Is the compensation number accurate or misleading?

It is primarily because they will work for rice.

 

No, but that is what they will be asked to do if the calculations about
hourly cost include health benifits and pensions of retired workers. You
will have to take less to account for the money spent on retirees.
Some non-union auto workers make the same or more than UAW workers when
considering only hourly rates. It depends on the factory.
There are some auto workers making less than $15/hour and some making
around $30/hour. And that is for non unionized import factories.

 

Employees can quit too. Years ago I worked for a company with a union (I was
not a member). We paid the employees about $1.50 over the contract rate.
That was the labor market we were in. When the company next door needed
people, he'd pay a little more than us and a few guys would jump ship. If we
needed them back, all we had to do was offer them a bit more.

As for the union, all they did was collect dues. That was the business they
are in.

 

Pension fund accounting is a complex subject, but a company must deposit
cash into the pension fund in advance each year based on the number of
employee hours worked that year to cover what the future projected pension
benefits are. That is the law regarding pension funds and the rules
regarding Generally Accepted Accounting Principles (GAAP).

If the investments in the pension fund are doing well, they may be able to
skip funding for a year, if the investments are doing poorly they make have
add additional funds, irrespective of the number of employee hours worked
that year. The Pension Fund is in a separate set of accounts from regular GM
accounts and are not affected by a bankruptcy (unless the fund is
underfunded for some reason in which case the difference is made up the US
government which has an insurance plan for such pension funds, sort of like
the FDIC for bank accounts).

At the end of 2007 the GM pension fund's assets were worth $104 billion,
more than enough to cover its projected obligations of $85 billion for
retired and current workers (based on the number of years a current employee
has worked so far). We do not know for sure what will happen when they
close the books for 2008 and look at their investments (which may have taken
a hit due to the market crash).

Health care is a different story.

 

Who says this $70/hour is based on GAAP? It is just a number they have
given the media. Why don't they break out the details?

 

I doubt that the Big 3 will go out business, but it is possible. Bankruptcy
does not usually mean out of business, it usually means reorganization.
Every major airline has declared bankruptcy except for AA and Southwest, but
only a few have actually disappeared.. The unions forced a shut down of
Eastern Airlines instead of negotiating a reasonable union contract. Other
airlines bought the Eastern planes, repainted them, and increased their
routes.

What will happen is that other automakers will take over and increase
production in the US. But there will invariable be more auto imports. I
doubt that it will affect my job much, because I am not associated with the
auto business, even indirectly.

When I lost my job in the mid 1980's because the price of oil hit $8 (that
was in 1986 dollars), I don't recall anyone in the northeast worrying about
my well-being.

 

So what do you think they were working for before everything was made in
China? Half as much rice as they make now.

Actually, you have been brainwashed. China is a rapidly growing economy and
your would surprised how many millionaires and billionaires there are in
China.

Everyone said the same about Japan 25 years ago, and now Japanese have a
much higher standard of living than in the US. If you went to Tokyo, I doubt
you could even afford to get out of the airport.

 

The number is bullshit. You would have to have an uninterested party
look at the books.
GM's bullshitting with these numbers has come back to bite them in the
ass when they have hat in hand.
When I was UAW at IH in the late '60's there was a short strike.
The Chicago Tribune published we were making $30 an hour.
I was making about $6 and probably in the top 20%.
Believe me, benefits wouldn't even get them close to $10.
Of course the Trib and IH were joined at the hip.
Actually, the only guy I believe on costs is Corker, though I don't
necessarily agree with his solutions.
There should be an open public forum with him and the UAW head
thrashing it out.
There's so much BS out there it's stinking up everything.

--Vic

 

The calculations do not include the retirement benefits of retired workers.
Pensions are funded in advance. Health care is a different issue, but they
could change the health care provisions if the union agreed (unlike the
pensions for retired employees, which cannot be changed by law).

 

If they go bust along with the union, there's nothing to keep the
transplants here. The industry is intricately interwoven, and once
it starts unraveling, it could end in tatters.
But it won't happen because of that.
IMO.

--Vic

 

Au contraire . The reasons that Japanese moved production to the US (and why
the Germans are doing so also) is because they got killed by the falling
dollar years ago, and if the cars were still made in Japan, no one would be
able to afford them (or the Japanese auto-makers would be taking big
losses).

If you look at the value of the dollar versus the Euro for the last 5 years,
and the fact that the price of BMW's, VW. Audi, and Mercedes has not
increased much, you will see that the Germans are getting killed by the
exchange rate in the US. They know they have to keep the prices low in order
to maintain market share and hope the dollar goes back up, or until they can
shift production to the US.

The US worker is to Germany, what the China rice farmer is to the US. The
German worker will complain that the US employees will work all day for a
few Big Macs (which may be close to true based on what a Big Mac costs in
Germany).

 

They could.

 

And contrary to that, the accepted reason to my knowledge for the Japs
building plants was American political pressure and threats of
limiting import sales back in the Reagan administration.
When I mentioned "interwoven" that includes politics.
Which usually trumps all the high falutin "economic theory" you might
have about the value of the dollar.
Keep in mind that the "best" economic minds have gotten the local
economies to the place they are now.
It is politicians who will set things straight, not economists.
That's not to say they won't follow economic principles, but they will
be local in nature, not global.
All politics is local, as you can see by the current geographical
divide on this bailout issue.
A less delicate way to say it is when you get a .45 stuck in your
face, you cough up your wallet.

--Vic

 

I doubt they have a much higher standard of living than here. They have
had a rough last decade and are not buying very many cars from what I
heard.
As for the number of millionaires and billionaires, that's because they
don't pay very much to the actual workers.

 

Exactly. They look like fools for paying so much but didn`t want to tell
congress that they were lying about the amount the workers got paid.
I`m not sure why the UAW doesn`t go on the offensive and explain these
numbers to people on the news programs.

 

Yes they do. Prove they don`t.

http://www.theglobeandmail.com/servlet/story/RTGAM.20081219.WBdriving20081219165105/WBStory/WBdriving

``...Rather, the $70 per hour figure (or $73 an hour, or whatever) is a
ridiculous number obtained by adding up GM's total labor, health, and
pension costs, and then dividing by the total number of hours worked. In
other words, it includes all the healthcare and retirement costs of
retired workers....``

 

Except that if the costs of retired workers are ammortized over the active
workforce, then the active work force IS paid the equivelent of $73, even if
they personally never see anywhere near that amount of money. The effective
labor cost is the same, whether it is in your paycheck or not.

If the car costs 15k in material and current costs to build, then the
additional costs of retirement packages is added in, then they can only add
that as a function of the current labor costs because the material costs do
not change.

Assuming (as you do) that current labor costs run to about $25, then the
discussion becomes about the cost of retirement benefits that approach $50
per working person. That particular discussion might be difficult to
support, but you do not seem to be arguing this point.

 

Accepted by whom? There were import quotas on cars even before Reagan. That
is one reason for them moving production here, but the main reason is to
protect against currency fluctuations. As the US has moved more to free
trade stance, the issue of import quotas is no longer a factor, and even the
Germans are moving production here.

 

Don't pay much by what standards? By Chinese standards they pay excellent
wages in automobile factories there.

 

You are confused. The $70 may include retired workers, but in that case it
also includes the hours that the retired workers actually worked. The
current workers are NOT paying for the retirement of retired GM workers. The
GM Pension Fund (separate from GM) had over $100 billion, and the
anticipated liability for retired workers was $85 billion at the end of 2007
(2008 numbers not released yet).

Now I don't know if $70 or $73 or $50 is the correct number, but I know that
GM has already funded in a separate pension fund account $100 billion for
the people who have already retired. I posted the NY Times article that
documented that (not a blog like above).

Health care is a different matter, and GM is probably paying and expensing
retiree health care costs as they occur (they have not funded it in
advance).