The True Price Of Auto Labor Costs
While UAW Is Blamed For Detroit's Troubles, Comparison To Wages Paid By Foreign Carmakers Isn't Whole Story
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Congressional critics have complained how much more union auto workers earn than non-union ones and neglect to mention that those lower-earning jobs were created with the financial help of U.S. taxpayers. (AP Photo)
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Bush Bailout Plan Analysis
CBS News' Bill Plante looks at the details of the bailout plan offered to auto companies from the White House today.
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UAW Head Answers Critics
United Auto Workers' President Ron Gettelfinger tells Katie Couric there was nothing his union could do to help Congress pass the auto industry bailout bill.
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Nuts & Bolts Of Auto Industry
Thousands of small companies that supply the Big Three with parts will also go bankrupt if the brakes are put on a bailout, reports Cynthia Bowers.
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Q&A: Big Three Bailout?
Why Detroit's automakers might get a rescue package
Wages were a key sticking point in the failure of the House's auto bailout bill (which the White House supported) when it arrived on the Senate's doorstep.
But wages aren't the whole story.
Hour By Hour
When Congress debated the bailout package for Detroit, Senate Republican leader Mitch McConnell and other Republicans had demanded that wages and benefits for employees of U.S. automakers needed to be renegotiated to match the lesser overall compensation that foreign carmakers like Toyota, Honda and Nissan pay at their U.S. plants.
The Associated Press reported that, for example, the average United Auto Workers member makes $29.78 per hour at GM, while Toyota pays its workers (most of whom are non-union) about $30 per hour. However, when total benefits (including pensions and health care for workers, retirees and their spouses) is factored in, GM's total hourly labor costs is about $69, while Toyota's is about $48.
The Japanese automaker has fewer retirees in the U.S., and its health care benefits and pensions are less generous than those negotiated between Detroit and the UAW. Another key point is that health costs and pensions for auto workers in Japan - worth billions - are subsidized by the Japanese government. Not so in the U.S.
UAW representatives were wary of renegotiating its contracts again, after having already settled for lower wages in its contract talks with GM earlier this year. [New hires at GM are paid $14-$16 an hour; Ford and Chrysler also pay new hires less; this has stirred the companies to offer buyout packages to their older workers.]
Last week UAW President Ron Gettelfinger told CBS Evening News anchor Katie Couric that labor has already sacrificed a tremendous amount in order to support the auto industry. "Are we willing to do more? Yes, we will."
The union made concessions in its last few rounds of contract talks, and also agreed earlier this month to reduce benefits for laid-off workers and accept deferred payments into the trust fund set up for retired workers. GM, for one, was scheduled to pay $7 billion into the fund by the end of the month.
Union leaders warn that benchmarking wages of its members with those of non-union workers at auto plants run by foreign companies may be brought down even further, as those companies seek to cut their labor costs.
The Detroit Free Press reported last week that it had obtained an internal Toyota report which said the company should align its hourly wages with the prevailing manufacturing pay in the state rather than those of competitors in the auto sector, with the goal of cutting an expected $900 million increase in worker compensation by 2011 by one-third.
And other manufacturing jobs, on average, pay less. In Kentucky, for example, Toyota workers in Georgetown earn about $30 per hour, while the median wage in the state for manufacturing jobs, according to the Department of Labor, is $12.64.
Hourly pay and benefits must also be adjusted geographically. For example, the cost of living for a worker in Detroit, Mich. is more than 8 percent higher than that of a worker in Chattanooga, Tenn., and nearly 10 percent higher than in San Antonio, Tex.
Government Subsidies
State and local subsidies to foreign-owned auto assembly plants have totaled $3.6 billion, to fund the construction of new operations or to expand existing ones. This has helped make BMW, Honda, Mercedes Benz, Nissan, Toyota and Volkswagen more competitive in the United States, thanks to U.S. taxpayers.
Good Jobs First, a non-profit based in Washington, D.C., reported last week that incentives (in the form of land discounts, infrastructure aid, property and sales tax exemptions, income tax credits, and training grants) were granted to six foreign car companies by Alabama, Georgia, Indiana, Kentucky, Mississippi, Ohio, South Carolina, Tennessee, Texas and West Virginia.
Greg LeRoy, executive director of Good Jobs First, said that while the proposed federal aid to Detroit automakers would take the form of a loan (with an expectation of being paid back), "the vast majority of subsidies to foreign auto plants were taxpayer gifts."
Such subsidies have been responsible for bringing new jobs and tax revenues into depressed areas, such as when Nissan opened its first North American plant in Smyrna, Tenn. in the early 1980s - aided by generous tax breaks.
In the 10 years since foreign automakers began producing cars or engines in Alabama, automobiles have become the state's leading export at more than $5.4 billion last year. The state's automotive industry now represents 11 percent of the state’s manufacturing GDP. So the state's investment of approximately $800 million to lure Mercedes-Benz, Honda, Hyundai and Toyota to Alabama proved farsighted.
This year Volkswagen announced it is opening a plant in Chattanooga, Tenn., which is expected to add about 2,000 jobs from the Tennessee/Georgia/Alabama area. The 1,350-acre industrial park land parcel was offered to Volkswagen at no cost. Estimated value: $81 million. Other incentives are expected to surpass $300 million.
In West Point, Ga., Kia is building a plant that will create 2,500 nonunion jobs (starting at $14 per hour), plus an additional 2,500 jobs for parts suppliers, thanks in part to the $400 million in tax breaks and other incentives that Kia received from state and local governments.
But such U.S. taxpayer handouts don’t always go smoothly. It was announced this week that Toyota is delaying completion of a plant under construction in Blue Springs, Miss., scheduled to open in 2010 for producing Prius hybrid cars. While Toyota has spent $300 on the project so far, the state has invested $200 million and local governments have invested about $35 million.
Gov. Haley Barbour said at a news conference that Toyota plans to work with state and local governments to mitigate extra costs caused by the delay.
A benefit of investing in new plants in the South has been that modern assembly processes have made these auto companies more flexible in their output, and in the application of labor resources. This can keep the number of hires down, or at least have them spending less time cooling their heels as production lines are retooled, so production costs are lower than at older plants up North.
Beyond The Shop Floor
Even the roar from Congressional critics about assembly line largesse seemed to miss the fact that (according to the UAW) labor costs account for about 10 percent of the cost of producing a vehicle; the remaining 90 percent includes research and development, parts, advertising, marketing and management overhead.
One major point about compensation and wage disparities: In 2007 GM's CEO Rick Wagoner earned about $15.7 million (including $1.6 million in salary, plus non-equity incentive compensation, benefits and other expenses), a jump of 64 percent compared to 2006. Ford’s CEO Alan Mulally's total compensation in 2007 was $21.7 million, including a $2 million base salary.
Meanwhile, last year Toyota paid its entire 37-member leadership team approximately $22 million. (Stock options and amenities like housing and country club membership weren't factored into the figure.)
By CBSNews.com producer David Morgan
© MMVIII, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.



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See all 76 CommentsThat''s what the UAW is there for... US... the taxpaying hard working people who support this WHOLE COUNTRY. It is there to make sure that we get some portion of what we deserve. A good living for an honest days work.
If your net worth is less than eight figures and you voted republican, you''re a fool. You''ve been duped by the class of lords. You voted in favor of making yourself a serf... a servant.
It is obvious that the Republicans want a cut for the worker but what about the bonus for the exec''s or their salary. Did they tell you that the top 10 exec''s at Honda make less than any one exec at GM.
Yes, that is true so now we know who''s pay needs to be cut. Good then next year the GOP will be almost in the super miniorty within 2 years if the Democrats just do a little better than the GOP they will enusre more seats in congress.
Posted by noloyalisti at 02:20 PM : Dec 19, 2008
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US should follow Iran where the highest pay can''t be more than 12 times the lowest salary. The ratio for most US corporations is 300:1 or even higher
Posted by noloyalisti at 02:20 PM : Dec 19, 2008
Actually------
In 1949, the highest paid CEO in America was Charlie Wilson of General Motors, who earned $586,100 in salary, bonus and stock. That''s roughly equivalent to what some of the better-compensated CEO''s are making today.
But what did Wilson pay in taxes? $430,350.
1949 $586,100= 5,309,376 today That''s base salary, bonus and stock options additional on top of that.
UAW pay 1949 plus 1949 was the year the pension agreements were rolled out. 1950 healthcare. Insurance for retired @ 30 and out 1953.
In 1949 the minimum wage was 75 cents per hour auto workers about 2.00 per hour. =2.00 per hour 1949= 18.12 approx 2008 dollars before benefit package, cola, or negotiated adjustments.
How naive.
What''s a house worth? Country club? Stock options? Also government healthcare and retirement vs self funded.
Can''t compare unless you know the real numbers.
And ---last time I looked this is America, you can ask for whatever you want in pay, if they say yes fine, if they say no, fine. So is it excessive? Or is it?
Only problem, they wont open their books, and no one can negotiate without the facts.
I wonder about the subsidies they get from their governments?
This is a whole can of worms Bush got us into again.
January 20th cannot come soon enough.
Posted by sockpuppet4 at 03:03 PM : Dec 19, 2008
Bush is responsible for foreign car companies getting subsidies? Honda & Toyota are NON-UNION and you think they''re cooking their books?
You need help.
Posted by a_witness at 03:07 PM : Dec 19, 2008
The UAW bought OBAMA, not Bush, drooler.
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Posted by rickwar
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Well, that is the way it SHOULD work.... except when you have a strong union that can go on strike and shut you down until you cave in to their demands. The Unions are crying about all the concessions they have had to make. There would be no need for concessions if they had not been so over-reaching in their contract negotiations for years and years. What is it about auto workers anyway that is so special that they should get a pay rate 3 or 4 times that of the average manufacturing job in a given area?
Have you EVER heard a Republican ask Top Level management to take a cut? I would love to see the figures on how many exec''s are making $250K plus.
Isn''t pathetic that the same whiners who put down fellow Americans for wanting a better pay defend the same corporations that ship American jobs overseas or who employ illegals?
People who complain about unions need to shut their pie holes for once so they can stop making fools out of themselves.
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Posted by closethippy1
People who support unions are the fools. They have almost priced themselves into unemployment. It is fine to ask for more money up to a point but it seems that the UAW has never heard the saying about killing the goose that laid the golden egg...Do you know what the average manufacturing job pays in Detroit? Why is an autoworker better than any other factory worker?
People who complain about unions need to shut their pie holes for once so they can stop making fools out of themselves.
Posted by closethippy1 at 03:52 PM : Dec 19, 2008
Jimmy Hoffa would agree with you 100%!
Posted by SusanHelit at 04:25 PM : Dec 19, 2008
I''ve been saying that from the git go. It''s not the UAW, it''s entirely management.
The UAW produces what management demands, the UAW is just following orders.
Plain and simple..
Big 3= Goose that laid golden eggs.
Result= Dead goose & no more eggs.
Posted by mbourn2 at 04:13 PM : Dec 19, 2008
What "Factory worker"? Having a Union and a Bargaining Agreements means that the employees NEGOTIATE with their employer for what they feel is fair compensation. In Non Union places the employee either takes what they offer or quits his job. When we started bashing Unions and saying they were paid to much, it was reversed. Non Union Places had to keep up with the Union Shops or face being Unionized. Thus EVERYONE, Union and Non Union benefited.
wallstreet white collar greed no
UNION YES
Posted by SusanHelit at 04:25 PM : Dec 19, 2008
I''''ve been saying that from the git go. It''''s not the UAW, it''''s entirely management.
The UAW produces what management demands, the UAW is just following orders.
Plain and simple..
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Posted by slim1h2o at 04:35 PM : Dec 19, 2008
Only your numbers are wrong, far wrong. The UAW labor costs the Big 3 $18 Billion a year. Management about $4 Billion. The CEO''s dont even cost a Billion, lol.
That way, if gross company income doubles, total worker wages double. If layoffs are made because of productivity increases, the total wage pool increases and individual workers share in the benefit.
Use the same formula for management and executive pay. What''s fair for one is fair for all. Additionally, such an agreement provides positive incentives for good management and good worker performance.
I realize this makes too much sense to be adopted, but one can spitball.
Does anyone NOT understand why they are failing? If you are a UAW member you dont need to answer this question. Your perspective is flawed.
Lets face it, it wasn''t the unions fault. The unions that stick up for the middle class, that we should be tar and feathering.
It''s the dam management, the bankers, the A-holes in government is the problem.
Stop blaming middle class America...which followed Washingtons, and managements lead, get what you can, whenever you can.
Leaders lead....and taxpayers have no recource but to follow...
The UAW produces what management demands, the UAW is just following orders.
Plain and simple..
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Posted by slim1h2o at 04:35 PM : Dec 19,
I am a designer in another industry. We are unable to design things our Union wont build. Sometimes we avoid designing some things because our union demands premium pay for certai, so called skilled tasks. I know for certain that at one time the UAW demanded extra pay for entering codes into the computers of some automobiles.
Sorry,,I didn''t offer any numbers.
It''s totally on managements lap, their demise that is.
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Posted by irmcvet971 at 04:39 PM : Dec 19, 2008
And the result is you NEGOTIATE your company into bankruptcy because no one ever asks if its affordable and you NEVER give back. Want proof? The Big 3 are failing, Toyota and Honda and BMW are not.
Posted by machineguy
Again, a management problem.
Why didn''t they require some kind of continuing education program?
Why didn''''t they require some kind of continuing education program?
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Posted by slim1h2o at 04:55 PM : Dec 19, 2008
They do!! They offer continuing education for free. But they dont demand it because then the union demands more moeny for going to school and a raise when you complete the class. The UAW has found a way to demand money for everything and now they are demanding it from America. Meanwhile, they brag that they raise the level of American workers.
Posted by machineguy at 04:59 PM : Dec 19, 2008
Every job I have ever worked was non-union. And I''m sorry that I did not get some kind of union job.
Without going into detail, I was forced to work non union hours(14-16 hour days) when I was ill, and I was overworked in general.
When I tried to put a stop to that, I was told to hit the road, and I was harrassed out of my job. After 12 yrs on the job. I was also infected by a co-worker, which I tried to fight, but without representation, I was doomed. I''m 48, soon to be 49, and in forced retirement, due in large part to my ex-employer, and the medical er health gare system..
And thats the rules that much of America works under.
So fv(k off,,,,
And thats the rules that much of America works under.
So fv(k off,,,,
Posted by slim1h2o at 05:10
Oh, and BTW,,machinguy, I get no help from the government, not the health care system.
If wasn''t for my forsight,,,I''d be homeless right now.
I havn''t worked in over 3 yrs.
Is that the way America should treat it''s workers, machineguy?
Thats why we have unions.....Again...shut up till you know what you are talking about, when it comes to workers rights.
Isn''t pathetic that the same whiners who put down fellow Americans for wanting a better pay defend the same corporations that ship American jobs overseas or who employ illegals just to make an ideological point?
People need to get real and realize that it''s the arrogance and greed of CEO''s that has destroyed the US economy, not workers trying to get better pay.
Posted by slim1h2o at 05:10 PM : Dec 19, 2008
Why would you stay in such a he!! hole for 12 years. Could you have gone on to a different job?
I have had my time in such places, but not for too long. As soon as I had another job lined up I was out of there.
Were you in a small town with little choice?
Posted by closethippy1 at 05:19 PM : Dec 19, 2008
You are exactly right on that.
This country deserves what it''s getting right now, at/from the hands of the CEO''s, and the government...
Were you in a small town with little choice?
Posted by Questionnews at 05:23 PM : Dec 19, 2008
Sort of, I was raised in a place where, if you had a job, you were lucky, and did whatever it took to hang on to it.
Also, it didn''t help that I had just bought a house, and was roped into the whole situation of trying to keep the house, or losing everything that I had worked for.
I ended up having a breakdown(over health issues), and lost evrything anyways.
STOP giving away our country to the best bidder. We need to protect our country and stop all this "free trade" that so far has ruined most manufacturing and related jobs in America.
STOP giving away our country to the best bidder. We need to protect our country and stop all this "free trade" that so far has ruined most manufacturing and related jobs in America.
Also, it didn''''t help that I had just bought a house, and was roped into the whole situation of trying to keep the house, or losing everything that I had worked for.
I ended up having a breakdown(over health issues), and lost evrything anyways.
Posted by slim1h2o at 05:29 PM : Dec 19, 2008
Tough having to choose between your health & soul and your home & creature comforts.
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