Automotive Industry Bailout? The UAW Should Bail Out!

We have the UAW to thank for the decreasing revenues of the Big 3 U.S. automakers. Some illiterate Bozo pushing a broom in a Detroit auto plant is making $20+ per hour! Here's a breakdown of actual labor costs per hour at the Big 3, this is for hourly workers only, and does not include extremely overcompensated white-collar salaries -

Labor cost per hour, wages and benefits for hourly workers, 2006. (Correction to the below information: I have just discovered on Nov 19, 2008 that, since 2006, the average laborer's compensation package for American owned automobile manufacturers has increased to slightly over $81 per hour! Therefore the following figures for the "Big 3" are about 12% low.)


Ford: $70.51 ($141,020 per year)


GM: $73.26 ($146,520 per year)


Chrysler: $75.86 ($151,720 per year)


Toyota, Honda, Nissan (in U.S.): $48.00 ($96,000 per year)
(source: Forbes)

Is it any wonder that American auto manufacturers cannot compete in the open market? They're being strangled by labor costs! That, coupled with the fact that, across the board, Chrysler, Ford and GM produce an inferior product, when compared to the quality and durability of competing Japanese imports.


As credit availability has tightened - to the point that it should always have maintained - consumer spending has slowed to a crawl. As a result, major U.S. automakers have seen their profits fall. Severe adjustments must be made in order to bring this industry back from the brink of extinction.

1. American auto manufacturers must return to the business of building a durable product. It seems that competitors in foreign countries produce products that can last for years with little need for maintenance. Many American made vehicles often have major mechanical problems within the first year or two of usage. In order to remain competitive in an emerging global market, the auto industry must produce vehicles that are more reliable and can attain optimum gas mileage.

2. Our auto industry must not continue to give in to the crushing demands of the auto workers union. A key advantage that foreign auto makers have is they do not have to pay outlandish wages and benefits when they can simply expand or relocate to areas that do not bow to union pressures. Foreign auto makers have consistently surpassed their American counterparts in production and profitability. It is now time that the auto behemoths stand up to the unions and demand their employees work for a fair wage and competitive benefits without jeopardizing the life of the company. How does it profit the unemployed worker to say, "I used to work for Chrysler (or Ford, or GM) when they were in business." Or the underemployed worker to ask, "Would you like fries with that, sir?"

3. They need to control spending at all levels of the corporation. Many auto executives revel in lavish luxury compensation packages, fail-safe "Golden Parachutes," and outlandish bonus incentives. The only people deserving of a Golden Parachute are those who save a failing corporation, not those who failed to save it! This is true for ALL industries, not just automotive.

The average UAW worker with a high school diploma earns 57.6% more total compensation than the average university professor with a PhD (who earns about $93,000 per year), and 52.6% more than the average worker at Toyota, Honda or Nissan.

The true bailout won't come about until the UAW either renegotiates the contracts to a reasonable level of compensation, or the UAW is eliminated as the bargaining entity for those employed within the automotive manufacturing industry.

I could be wrong .............................. but I'm NOT!

Shades of 1929!

The government won't make it official, because that would reflect poorly on the administration, but we are in a recession - bordering on another depression. It's been almost 80 years since the beginning of the "Great Depression" of 1929, which lasted until 1941, so we were about due for one. We had four lesser-known (except to economists and historians) depressions in the 1800's, each of which lasted between five and seven years. So, in a relative sense, the 20th century was a much smoother one, depression-wise. One biggie, but no roller coaster rides.

The root causes of the Great Depression are still uncertain, but a drop in the Gross Domestic Product (our ability to sell what we manufacture) initiated a high unemployment rate in the United States. The unemployment rate represents what is not produced that could be produced. The unemployment rate, these days, is a misleading statistic anyway. An individual is counted as unemployed if the individual is over the age of 16 and is actively looking for a job, but cannot find one. Students, those individuals who choose to not work, and retirees are therefore not counted in the unemployment rate. Nor are the under-employed (those who desire full-time employment but cannot find it), or those who are not drawing unemployment compensation from the government (those who have not filed for unemployment, or have exhausted their unemployment benefit). In 1929 the unemployment rate in the USA was 3.2%. In 1930 it had more than doubled at approximately 8.5%., and by 1933 our unemployment rate had hit 25%. (Source: www.sjsu.edu) That means that one person in four who was capable of working, and actively seeking employment was just S.O.L.! Keep in mind also, that at that time in our history, the labor force was over 90% male. Women may not have even been included in the statistics.


So, what's going on today? In August of 2001 our unemployment rate was 4.9%, based on:

		Description
Total civilian population	212,135,000	(excluding those under 16, members of the military, and persons in institutions)
- Not in Labor force	70,785,000	(retired, students, individuals choosing not to work)
= Labor force	141,350,000	(total population minus those not in labor force)
- Employed	134,393,000	(individuals with jobs)
= Unemployed	6,957,000	(individuals without a job and actively searching)

(Source: www.econedlink.org)

But, that was seven years ago. Today we have offshore outsourcing of American jobs, combined with in-sourcing of technical and professional people, added to the reported 12,000,000 (and constantly growing) illegal aliens. And we have an ever-increasing export deficit, and we are becoming more dependent on overseas sources - many of which are less-than-friendly to the United States - for goods and services. Where is our unemployment today? As of May 2008 our national unemployment stands at 5.5% - 2.3 percentage points above 1929, yet roughly 3 percentage points below 1930. We now have a "civilian population" of 154.5 million - that's slightly over 51% of our total population of 301 million - for a decline of 57,635,000. Where did those 57.6 million people go? Did they die? Surely mortality rates would be offset by those coming of age.

According to the U.S. Census Bureau, in 1990 there were 16.7 births per 1,000 population (those would be the people who will be 18 at some point in 1908). In 2007, the last year available from the U.S. Census Bureau, there were 8.1 deaths per thousand. That's less than ½ the number of people who had been in the employable age range for the previous 2 years. (I could find no figures giving specific numbers of either births or deaths, nor could I find statistics showing the number of people in the 16-30 age range who would have been excluded from the "civilian population" due to education, military or institutional status.) How do you have a birth rate twice that of the death rate, and lose 57.6 million people from the workforce? I am amazed at the number of things in this world that I just simply do not understand.
Our GDP has remained fairly stable since 2006 reflecting a growth of approximately $1 billion, which is a good sign. Although that amount is significantly larger than my monthly check, $1 billion is not a lot of money when your talking about a total GDP of $14,000,000,000,000 ($14 TRILLION). To review we have a 5.5% (official, if not totally accurate) unemployment rate, and a stagnant GDP. Then add over 5,000,000 welfare/Medicaid recipients (whose only skill seems to be spreading their legs and letting the taxpayers pick up the tab), and corporate offshore outsourcing of hundreds of thousands of American jobs. Now OPEC is actively engaged in driving our economy further and faster down the road to ruination, and transportation costs are killing us at the gas pump, retail stores, and others offering goods and services. Additionally, the U.S. dollar has been devalued by half around the world! Does the inevitable outcome escape our elected representatives in Washington D.C.? Let me spell it out for them - D.E.P.R.E.S.S.I.O.N.! And what gifts does the depression bring? Civil disturbances, increased crime rates, and perhaps rioting ... or possibly even another revolution. I do not wish to see any of these things happen, but I fear that unless the government changes the course our country has taken in the last 50 years, these will be the consequences of our inaction.

I hope that someday I can say, "That prediction I made back in 2008 was wrong! Our government finally grew a set, and re-directed our economic policies. Today our country is as prosperous as it was in the 1950s, our borders are secure, and we depend on nobody outside the United States for our fuel needs!"

I'm Gil, and I approve this blog!