Republicans, breaking sharply with President George W. Bush as his term draws to a close, refused to back federal aid for Detroit's beleaguered Big Three without a guarantee that the United Auto Workers would agree by the end of next year to wage cuts to bring their pay into line with U.S. plants of Japanese carmakers. The UAW refused to do so before its current contract with the automakers expires in 2011.We've been told that the choice here was bailout or total liquidation of the American auto industry. That made the choice for the UAW either reduced wages or no jobs at all. How is an income of $0 a year better than wages equal to the Toyota workers' wages?
Let's see what Dave Ramsey has to say about this in a recent call to his talk show.
Question: Seth lost his job earlier this week, and he has some debt. He is in his 20s, married and has a 10-month-old daughter. He wants to know how to keep his head above water. Dave gives him short term and long term goals to shoot for.Emphasis in the original.
Dave Ramsey's advice: I'd go crazy about finding an income, because this is all about finding an income. If this involves delivering pizzas at night and working at the mall at weekends to replace your income, then do that while you hunt for a full-time job.
If Seth was a UAW worker and he called up Dave to ask if he should take a cut in pay or throw away his job, what do you suppose Dave would say? How about this: "Seth, I think you should toss away the job you have and end up scrambling for pizza-delivery jobs in a financially wrecked part of the country!"
I doubt it.
GM is not selling cars because the cars cost more than they're worth to the customers. Cost comes from labor + capital + raw materials. The last two are fixed costs, so the only variable cost is labor. It's pretty simple stuff. I don't understand the UAW denial and intransigence.
Update: I understand now. The UAW will get its bailout anyway.
The Bush administration dropped its opposition to using the $700 billion bank bailout fund to provide financing for U.S. automakers, after the Senate yesterday failed to approve emergency loans.Honestly, what's the point of voting, anyway? If it isn't the courts finding mysterious rights in the Constitution and telling all of us to shove it if we don't like them, it's the Treasury blowing money in defiance of the legislature.
I considered trying to make a buck on this and buying 100 shares of GM with a sell order 20% higher from where it is right now, figuring on a bounce, but I decided not to do so. That kind of gambling just doesn't work for me.
4 comments:
I'll nitpick your cost math a little, but not dispute your overall contention that the Big 3 have destroyed themselves while the "foreign" manufacturers have coped.
The raw materials costs are flexible to the extent that your supply chain keeps its labor and transport costs down. Insist that all your suppliers be union shops, and your raw material costs go up. Ship parts in from all over, and your costs go up.
It also doesn't help that congress adds to your costs through tariffs and regulations (how much could we save per car by dropping steel tariffs and the requirement for 20 airbags?).
(torksor!)
As I understand it, for the most part, American Toyota plants use many of the same suppliers and have to deal with the same tarrifs and regulations.
Still, those were good points.
KT,
Please see my post on this subject. Toyota and Honda make cars in America with labor cost differentials that are not nearly as great as you might imagine. But the price differential on an equivalent $24,000 sedan is about $2000 because of the higher quality Japanese label product. In this case, I think it is management, not workers who are to blame.
Ever wonder what a UAW contract looks like? It is over 2200 pages and weighs 22 pounds. It no wonder the big three can not compete in the global market. Honda and Toyota don't have to deal with that kind of crap. It would take a team of lawyers just to understand this document. 2215 pages of inefficiency brought to you by the UAW
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