Here’s One Problem the Big Three Have

by SunnyRight on November 18, 2008

The average total compensation for a Big Three autoworker? $73.21 an hour. Toyota, Honda, and Nissan, meanwhile, pay an average of $44.20 an hour. Scarier is the fact that IBD is on the same page as former Clinton Treasury Secretary Robert Reich.

Someone check the weather report in hell.

Credit this idea to Robert Reich, the former Clinton administration official. We’ve had lots of disagreements with Reich in the past, and no doubt will in the future. But on this he’s right: If a bailout is to be given, the Big Three and their unions must thoroughly revamp their businesses, almost as if it were a bankruptcy. Call it a Chapter 11 Bailout.

Above all, the companies’ poisonous contracts with the United Auto Workers union have to be torn up. The problem is that the UAW, under President Ron Gettelfinger, remains adamant: No givebacks. This is financial lunacy.

Thanks in part to managerial incompetence, but mostly due to pricey union contracts, it costs American carmakers too much to build cars here; they can’t compete. When you fold in health care, pensions, hourly pay, vacations and the rest, average total compensation for a Big Three autoworker is $73.21 an hour, according to data cited by University of Michigan economist Mark Perry.

Toyota, Honda and Nissan pay a still-generous $44.20 an hour in total compensation — a cost edge of nearly 40%. Is it any wonder that Ford, GM and Chrysler can’t compete? Or that, after paying their workers, they never have enough cash left to retool?

Today the total market capitalization of the Big Three has fallen to about $7 billion. Is it better for the owners of those companies to suffer a total loss or for taxpayers to lose $25 billion? The answer is obvious. As such, the only case for a bailout is if it would force major changes on the industry. That won’t happen with current management in place or with giveaway union contracts that make the companies unviable.

That’s right. We’re going to spend tens of billions of dollars (or more) bailing out three auto companies with a combined market capitalization of $7 billion. Disney’s current capitalization alone is $38 billion. Apple’s is in the area of $80 billion — 11.4 times that of the three automakers combined.

But remember: “It’s not your money”.

117 Responses to “Here’s One Problem the Big Three Have”

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