Automotive Industry: Article Round-up
So, the latest news is that the Big 3 automotive manufacturers want to be bailed out and are testifying in Congress today. I’ve read several interesting articles about the industry in the past couple days and thought I’d share them with you.
First, CNN reports that the automakers’ executives used their private jets to fly to the hearings where they’re asking for a handout, at a cost of $20,000 per executive compared to a $500 round-trip business class flight. Some excerpts:
“There is a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hand, saying that they’re going to be trimming down and streamlining their businesses,” Rep. Gary Ackerman, D-New York, told the chief executive officers of Ford, Chrysler and General Motors at a hearing of the House Financial Services Committee.
“It’s almost like seeing a guy show up at the soup kitchen in high hat and tuxedo. It kind of makes you a little bit suspicious.”
…
Rep. Brad Sherman, D-California, asked the three CEOs to “raise their hand if they flew here commercial. Let the record show, no hands went up. Second, I’m going to ask you to raise your hand if you are planning to sell your jet in place now and fly back commercial. Let the record show, no hands went up.”
Next, Kevin sent me a blog entry from a guy who grew up in a family that worked for GM. Interesting view from his father’s point of view about the cost of hiring employees when you’re an automaker:
Legacy costs and union benefits costs are astronomical for Ford and GM. Toyota pays about $47/hr per employee, GM about $80/hr in salary for people WORKING NOW.
…
… the companies treated the unions the way the drug dealer treats a high priced lawyer – merely a cost of doing business.
Speaking of cost of doing business in regards to the union workers, this article from the New York Daily News reveals some details of the UAW contract:
Management and labor consigned the Big Three to a future of troubles when they agreed to preposterous work rules, requiring management to pay workers at 90% of their salaries when they were laid off.
Those rules compelled General Motors in particular to keep pumping out vehicles in the face of shrinking demand earlier in the decade, ushering in the period of “0% financing” for five, six and seven years. Because labor costs were locked in, it made more sense to keep producing and selling at below the full cost of production.
Wow. For the record, I’ve never joined a union. When I worked at UPS, I had the opportunity to join Teamsters and declined. That said, I don’t understand how union officials can seriously expect laid-off workers to be paid for not working! At some point the company needs to be able to reduce labor costs in response to reduced demand, but this doesn’t allow them to do it.
I don’t agree with giving companies taxpayer money. Should the government have subsidized typewriter manufacturers when computers started becoming more prevalent? A lot of typewriter makers went out of business or adapted to making keyboards. Maybe automakers should learn to adapt instead of getting free money to continue their old ways.
