Richard Olivastro

The domestic automakers are in ‘Intensive Care’. The bailout medicine being injected as an IV drop by the outgoing Bush Administration is a $17 billion dollar placebo. As prescribed, it will neither cure the patients nor help the workers whose union is not cooperating.

While the excessively high labor, benefit and pension costs contracted over the years by the three automakers can be described as a virulent out of control virus, a more apt description is several bad cells that, over the years, mutated, multiplied, grew into bulbous tumors, and metastasized onto the bone of the businesses.

Neither President Bush nor President-elect Obama are willing to face all the facts.

Here’s a briefing:

WORKERS

The three domestic automakers employ 150,000 factory workers in the U.S. That’s about 30 to 36 thousand more than really needed. Current wage rates and benefits, including pension costs for all current and future retirees, add $1600 to the manufacturing cost of each vehicle. Those are facts, and core problems.

While the UAW and the companies often spin other data, here are more facts for you. The average hourly rate for Big Three factory workers is $28. Add $10 for benefits, that’s $38 per hour. But, that is for current workers only. When current and future retirement and benefit costs for all personnel are necessarily included, the hourly labor rate jumps dramatically. The specific rates, as reported by Forbes are – “Ford: $70.51, GM: $73.26, and Chrysler: $75.86. Compare that with the total labor costs of Toyota, Honda, and Nissan (in U.S.): $48.00”. You can see the core cost problem affecting the viability of the Big Three domestic automakers.

The Bush plan is right in calling for UAW wages to be brought in line with competitive pay of other workers at US auto plants, along with more flexible work rules; but, wrong to delay needed adjustments to December 31, 2009.

In addition, the UAW so-called ‘Job Bank’ must be eliminated immediately. The Job Bank pays idle workers, in the aggregate, 95% of their hourly rate for doing nothing. It is yet another example of how weak management permitted ice to buildup on the wings of their businesses. Left in place, such inappropriate costs freeze and crash the enterprise. It is not acceptable to give either union or company officials a pass on this or any other instance of dastardly deal-making.


Richard Olivastro

Richard Olivastro is a professional member of the National Speakers Association, president of People Dynamics, an executive leadership development company, and founder of Citizens For Change.
 
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