No, U.S. auto workers do not make $71 an hour

Whenever the U.S. auto industry gets attention in a newspaper or online, a big reader response often follows. It's a constant in business journalism, and is a tribute to an industry that's such a big and historical piece of the U.S. economy.

Earlier this week I wrote a column in the St. Petersburg Times suggesting -- with ample warning it was a draconian solution -- it's time to put GM, Ford and Chrysler into Chapter 11 bankruptcy and, with government aid and a major research commitment, create a new auto company and a better vehicle. If you click on the link above to the column, you'll see about three dozen comments, pro and con. In the column, I compare the total hourly compensation of a UAW worker at GM, Ford and Chrysler with an average worker's pay at a Japanese plant in the United States. I used $71 per hour versus $42 per hour to point out how uncompetitive the domestic industry is.

Well, plenty of folks, including UAW and auto industry retirees raised heck, saying the comparison is skewed. Why? Because the figures include workers' wages and benefits and all of the pension and healthcare expenses the domestic industry must pay to its large base of retirees. Japanese plants, in comparison, are young and have few retirees to account for. And old-style guaranteed pensions (a huge company liability) have largely gone away, replaced by 401(ks) for retirees that minimize ongoing expenses for corporations.

From GM's own Web site, here's a breakdown of what makes up what is actually the $73.26 per hour (in 2006) worker's compensation. Bottom line? Detroit's domestic auto workers are not individually compensated $73.26 but something much closer to the foreign competition makes here. I should have explained this more clearly. But I'll get back to this point in a moment.

I called GM news relations director Tom Wilkinson in Detroit this morning and explained the controversy. He's quite familiar with it. He sent me a recent article by Jonathan Cohn from The New Republic headlined "Assembly Line: Debunking the myth of the $70-per-hour autoworker." The story relies on data supplied by the Center for Automotive Research, all  on the up and up. Here's a key paragraph of the story:

"It's not as if each active worker is getting health benefits and pensions worth $42 per hour. That would come to nearly twice his or her wages. (Talk about gold-plated coverage!) Instead, each active worker is getting benefits equal only to a fraction of that -- probably around $10 per hour, according to estimates from the International Motor Vehicle Program. The number only gets to $70 an hour if you include the cost of benefits for retirees -- in other words, the cost of benefits for other people."

Separate all those extra retiree costs and the hourly price per domestic auto worker is not much different from those at foreign auto plants here. In fact, that's one of the proposals considered by the domestic auto makers. Create a union-administered trust fund (called VEBA for Voluntary Employee Benefit Association) for retirees. Detach that cost from the ongoing expense of making autos. End most of the retiree liability.

So let's come full circle. Without some form of bailout to cover at least the expenses of domestic auto retirees, the Detroit Three can't compete on a global basis. A Chapter 11 plan -- which must include federal assistance on numerous fronts -- would legally free up GM, Ford and Chrysler to become more streamlined, less burdened manufacturers. Personally, I am not sure even that would be enough but it would be a fighting chance. Today's pitches on Capitol Hill and made directly by GM, Ford and Chrysler CEOs will not do the trick, in my opinion.

Are Detroit automaker selling vehicles competitively or not? Let's sample the sales data from R.L. Polk for the Tampa Bay area of vehicles sold (based on registrations), January to September 2008, compared with the same period of 2007:

* General Motors: Chevrolet 11,330 sold, down 28 percent; Cadillac 2,672 sold, down 21 percent; GMC 2,469 sold, down 39 percent, and Saturn 2,338 sold, down 21 percent.

* Ford Motor: Ford 12,330 sold, down 34.5 percent, and Lincoln-Mercury 2,539 sold, down 26 percent.

* Chrysler: Dodge 4,609 sold, down 45 percent, and Chrysler 2,828 sold, down 36 percent.

* Toyota: Toyota 21,605 sold, down 21 percent, and Lexus 2,991 sold, down 29 percent.

* Honda: Honda 14,431 sold, up 9.5 percent (yes, that's up), and Acura, 1,422 sold, down 25 percent.

* Nissan: Nissan, 11,321 sold, down 11 percent.

Finally, a note of thanks to all the readers who pointed out the fairness issue in comparing those hourly compensation figures.

-- Robert Trigaux, Times Business Columnist

Comments

[John D.]

although it's not $71, I wish I made $39 dollars an hour as mentioned.

[Richard]

During testimony given today by the CEO's UAW workers wages are $28.00 per hour and Toyota, Honda, Nissan, etc. are $25.00 per hour.

[Jocephus]

Thank you for the correction, Mr. Trigaux, even if it's in a blog that most newspaper readers will never see.

[JIM]

A cost is a cost no matter on what line you place the dollars.

An independent retirement fund might work, if it were fully funded at the time of separation. I don't know if GM retirement is fully funded. My guess would be "only in your dreams"

The downside is the taxpayer will still get stuck if they go bankrupt. The "Broke " Federal retirement safety net will assume the burden.

Mr. Obama is going to do away with Pick ups and SUVs no matter what. If any auto maker can not make money with small cars they will fail no matter how much money we throw at the problem.

[Tom]

Thank you for clearing up the misunderstanding. I hope you will also clear this up in the print edition.
A lot of misinformation on our industry has been put out by politicians like Senator Shelby of Alabama, a champion of subsidized foreign auto companies.

I think you also overlooked the potential value in the new GM Volt.
This car will take advantage of abundant renewable power from wind and solar. The challenge is to engineer better batteries and manufacture electric cars at an affordable cost.
America needs to provide a bridge loan to keep this vital industry alive through the current recession.

[Joe]

Here's how the Detroit execs can bring down that hourly figure of $70.
Instead of layoffs and plant closings, hire some more workers to produce quality and spread the retirees share among a larger base. That's all I'm saying.

[Brian]

Tom, the volt is a white elephant. It will sell for $ 40,000. People can't afford $ 25,000 cars without funny financing and equity loans. Long term, car makers are in trouble, all of them. Overhead costs including worker's benefits have to be cut in order to produce good $ 16,000 cars that people can afford without leases, 1.9% financing and home equity loans. That's the big picture buddy, so take off your greenie glasses and view the real world.