporate sector in consideration of wages, safety, and fair treatment. This role has warn out its welcome many years ago. The average college student who risks student loans and years without work is coming out of school and finding no jobs. And when they do find jobs, they’re at $8.00 - $10.00 per hour. The average autoworker who is uneducated has sacrificed nothing for his or her future in terms of student loans makes and average of over $100,000 per year (according to CNN news). There is not a human resource recruiter in the world that could place that worker in the real world for any more than minimum wage. There are doctors, engineers, attorneys, college professors, etc. that don’t make that kind of money. What message does that send to our children that spend all that time, effort and money to graduate and come out only to make minimum wage? It is difficult to get a degree. It’s a challenge and it’s a risk. I’m sorry the auto workers didn’t do the things in their life and take the sacrifice in their life to become educated. They have no skin in the game. Putting bolts on hubcaps doesn’t qualify for a doctor’s salary. This world is upside down. We need to compete on a global scale and that change needs to start here. We have to reward the people that strive to better themselves and f