The UAW Ad for the Auto Industry Bailout

[cannon_fodder]

Wevus:

$28 an hour
+ pension
+ health
+ dental
+ disability
+ life insurance
+ overtime
+ taxes (FICA match + unemployment + workers comp)
__________________
Together > $28.  

As I understand it, that is what the package is.  Explicitly said it was sans legacy costs.  

In any event, it does not change my perspective as outlined above.

[nathanm]

quote:Originally posted by cannon_fodder

Wevus:

$28 an hour
+ pension
+ health
+ dental
+ disability
+ life insurance
+ overtime
+ taxes (FICA match + unemployment + workers comp)
__________________
Together > $28.  

As I understand it, that is what the package is.  Explicitly said it was sans legacy costs.  

In any event, it does not change my perspective as outlined above.

But $70 an hour includes the cost of benefits for people no longer working for the company. Retirees in Arizona or whereever. No company accounts for the cost of labor that way, yet everyone continues to assert that the wage plus benefits of current employees is $70 an hour. Why is that?

I guess one positive of bankruptcy (if they can get DIP financing) is that the companies will be able to dump the retiree benefits on the PBGC like most of the airlines did. That will end up costing us a lot more than the loans they are asking for, but we're short sighted like that.

[Gaspar]

Reading the text of the bill, I see that old Harry Reed got his earmark delicately tucked in:


(c) Authorization of Fiscal Year 2009 Cost of Living Salary Adjustment for Justices and Judges- Pursuant to section 140 of Public Law 97-92, justices and judges of the United States are authorized during fiscal year 2009 to receive a salary adjustment in accordance with section 461 of title 28, United States Code.

[cannon_fodder]

Nathan,  

If you wish to continue hammering on wages, lets be VERY clear about it, but please read my position.  I believe this information very clearly puts this issue to rest.

Legacy costs means retirees.
Sans means without.

The figure is WITHOUT the cost of retirees.  

1) Average hourly wage for GM worker: $39.68 ($28 an hour as referenced in your article is from the same source I have reviewed and reflects base wage for regular non-overtime vehicle assembly workers, me $39.68 is average wage for all UAW hours worked.  Which seems a more accurate reflection.)

Reflecting base pay, shift premiums, overtime, vacation and holiday redemption and any bonus.
-> General Motors Inc., "GM Manufacturing and Labor Resources," p. 28.  Available at http://media.gm.com/manufacturing/handbook/other_benefits.pdf [last visited  12/15/2008]

2) Hourly benefit cost for hourly GM worker: $33.58

   *  Hospital, surgical, and prescription drug benefits;
   * Dental and vision benefits;
   * Group life insurance;
   * Disability benefits;
   * Supplemental Unemployment Benefits (SUB);
   * Pension payments to workers pensions accounts to be paid out at retirement;
   * Unemployment compensation; and
   * Payroll taxes (employer's share).
-> General Motors Inc., "GM Manufacturing and Labor Resources," p. 28.

THESE ARE PRESENT AND FUTURE COSTS OF CURRENT LABOR.  NOT legacy costs.  No  money goes to retiree pay.

NOT costs for retirees.  These are NOT costs for people that are retired.  These ARE costs for current workers that are both paid out of pocket and reserved for future payments.  In accounting terms, they current are costs and expenses (some are technically accruing and deferred pension liability expense, but it is much easier to think of it in cost accounting terms and hence:  a current cost).  

PLEASE PLEASE PLEASE take notice that this figure is a joint publication by General Motors and is on file with the SEC and the UAW.  It is not a biased report.  It is not a political report.  It is not made up by the left or right wings.  The citation is GM.COM
http://media.gm.com/manufacturing/handbook/other_benefits.pdf

According to GENERAL MOTORS and the UAW the compensation for a CURRENT hourly employee averages:  



$39.68 per hour cash compensation
$33.58 other compensation and costs
_____
$73.26

Very tellingly, the source that is saying wages are $28 cites the EXACT SAME SOURCE but chooses to only include cash compensation and only for the position of "vehcile assembler."  TO that figure one would have to add the benefits package and it remains exclusive of over time, shift premium, banked vacation pay, or other actual cash compensations.

Essentially, the $28 an hour figure is the lowest figure one could extract from the report.  And even that figure represents a cost to the company in excess of $60 an hour.  So if that is your saving grace, drop the argument.

They have priced themselves out of the market, it is reflected in the performance of the company and in their total employment numbers:

GM Labor, hourly:
99 (2) 139,709
00 134,771
01 127,852
02 121,185
03 118,512
04 106,911
05 97,987
06 80,758
07 75,000 (est.)
08 70,000 (est.)

Please, don't pull some numbers from some BS blog and not understand where they come from.   The actual GM provided numbers are on file with the SEC, they are published, and available.  Use them:
http://media.gm.com/manufacturing/handbook/index.html

Similar publications are available from Ford and previous years for Chrysler (they are a private company now).  Argue about the merits of their wage, or that management is kill it faster, or whatever else.  But arguing the numbers when they are published seems a bit moot.   You can not account for legacy costs and current costs the same.
- - -

To DRIVE my point home, the GM pension plan is currently over funded by $11 BILLION and is funded with about $68,500,000,000.00 in assets.  As an employee works money is paid into the fund as a credit on their behalf.  This is standard pension accounting.  Current employees do not fund the pensions of former employees lest a pension find itself underfunded (there are federal parameters for funding) which is a cause for concern BUT not in the current situation per GM.

The risk would be to "nearly" retired persons who do not have their accounts fully funded or fully vested.  To put 20 years in at GM and not have a pension secured.  However, this discussion is ancillary to the compensation discussion above.

http://media.gm.com/manufacturing/handbook/pensions_401k.pdf
- - -

Want to blame management?  Fine, plenty of fodder in the report to point a boney finger at them too:

MARKET SHARE
Calendar Year, Cars %, Trucks %, Total Vehicles %, US Vehicles tot
1978 47.9% 40.8% 46.0% 7,097,287
1979 46.3 39.8 44.7 6,326,705
1980 46.0 37.4 44.1 5,056,808
1981 44.6 37.1 43.0 4,643,875
1982 44.2 40.2 43.2 4,553,399
1983 44.3 39.5 43.1 5,302,296
1984 44.5 34.5 41.7 6,035,190
1985 42.7 34.7 40.3 6,344,578
1986 41.1 32.3 38.5 6,285,802
1987 36.6 30.9 34.7 5,273,177
1988 36.2 33.1 35.2 5,562,679
1989 35.1 33.6 34.6 5,144,598
1990 35.6 34.3 35.3 4,994,785
1991 35.9 32.9 34.9 4,371,710
1992 35.9 32.2 33.9 4,449,878
1993 34.4 31.4 33.2 4,713,254
1994 34.3 30.9 32.8 5,063,294
1995 34.2 29.9 32.4 4,895,368
1996 32.7 29.0 31.0 4,793,169
1997 32.5 28.7 30.7 4,766,104
1998 30.0 27.6 28.9 4,608,764
1999 29.8 27.8 28.8 5,017,150
2000 28.6 27.0 27.8 4,953,163
2001 26.9 29.2 28.1 4,904,015
2002 25.4 31.0 28.3 4,858,705
2003 25.7 30.0 28.0 4,756,403
2004 24.9 29.0 27.2 4,707,416
2005 22.6 28.5 25.9 4,517,730
2006 20.7 27.1 24.2 4,124,645

Not only have they lost market share at an alarming rate, they are producing just over HALF the total number of vehicles today as they did in 1978.  The US auto market has nearly doubled in that time frame, and they produce HALF the vehicles.

Toyota, Nissan, et. al make more vehicles in the United States than GM does.  Together, the "Japenese" auto makers produce about 6,000,000 vehicles in the US.  Or about as many as GM did in 1984.  

Clearly that is not labors fault, management has plenty of blame.

AGAIN, I am not blaming labor for the demise.  At this juncture I would yield the argument in its entirety and still stand by my position.  The company is failing and a drop in the bucket from the Treasury won't stop that.
- - -

Health care?

Total health care costs to GM are about $5 BILLION per year.  That's for everyone. Working, retired, widow, salary, wage, everyone.  
http://media.gm.com/manufacturing/handbook/health_care.pdf

While a staggering amount of money it is a known and reoccurring cost.  Poor planning (again, another notch on managements belt) coupled with increasing costs and a failing business have caused the problem to be amplified.   $5Bil accounts for about 1/3 of their cash losses.   If health care cost was eliminate GM would still lose about $10,000,000,000 per year.

Looking over their cash flow, in the last 5 years (how far my S&P report goes back) no year would cash flow positively even if they had no health care expenses.  Take away the health care costs and it is still a failing company.

Thus, a red herring in the discussion.  
- - -

PLEASE, dear god PLEASE, don't tell me the number includes legacy costs again unless you have better numbers than the UAW, GM, and the SEC and have a reference for those numbers.

[nathanm]

Once again, your "other costs" in the non-wage compensation includes the cost of health care (amongst other things) for retirees.

The PDF you linked does not say what you think it does. It once again is a so-called accounting of wage & benefits taken by adding up the entirety of GM's cost for active and retired employees and dividing it by the number of hours worked.

When their competitors have retirees numbering in the low thousands, that's not at all a fair comparison.

Thanks for the reference, though. It allowed me to calculate that the average GM worker works 2395 hours a year. There were 80,758 hourly employees. That's 193.4 million hours worked.

GM's pension benefits paid in 2006 were 4.9 billion dollars. They paid 4 billion dollars in health care for the retirees. They have 432,000 retirees.

That's $25 an hour in pension benefits. Interestingly, taking the $73 GM claims in those PDFs that they pay each worker per hour and subtracting the cost of pension benefits agrees pretty well with what I claim is actually the average worker's personal wage and benefits cost.

I think that's pretty good evidence that GM is in fact including the pension payments to retirees in the wage and benefits figure you cited.

Maybe I'm just stupid, but I cannot find in the 10-K where wage expense is broken out, otherwise I'd reconcile the difference. Perhaps you can check my numbers.

Either way, their operating loss last year was 6.2 billion. The retiree expense (including health care), if removed, would more than make up for that. It would not, however, stem the flow of losses from GMAC.

Interestingly, if you look at this page:

http://www.media.gm.com/division/uaw/gm_wages.htm

It claims the 1998 total compensation was $46.17 an hour. That pretty much proves to me that there is a bunch of relatively fixed cost being thrown into the 2006 average wage figures. I can't prove, at the moment, whether or not that relatively fixed cost is retiree benefits, but I can do some more research.

[Gaspar]

OMG he still doesn't get it.  

You might as well give up CF.

[cannon_fodder]

quote:Originally posted by nathanm

Once again, your "other costs" in the non-wage compensation includes the cost of health care (amongst other things) for retirees.
. . .
Interestingly, if you look at this page:

http://www.media.gm.com/division/uaw/gm_wages.htm

It claims the 1998 total compensation was $46.17 an hour. That pretty much proves to me that there is a bunch of relatively fixed cost being thrown into the 2006 average wage figures. I can't prove, at the moment, whether or not that relatively fixed cost is retiree benefits, but I can do some more research.

For god's sake, READ THE ENTIRE THING before making stuff up.

Unreal.  Really.  You don't like the facts presented so you decide they are wrong.  Call the SEC and the UAW and tell them they have been lied to.  I'm sure they would like to know. Would probably be the final death blow to GM, those groups don't take kindly to being lied to.

As for the 1998 numbers... you have to READ the document and not skim it.  1998 included Delphi as part of GM.  Delphi workers were under a different contract that GM Auto workers.  If you look at the employment figures it clearly reflects that in the numbers as well as in a footnote.  Again, you have to actually READ the document, not just cherry pick parts that support your viewpoint.

I will go over this again, very very slowly and very very clearly using small words:

The wage number I gave does not include current cost for people no longer working at GM.
- - -

Lets break this down:

I went to the SOURCE for the article you referenced.  A source published by GM, filed with the SEC, and distributed to the UAW.  With that source I extracted the numbers you were citing and told you why they were out of context.

You then, went to that source and grabbed random numbers and extrapolated your own information from it, in spite of the very clear numbers to the contrary.

PENSIONS
1) By accounting and SEC rules you can NOT account for accrued pension liability as a current cost.  

2) The GM pension plan is, as of the date of the latest publication, fully funded.

3) The best source specifically states that the number is for CURRENT employees.

I have GM, the UAW, the SEC, GAAP, and a GM published document and financial statements to support my argument.  What are you basing your argument on?
- - -



You know what, never mind.  I have cited the best sources I could and tried to very, very clearly lay out my position.  I welcome interpretation of those sources but beg you to read them in full before throwing out information that is clearly covered (Delphi employees, pension funding).  

Once more:  I want GM to do well.  I am a stake in Ford so clearly want them to do well.  I am not patently hostile to organized labor as evidence by working with the AFL/CIO in many occasions.  I've worked at and run union shops.    So I'll pretend the labor contracts are just fine and it is economically feasible to pay a 300,000 high school graduates $75,000 each.  I'll give you that.

I still say GM is a failing company and the bailout will only be successful if they require draconian measures.

Sorry I can not discuss this further, got to get to court.

[nathanm]

quote:Originally posted by cannon_fodder

quote:Originally posted by nathanm

Once again, your "other costs" in the non-wage compensation includes the cost of health care (amongst other things) for retirees.
. . .
Interestingly, if you look at this page:

http://www.media.gm.com/division/uaw/gm_wages.htm

It claims the 1998 total compensation was $46.17 an hour. That pretty much proves to me that there is a bunch of relatively fixed cost being thrown into the 2006 average wage figures. I can't prove, at the moment, whether or not that relatively fixed cost is retiree benefits, but I can do some more research.

For god's sake, READ THE ENTIRE THING before making stuff up.

Unreal.  Really.  You don't like the facts presented so you decide they are wrong.  Call the SEC and the UAW and tell them they have been lied to.  I'm sure they would like to know. Would probably be the final death blow to GM, those groups don't take kindly to being lied to.

As for the 1998 numbers... you have to READ the document and not skim it.  1998 included Delphi as part of GM.  Delphi workers were under a different contract that GM Auto workers.  If you look at the employment figures it clearly reflects that in the numbers as well as in a footnote.  Again, you have to actually READ the document, not just cherry pick parts that support your viewpoint.

I will go over this again, very very slowly and very very clearly using small words:

The wage number I gave does not include current cost for people no longer working at GM.
- - -

Lets break this down:

I went to the SOURCE for the article you referenced.  A source published by GM, filed with the SEC, and distributed to the UAW.  With that source I extracted the numbers you were citing and told you why they were out of context.

You then, went to that source and grabbed random numbers and extrapolated your own information from it, in spite of the very clear numbers to the contrary.

PENSIONS
1) By accounting and SEC rules you can NOT account for accrued pension liability as a current cost.  

2) The GM pension plan is, as of the date of the latest publication, fully funded.

3) The best source specifically states that the number is for CURRENT employees.

I have GM, the UAW, the SEC, GAAP, and a GM published document and financial statements to support my argument.  What are you basing your argument on?
- - -



You know what, never mind.  I have cited the best sources I could and tried to very, very clearly lay out my position.  I welcome interpretation of those sources but beg you to read them in full before throwing out information that is clearly covered (Delphi employees, pension funding).  

Once more:  I want GM to do well.  I am a stake in Ford so clearly want them to do well.  I am not patently hostile to organized labor as evidence by working with the AFL/CIO in many occasions.  I've worked at and run union shops.    So I'll pretend the labor contracts are just fine and it is economically feasible to pay a 300,000 high school graduates $75,000 each.  I'll give you that.

I still say GM is a failing company and the bailout will only be successful if they require draconian measures.

Sorry I can not discuss this further, got to get to court.

I did read them fully, thanks. The reason I wanted to find wage expense on the cash flow statement was to find out whether or not GM's puff piece (which is, for what it's worth, entirely for the benefit of making themselves look good to the UAW) is accurate or not.

It's not a GAAP compliant financial statement. Hell, even GM claims that until they set up the trust last year, they were paying retiree health care on a pay-as-you-go basis. Hence their setting up the trust and making the UAW handle it to get it off their books. Even now they're still on the hook for a couple billion more in payments to that trust.

Oh, and yet another article citing an independent analysis stating that what I claim is in fact true:

http://www.dallasnews.com/sharedcontent/dws/bus/stories/DN-AutoPay_13bus.ART.State.Edition2.4a28693.html

It also claims Ford's wages and benefits for current employees are $55 an hour, with another $16 going to retirees.

And here's yet another article:

quote:
GM says its total hourly labor costs are now $69 including wages, pensions and health care for active workers, plus the pension and health care costs of more than 432,000 retirees and spouses. Toyota says its total costs are around $48. The Japanese automaker has far fewer retirees and its pension and health care benefits are not as rich as those paid to UAW workers.

http://www.manufacturing.net/News-GM-Vs-Toyota-Wages-And-Benefits.aspx

[cannon_fodder]

Fine, the SEC, UAW, and GM are all wrong and you are right.  It doesn't really matter what source I show you will claim it is wrong.  And you will read it in full and know before you type it that you are wrong (ie. Delphi employment figures) and still make the argument.  Who cares, I can abandoned the argument and still make my point.

I amend my statement to say paying 100,000 high school graduates $55 an hour and then having to pay them $15 an hour even after they retire is not economically feasible.  Using your number of 2400 hours worked, that is $132,000 per year for high school graduate hour worked + $36,000 for retiree benefits.  So $158,000 a year. That is not economical.

We will use your number of $55 an hour + $15 for retirees.  Please make the argument that a company can employee 100,000 high school graduates costing them $132,000 a year each and still be viable.  Then argue the company can support an additional $36,000 per currently working employee to pay for deferred costs (essentially the productivity of current employees has to make up for deferred costs).

- - -

Now back tracking, the article you cite from the Dallas Morning News says the average GM worker makes just less than $30 an hour.  That is their base wage.  Add overtime, shift premium, vacation, etc.  Then add the benefits package.  Then add other costs to the company (taxes).  Just as before, they have taken the lowest number of all the figures and attempted to pass it off as the labor cost.

It is the same AP news story you have posted before, this time reworked for a a Dallas audience.  No matter how many times you post to the same AP numbers, they are still unsubstantiated.    And, as indicated above,remain irrelevant.

And you "yet another article" says $69 an hour PLUS retiree costs.  Which would seem to support my contention of $74 much more than the $28 an hour number otherwise used.    

Not trying to be a dick about it, but I have a background in cost accounting and taking the lowest figure and pretending it accurately reflects total labor cost is ridiculous.
- - -

Now, to attempt to be very clear again:

I totally grant you $55 an hour + $16 an hour legacy costs.  You win.  The AP story trumps all other sources. STILL, labor costs are a significant part of the problem.  Put labor costs in line with Toyota and GM still has problems.

You either get it, or you don't.  There is clearly no point in continuing the discussion.

[nathanm]

quote:Originally posted by cannon_fodder


Now, to attempt to be very clear again:

I totally grant you $55 an hour + $16 an hour legacy costs.  You win.  The AP story trumps all other sources. STILL, labor costs are a significant part of the problem.  Put labor costs in line with Toyota and GM still has problems.

You either get it, or you don't.  There is clearly no point in continuing the discussion.

That, I agree with. I don't think we agree on what exactly the problem is. I think legacy costs are a large part of it. I also think the US manufacturers have an enormous problem with the way the public perceives the quality of their vehicles.

I don't know what exactly you think the fundamental issues are.

FWIW, I contend you're reading the subordinate clause in the sentence in my yet another article wrongly. It is unclear, however.

[cannon_fodder]

My last sentence was obtuse, I should have said you either agree with my position or you do not.

Basically, I think the labor contracts are not economical.  I think management has failed to respond to the market and is out of touch with demand (in general, but concentrating on GM).  I think the entire corporate structure has gone wrong and is now duplicative and wasteful (the different car "companies" in GM should be quasi separate and concentrate on different market segments... currently they all make cars for all markets).  I think they have failed to properly assess future costs (both legacy and growing contractual obligations, health).  I think management and labor both concentrated on short term goal$ instead of worrying about long term success (higher profits and stock prices for the company, job security and employment growth for the workers).

It is an wide spread, prolonged, and systematic failure of the company.  The result is a loss of market share, a failure to be able to afford the current dwindling labor, a loss of good will, a lag in manufacturing equipment and techniques, and ultimately the demise of a profitable company.

The core issue is that the Big 3 are failing of their own volition.  A bailout will not change that.

[guido911]

Bush is considering an orderly bankruptcy for the big 3:

http://apnews.myway.com/article/20081218/D955719G7.html

[nathanm]

quote:Originally posted by cannon_fodder


The core issue is that the Big 3 are failing of their own volition.  A bailout will not change that.

I think that was true two years ago. They've already taken major steps to rectify the problems. They did get caught out by the sudden shift from SUV sales (as did the Japanese manufacturers!) due to the sudden spike in the price of gasoline and again by sales going in the tank due to economic uncertainty (as did the Japanese) while their cash reserves were low.

They (being GM..I don't know about Chrysler) expected to have the money to complete their restructuring but the drop in sales that has affected everyone, not just them, has made that impossible.

Ford, lucky for them, has the money to continue along with their restructuring presuming they don't have to make big cash infusions to suppliers if GM or Chrysler go away. Not only that, but their sales haven't dropped off nearly as much as they have at the other makers.

The problem is largely the perception of them as makers of unreliable cars who can't even be bothered to change their business to save themselves. None of that is true in the main.

[Gaspar]

quote:Originally posted by nathanm

quote:Originally posted by cannon_fodder


The core issue is that the Big 3 are failing of their own volition.  A bailout will not change that.

Ford, lucky for them, has the money to continue along with their restructuring presuming they don't have to make big cash infusions to suppliers if GM or Chrysler go away. Not only that, but their sales haven't dropped off nearly as much as they have at the other makers.

Luck has nothing to do with it.  Ford made very smart decisions and dumped unsuccessful brands. Axed poorly performing vehicle platforms and made quality decisions.

Luck is not usually a factor in success.  

[cannon_fodder]

Agree on Ford.  The reason I bought into Ford stock a while back (currently holding for a 50% loss) is that the chairmen has taken a personal long term interest in the company.  Drastic cuts were made, hard decisions, and choices that may hurt short term performance and perception for long term gain.

I also had hope for Chrysler when the private equity firm bought it.  I imagine their tune will change if they don't get free money and drastic steps will be taken.

GM, however, has done no such thing.  They have made necessary reactive moves (today they announced some shutdowns and a cessation of work on the VOLT, can you say blackmail?), but nothing on the magnitude needed.  For all three, it was too late to keep them in the realm of successful companies.  They may be able to get back there, but currently it is not pretty.
- - -

I do not have information on the SUV sales, but I can tell you in the period you are talking about the Japanese made billions about billions of dollars and the Big 3 lost equal billions.  So in the big picture, the Japanese made better decisions.  Furthermore, Japan increased total sales AND market share while the Big 3 continued to slide.  

So if they correctly anticipated the market trend and still sold fewer vehicles, a smaller market share, and lost billions... then they did something else terribly wrong.  While benefiting from a weak dollar they STILL did not regain market share.  Maybe I need to have sales figures thrown in my face, but while I realize foreign makers are also suffering - my understanding is that the Big 3 are still losing market share.
- - -

Per reliability.  Most US made cars are equal to their foreign counterpart now.  The problem is that such has only been true for 5-10 years.  It took Toyota 20 years to be taken seriously as a quality car maker.  It took the Big 3 some 20 years of making inferior quality cars to get their reputation down in the dumps (and by most accounts, it was deserved).  I have owned Fords, Chryslers, GM products, Volkswagon, Volvo, and Nissan.  All have had their pluses and minuses.

Recently I wanted to by an SUV for boat towing, camping, penis enlargement, dog hauling, and the like.  My father has had bad luck with his Ford Explorer (3 transmissions).  Jeep and Toyota retain their value too much to by used.  GM products have poor rating for actual SUV performance but-for the top-tier.  So Nissan it was.  Just a matter of comparing what is out there, what has the best reputation (both from consumers and rating institutions [aaa., consumer reports, etc.]), and what is the best value.  I didn't avoid America made, but Nissan fit my need.

My wife drives a Ford Taurus (with a 2 brand new transmissions on 75,000 miles, car not used for towing or anything), before that she had a Ford Taurus.  For her next car she wants a Ford Mustang.  

I'm not anti US vehicles.  But like most consumers I will buy what fits my need.  It is their job to do that and largely they have been failing or at least falling behind the competition.