Novocastrian

I posted the average hourly pay at GM and Toyota upthread, both in the neighborhood of $30. Not $77.

Oakvillian

I absolutely agree that the management of the Detroit 3 are the architects of their own downfall, but can you not acknowledge that the union is at least partly culpable for the position GM and Ford are in (Chrysler is a different kind of basket-case)? The UAW's (and moreso the CAW's) resistance to change and (perhaps justifiably) intransigent bargaining positions have certainly been a factor - not by any means the decisive factor, but a factor nonetheless - in the manufacturers' inability to react to any changes in the marketplace.

Ron Gettelfinger of the UAW seems to have acknowledged as much in the negotiation round earlier this year, agreeing a package that would effectively see "the 'all-in' wage, benefit and pension costs of U.S. assemblers ... drop, from a high of $75.86 per hour in 2007 to an average of about $51 per hour starting in 2010." Buzz Hargrove's strategy, conversely, "was to squeeze every dime out of them," according to Tony Faria, a professor of business and co-director of the Office of Automotive Research at the University of Windsor.

Faria acknowledges that he "clearly [has] a severe philosophical difference with Buzz Hargrove. His philosophy has always been get everything you can for the worker. I can appreciate a labour leader looking after his members. But you have to look at jobs, too." He suggests that both Ford's St Thomas plant (making "police cars and limousines on a 30-year-old platform") and Chrysler's Brampton facility are in the firing line, and that Hargrove's legacy as outgoing CAW president is to have set the scene for massive cuts in Canadian auto manufacturing.

Quotes above are all from this Windsor Star article

Novocastrian

I take your point. But the benefits/retirement provisions negotiated in the past were achieved at a time when they were affordable (in the view of management). The fact that they are distinctly less affordable today is simply a result of management incompetence. Do the management suffer because of that? No way. It's the workers who are supposed to take the punch. As ever.

Oakvillian

Granted. I forget where I heard Ford and GM described as "poorly performing financial services companies encumbered with a manufacturing sideline" but a few years ago the management probably would have been proud of that description.

Novocastrian

Nice description. Which helps highlight one of the similarities between the NA auto sector crisis and the banking meltdown. The lack of emphasis on the product or service which should be the core business, in place of cowtowing to MBA wunderkinder who don't give a shit about anything but paper wealth "creation". AKA fraud.

iaink

I domt think its was Fraudulent necessarily. The finance side grew as a way to shift product that would not shift any other way.

The root cause of the problem, as with the UK auto makers, was insufficient attention to quality and forgetting to make a product people actually would go out of there way to own.

The big three make half decent cars now, but perhaps its too late to save them in the current form.

Having said that look at the difference between Chrysler (all gas guzzling Hemi V8 focus), and Honda / Toyoto (mostly small 4 bangers). Maybe they havent learned the lesson of the past. Make something people want to buy. I wanted a economical small 4 door family car, and ended up with a Honda. At least its made in Canada.

Novocastrian

I didn't mean that GMAC etc., are fraudulent per se. Only that the emphasis on financial instruments rather than quality, or at least desirable and appropriate production is a chimera.

We don't disagree on a thing.

<It's lunch break for you guys in Ontario, but I'm off for dinner now... see you later>

Rich_007

Holy pi$$. That's almost something I'd write. Are you ill ?

R.

MarkG

Again, that's pay plus benefits; and $30 an hour is still an awful lot of money for unskilled or low-skilled work that Chinese people will do happily for $1 an hour.

Why should someone making $10 an hour in Starbucks be taxed to prop up a company that's going bust because it pays people $77 an hour in wages and benefits?

iaink

Thats $10 an hour at starbucks is really $50 an hour to head office by the time they cover all the associated expenses.

But yes, $25 or 30 an hour for a relatively unskilled assembly job is half the problem. The union served its workers well in the short term, but long term that will kill the golden goose.

MarkG

They were 'affordable' because most of the costs were pushed out two or three decades in the future; by which time the managers would have taken their bonuses and stock options and either retired or found other work.

Guess what? Today is two or three decades in the future and the bill has arrived... and the auto makers can't pay it. The US government has a similar problem with its expensive, unfunded retirement benefits that are about to explode over the next 10-20 years.

MarkG

The average Starbucks coffee-flinger makes $40 an hour in benefits and pension costs?

I'd be a little surprised if that was true.

iaink

No they dont make $40 an hour in benefots any more than an auto employee makes $77 an hour

Benefits, EI , CPP, building maintainence cost, utility costs, equipment depreciation, taxes, management salary costse tc etc are all factored into that hourly operating rate.

Overhead is more than just direct labour costs, there is a while rash of other stuff on top too.

GavinR

On topic

http://info.detnews.com/video/index.cfm?id=1189

especially the last few words. Fords Brazil factory.

Aviator

If that was the ratio, pretty much every business in the country would be going bankrupt and losing money. Direct labour cost is not part of overhead, it is is a blend of fixed and viariable costs, but can be reduced in hard times as Citi bank have demonstrated recently.

Overhead costs come out of gross profits, otherwise companies would not be able to reduce labour costs by cutting back staff and still remain in business. A $10 an hour labour cost would in reality cost nearer $12.00 an hour with emoplyers contribution of EI, CPP, WCB, vacation pay & benefits. Without benefits closer to $11.50. The only overhead that could be attributed to labour is payroll costs, such as a payroll department or personel.