December 5, 2008
With the issue of the automobile bailout in the news right now, I find myself even more irritated than during the presidential campaign. You sort of expect journalists to favor one side in a political campaign so it's not a big disappointment when they ignore facts then.
But during a cut-and-dried crisis like the auto bailout? Cripes!
I live with a UAW worker employed by GM and I'm an accountant with a first-rate bullshit detector who spent six months working in management at GM, so you can assume what I am about to say is at least somewhat enlightened.
UAW WAGE RATE
Let's start with the damn $75/hr. wage rate you hear twenty times a day on talk shows and see in every AP article. That figure comes from Lars Larson, a conservative radio talk show host, who got it from a three-year-old PBS report, which he then rounded up. That figure not only includes benefits as calculated by management, it includes payments and benefits to retirees! Does that make sense? Does it make sense to say "UAW factory workers are making seventy five dollars per hour" when you're including pension payments to retirees not even working anymore? Does it make sense to say "UAW factory workers are making seventy five dollars per hour" when you're talking about vague accounting-department-generated fringe benefits like the cost of the parking lot where employees park their cars, the cost of the fitness centers where (mostly) management employees work out on their lunch hour, and whatever other crap management can include for purposes of winning their public relations battle with the union?
Let me tell you: when a UAW factory worker is sweating all day long on the line and has a half hour for lunch, that worker is too tired to even make it to the cafeteria and back. Autoworkers tend to eat right there by their station on the assembly line. They sure as hell don't have the time or energy to hit the fitness center over the offices, which might be a fifteen-minute walk away.
As for the payments to retirees, here's the facts: Generally Accepted Accounting Principles (GAAP) and federal law require that retiree benefits be expensed in the year in which they are incurred. Got that? It means there are no retiree payments included in the price of the car being built this year. Those benefits were expensed in the years when the retirees were working. My God, I feel stupid for even having to say this—this is kindergarten stuff! And yet I see so-called "financial experts" and talkshow morons like Lars Larson all over the airwaves talking about the payments to retirees putting the American car companies at a competitive disadvantage. It makes me want to scream.
To Lars' credit, he admits the above facts about the $75/hr. figure, claiming he always makes it clear that the number includes payments to retirees, but he's lying via insincere confession. Just yesterday I heard him say "UAW workers making seventy five dollars an hour are dragging them down." Trust me, I see a UAW paystub every week and there ain't no $75/hr. listed on that puppy.
The truth is quite awkward for people who want to blame the union for GM's problems. Actual comparisons of wage rates show that UAW autoworkers make just a couple dollars more per hour than the non-union foreign autoworkers. Read these words from Motor Trend Magazine:
"Since they began operating U.S. auto factories in the early 1980s, the nonunion Asian and European transplants have kept their wages within a few dollars of those paid by the Detroit 3 to UAW work forces."This goes for Toyota workers in Alabama, where Toyota received something like a quarter billion dollars to build an assembly plant. (I mention Alabama because Alabama's Senator Shelby is such a vociferous opponent of loan guarantees for the Big 3. This hypocrite is simply protecting the foreign companies in Alabama who keep his campaign fund full, at the expense of GM which is headquartered in Michigan. The state government of Alabama has forked over more than a billion dollars to foreign automakers to bribe them to locate in Alabama. Now all of a sudden he's against government loan guarantees for automakers.)
Obviously, because I know and love somebody with a horse in this race, it's difficult for me to be objective about the bailout issue. My household income and retirement are possibly threatened.
That being said, let's examine the Threatened Asset Recovery Plan—the original $700 billion financial bailout which, through Treasury Secretary authority, has actually expanded to a $7 trillion bailout for Wall Street. What is that money for? According to our Treasury Secretary and Federal Reserve Chairman, that money is to make sure the credit markets have money available for American businesses who need money to operate. Isn't that what GM, Ford, and Chrysler are talking about? If they took $30 billion of that $7 trillion and loaned it to the automakers directly—that's less than half of 1% of the bailout by the way—wouldn't we just be cutting out the middle men on Wall Street?
IF THE WHOLE POINT OF THE BAILOUT IS TO MAKE SURE AMERICAN BUSINESSES HAVE ACCESS TO CREDIT, WHAT COULD POSSIBLY BE WRONG WITH GIVING CREDIT TO THREE OF THE BIGGEST AMERICAN BUSINESSES!?
I didn't agree with the bailout of Chrysler twenty years ago and I don't agree with a bailout of GM now, but let's be honest about this. Have we committed $7 trillion dollars to rescue Paulson's friends on Wall Street, or is the goal to make sure credit is available to business? Make up your mind.
MANAGEMENT VS. UAW
I could literally tell you stories about GM management for hours. These are not intelligent people. The men at the very top might be smart and the engineers might be brilliant but I don't think it's possible to have worse frontline management than I saw at GM. Everybody comes to work every day with one goal in mind—to stick it to the union—and to hell with the actual business of building and selling cars.
And I have never seen more nepotism in an entity than I see at GM. During the congressional hearings in Washington I've been begging for one politician to ask the chairman of GM how many relatives he has on the company payroll. I don't know, but I can guess. If the chairman of GM has less than a dozen relatives working for GM I'd be flabbergasted. Hiring your relatives and your wife's relatives and your kids' spouses is simply the way it works for American car companies. Competence and ability are irrelevant when it comes to stuffing GM office buildings full of relatives.
The UAW is not the problem at the automakers. You don't have to take my word for this. There is a book about Saturn called "In the Rings of Saturn," which was commissioned by GM management itself, and this book tells the story of the Saturn Division of General Motors and how they took laid-off UAW workers from Detroit down to Tennessee where they started a new car company and implemented a different management plan, and used those UAW workers to build the best cars in the world faster than anybody else in the world had even dreamed was possible. Japanese and German automakers were lined up at the Saturn gates in Tennessee hoping to learn how they were doing it. What was the difference? The UAW wasn't different. It was the same old UAW and the same wage rates as the rest of GM. The difference was the way GM managed and ran the Saturn plant in Tennessee.
So what did the brainiancs at GM do? They tried to capitalize on the Saturn reputation for quality and the fierce customer loyalty by slapping the Saturn name on vehicles built at other plants. "Hey, nobody is buying the crap we're making at the Delaware plant—why don't we slap a Saturn label on those lemons and see if we can trick people into buying them?"
Pretty soon, customer loyalty began to fade, and the usual management practices were allowed to infiltrate the Saturn division and Saturn's Tennessee plant. Then GM decided to just fold the Saturn division in with the rest of GM and the Saturn experiment was effectively over. It was back to blaming the UAW for all the problems while hiring their sister's retarded son Gomer to manage quality control at the Corvette plant.
Now General Motors is talking about ending the Saturn brand altogether as part of their restructuring. The Saturn Experiment is begging to be a Harvard Case Study—business students need to see the ultimate example of management stupidity.
Never forget: just a few years ago UAW workers straight out of Detroit were making the highest quality cars in the world at the fastest rate in the world. Then, like ants late to the picnic, GM management swarmed in and asserted itself, started nibbling at the source of their bounty, and eventually consumed Saturn leaving nary a crumb.
From Reno, Nevada, USA