I just received the following defensive editorial written by Jim Jackson who is from Elkins Fordland (a Ford Dealer) in Elkins, West VA. I was given permission to reprint it. He also appeared on FOX News as seen on the following link. http://video.aol.com/video-detail/jim-jackson-on-fox-news/2228025076/?icid=VIDURVNWS12
“As I watch the coverage of the fate of the U.S. auto industry, one alarming and frustrating fact hits me right between the eyes.
The fate of our nation’s economic survival is in the hands of some congressmen who are completely out of touch and act without knowledge of an industry that affects almost every person in our nation.
The same lack of knowledge is shared with many journalists whom are irresponsible when influencing the opinion of millions of viewers.
Sen. Richard Shelby of Alabama has doomed the industry, calling it a dinosaur. No Mr. Shelby, you are the dinosaur, with ideas stuck in the ’70s, ’80s and ’90s.
You and the uninformed journalists and senators that hold onto myths that are not relevant in today’s world.
When you say that the Big Three build vehicles nobody wants to buy, you must have overlooked that GM outsold Toyota by about 1.2 million vehicles in the U.S. and Ford outsold Honda by 850,000 and Nissan by 1.2 million in the U.S. GM was the world’s No. 1 automaker beating Toyota by 3,000 units.
When you claim inferior quality comes from the Big Three, did you realize that Chevy makes the Malibu and Ford makes the Fusion that were both rated over the Camry and Accord by J.D. Power independent survey on initial quality? Did you bother to read the Consumer Report that rated Ford on par with good Japanese automakers.
Did you realize Big Three’s gas guzzlers include the 33 mpg Malibu that beats the Accord. And for ’09 Ford introduces the Hybrid Fusion whose 39 mpg is the best midsize, beating the Camry Hybrid. Ford’s Focus beats the Corolla and Chevy’s Cobalt beats the Civic.
When you ask how many times are we going to bail them out you must be referring to 1980.
The only Big Three bailout was Chrysler, who paid back $1 billion, plus interest. GM and Ford have never received government aid.
When you criticize the Big Three for building so many pickups, surely you’ve noticed the attempts Toyota and Nissan have made spending billions to try to get a piece of that pie.
Perhaps it bothers you that for 31 straight years Ford’s F-Series has been the best selling vehicle. Ford and GM have dominated this market and when you see the new ’09 F-150 you’ll agree this won’t change soon. Did you realize that both GM and Ford offer more hybrid models than Nissan or Honda. Between 2005 and 2007, Ford alone has invested more than $22 billion in research and development of technologies such as Eco Boost, flex fuel, clean diesel, hybrids, plug in hybrids and hydrogen cars.
It’s 2008 and the quality of the vehicles coming out of Detroit are once again the best in the world.
Perhaps Sen. Shelby isn’t really that blind. Maybe he realizes the quality shift to American. Maybe it’s the fact that his state of Alabama has given so much to land factories from Honda, Hyundai and Mercedes Benz that he is more concerned about their continued growth than he is about the people of our country. Sen. Shelby’s disdain for “government subsidies” is very hypocritical. In the early ’90s he was the driving force behind a $253 million incentive package to Mercedes. Plus, Alabama agreed to purchase 2,500 vehicles from Mercedes.
While the bridge loan the Big Three is requesting will be paid back, Alabama’s $180,000-plus per job was pure incentive. Sen. Shelby, not only are you out of touch, you are a self-serving hypocrite, who is prepared to ruin our nation because of lack of knowledge and lack of due diligence in making your opinions and decisions.
After 9/11, the Detroit Three and Harley Davidson gave $40 million-plus emergency vehicles to the recovery efforts.
What was given to the 9/11 relief effort by the Asian and European Auto Manufactures? $0. Nada. Zip!
We live in a world of free trade, world economy and we have not been able to produce products as cost efficiently.
While the governments of other auto producing nations subsidize their automakers, our government may be ready to force its demise.
While our automakers have paid union wages, benefits and legacy debt, our Asian competitors employ cheap labor. We are at an extreme disadvantage in production cost.
Although many UAW concessions begin in 2010, many lawmakers think it’s not enough. Some point the blame to corporate management. I would like to speak of Ford Motor Co.
The company has streamlined by reducing our workforce by 51,000 since 2005, closing 17 plants and cutting expenses. Product and future product is excellent and the company is focused on one Ford. This is a company poised for success. Ford product quality and corporate management have improved light years since the nightmare of Jacques Nasser.
Thank you Alan Mulally and the best auto company management team in the business.
The financial collapse caused by the secondary mortgage fiasco and the greed of Wall Street has led to a $700 billion bailout of the industry that created the problem.
AIG spent nearly $1 million on three company excursions to lavish resorts and hunting destinations. Paulson is saying no to $250 billion foreclosure relief and the whole thing is a mess.
So when the Big Three ask for 4 percent of that of the $700 billion, $25 billion to save the country’s largest industry, there are obviously oppositions.
But does it make sense to reward the culprits of the problem with $700 billion unconditionally, and ignore the victims?
As a Ford dealer, I feel our portion of the $25 billion will never be touched and is not necessary. Ford currently has $29 billion of liquidity.
However, the effect of a bankruptcy by GM will hurt the suppliers we all do business with. A Chapter 11 bankruptcy by any manufacture would cost retirees their health care and retirements.
Chances are GM would recover from Chapter 11 with a better business plan with much less expense. So who foots the bill if GM or all three go Chapter 11?
All that extra health care, unemployment, loss of tax base and some forgiven debt goes back to the taxpayer, us. With no chance of repayment, this would be much worse than a loan with the intent of repayment. So while it is debatable whether a loan or Chapter 11 is better for the Big Three, a $25 billion loan is definitely better for the taxpayers and the economy of our country. So I’ll end where I began on the quality of the products of Detroit.
Before you, Mr. or Ms. Journalist continue to misinform the American public and turn them against one of the great industries that helped build this nation, I must ask you one question.
Before you, Mr. or Madam Congressman vote to end health care and retirement benefits for 1 million retirees, eliminate 2.5 million of our nation’s jobs, lose the technology that will lead us in the future and create an economic disaster including hundreds of billions of tax dollars lost, I ask this question not in the rhetorical sense. I ask it in the sincere, literal way.
Can you tell me, have you driven a Ford lately?”
Jim Jackson, Elkins Fordland
OK Juice readers. It’s your chance to join the debate. As always your comments are welcome.
I remain unconvinced that a bailout of the auto manufacturers would be effective or in the best long term interest of our nation’s economy.
I would much rather see the government bail out the hundreds of thousands of small and medium businesses in America than the Big 3. Small business is the backbone of America — not the auto industry as the UAW or Mr. Elkins would have you believe.
Small Business employes 100 times more people than the automobile industry. Small business has at least 10 times more people dependent on them and none of those people make $30 per hour. Not the guy who changes tires at Discount Tire, not the mechanic at Brakes Plus, not the man running the press at the dry cleaners. … Only UAW workers make nearly $70 per hour for wages and benefits.
Very few Americans make anywhere near that kind of money — especially for minimum skilled labor that doesn’t even require a college degree.
It is, however, the mom and pop shops and franchises across the country that employ the most Americans. They are the ones who need a bailout. If the Big 3 bite the dust, you can still buy a car. If all the mom & pop shops, stores, gas stations, grocery chains go bust, you can have your fancy car but you won’t have any place to drive it to and no place to get gas for it.
NO for Auto Bailout
Yes Jim. I have driven a Ford lately. I’ve been driving Fords since 1965. Mercury, Ford. So What? The problem is that while the auto industry helped build this nation, they were not alone.
But, the UAW helped destroy it and other unions forced out 95% of American manufacturing today. Where are the American made TVs, Radios, Motorcycles, Medical instruments, home appliances, tennis shoes, Optics, computer chips… ALL GONE! Why? Because it cost too much to make them here! American Labor priced itself out of the market.
The problem with Unions is that they brainwash the members into thinking no job is better than a reduction in pay. That unskilled labor should make as much as a database engineer. That the money supply from their employers is endless and that they always deserve more. Well Mr. Fordland, those days are over. Your arrogance won’t win this time.
#’s 1,2 and 3 Bunk!!! The conservatives in this country want to destroy the unions because they are the last bastion of progressive politics in this country. After Reagan took office this country went from being the largest exporter of manufactured goods, the largest importer of raw materials and the biggest creditor nation to the largest importer of manufactured goods, the biggest exporter of raw materials and the BIGGEST DEBTOR nation in the world. That’s what 28 years of union busting, “free trade” and deregulation (all CONSERVATIVE REPUBLICAN policies) have brought us, a THIRD WORLD ECONOMY!
I must agree with the fact that the auto workers feel they are worth more than firefighters, police officers, and our young men and women that are willing to lay their lives on the line for us everyday. They have become the demise of the auto industry! I have owned ALL America made cars, trucks and motorcycles since I started driving however recently I have looked at Japanese because of quality in the type of vehicle I am looking at plus amenities.
I looked at American made and did not find anything that met my families need with quality. I am very American made pro but…I have spent over $200 dollars for a pair of boots just because they were made in America and quality…however I can not drop my expectations to buy something that is not going to fill the need!
whattttttttttt!!!!!!!!!!!!!!!!!!
Please don’t change your opinion. Keep blaming conservatives for the fact that the sun comes up every morning or if it will rain on Wednesday or Thursday. I hear you beating the same “talking drum” every night when we go to bed.
Good night!!!!!!!!!!!!!!!
Larry, forgive me for pointing out that the dire economic straits we are in are the end result of Reaganomics, I guess the truth hurts.
Of course workers who actually produce something will get paid more than Phil Gramm’s whiners who shuffle papers. They should use their spare time to figure out how to raise their own wages rather than pull others down.
I’m a small business owner and do produce something. I’m not on my knees blowing folks in congress to get a bailout. I’m not whining. I don’t have a billion dollar lobby behind me to get congress to rip of the taxpayer. I go to work every day and work. I will get by without taxpayer dollars. Why? Because I want to!
But, if this atrocity of an auto bailout passes, I can guarantee that I will never buy another American made automobile. Never!
I’m a mother of 3 young children and my husband works very hard as a Ford Service Technician to support our family. Sadly, the Ford dealer he worked for had to close. They offered him a job at another of their Ford Dealers a few cities away that has not closed yet. Their Dodge Dealer next store also closed. In our city alone that is a lot of jobs lost without the big 3 even failing yet. When a dealer closes, so does the service department. That means if you drive any of these vehicles you will be forced to go to a private shop that often doesn’t do it right. My husband is always fixing those mechanic shops mistakes because they are general mechanics not Ford mechanics. You then lose quality in service.
My husband is a fully certified Ford Service Technician that went to school and has a Bachelors Degree. He works very hard for the money he earns. It is evident in his scrapes, cuts and bruises he comes home with that he gets from fixing vehicles for everyday people. It makes me very upset that so many of you don’t realize it affects everyone if the Big 3 fail. My husbands job, though he has an education, will likely be lost. I completely agree with Jim and hope that you truly think about how much it will affect millions and probably any of you that drive any of these vehicles.
My husband proudly goes to work every day because he wants to! We also proudly drive 2 Ford American made vehicles and love them!
According to the Heritage Foundation, wages of current workers are over $70 per hour! Why are we bailing out something that can not be fixed without UAW contract renegotiation?
December 8, 2008
UAW Workers Actually Cost the Big Three Automakers $70 an Hour
by James Sherk
WebMemo #2162
The United Auto Workers (UAW) wants Congress to bail out General Motors, Ford, and Chrysler to prevent their undergoing restructuring in bankruptcy proceedings. In bankruptcy, a judge could order union contracts to be renegotiated to reflect competitive realities. Many analysts have objected that hourly autoworkers at the Big Three are some of the most highly paid workers in America, costing the Big Three over $70 an hour in wages and current and future benefits. All taxpayers should not be taxed to preserve the affluence of a few.
Some observers argue that UAW members do not actually earn this much.[1] They argue this figure includes the cost of benefits paid to current retirees as well as wages and benefits paid to current workers and that the actual hourly earnings of current UAW members are much lower. This is a mistaken interpretation of the financial data released by the Detroit automakers.
Cash Compensation
Chart 1 shows the average hourly compensation for UAW workers and the average compensation for all private sector workers. These figures are based upon calculations by the Detroit automakers themselves as published in SEC filings, their annual reports, and other materials. According to briefing materials prepared by General Motors, “The total of both cash compensation and benefits provided to GM hourly workers in 2006 amounted to approximately $73.26 per active hour worked.”
UAW workers are highly paid, but not all this compensation comes as cash wages. Breaking the $73.26 figure down, General Motors reports that it pays base wages of roughly $30 an hour. At the end of December 2006, the average vehicle assembler at GM earned $28.02 an hour; the average machine repair electrician earned $32.43.[2]
Other provisions raise cash earnings above this base pay. For example, workers at Ford earn 10 percent premium payments for taking midnight shifts and double time for overtime hours worked on Sundays.[3]
Autoworkers put in substantial overtime hours at higher rates, raising earnings above their base pay. GM reported that its average hourly employee worked 315 overtime hours in 2006. Including all monetary payments–base wages, shift premiums, overtime pay, as well as vacation and holiday pay–GM reported an average hourly pay of $39.68 an hour in 2006.[4] About 54 percent of the average UAW employee at GM’s earnings came in cash in 2006.
Earned Benefits
The remaining $33.58 an hour of hourly labor costs that GM reports–46 percent of total compensation–was paid as benefits. These benefits include[5]:
* Hospital, surgical, and prescription drug benefits;
* Dental and vision benefits;
* Group life insurance;
* Disability benefits;
* Supplemental Unemployment Benefits (SUB);
* Pension payments to workers pensions accounts to be paid out at retirement;
* Unemployment compensation; and
* Payroll taxes (employer’s share).
These benefits cost the Detroit automakers significant amounts of money. Critics contend that these benefit figures include the cost of providing retirement and health benefits to currently retired workers, not just benefits for current workers. Since there are more retired than active employees this makes it appear that GM employees earn far more than they actually do.
This contention contradicts the plain meaning of what the automakers have reported in SEC filings and in their public statements and would be contrary to generally accepted accounting principles.
Under the accounting rules established by the Financial Accounting Standards Board, the Detroit automakers must report their liability for future benefits as they accrue.[6] The hourly benefits figure includes payments into defined benefit pension plans to provide future pensions to current workers. It also includes the estimated costs of future retirement health benefits that current workers earn today.
Chrysler, for example, reports paying $20.14 an hour in health costs for its hourly employees. That figure includes the estimated cost of their health benefits in retirement, calculated according to Financial Accounting Standard 106.[7] The government does not allow Chrysler to promise to pay tens of thousands of dollars in health benefits in the future without reporting that cost on its balance sheets today.
Excludes Legacy Costs
The hourly benefit figures the Detroit automakers report covers the cost of current and future benefits earned by actively working employees. It does not include the cost of paying health benefits and pensions to current retirees.
Before they requested a bailout, the Big Three automakers specifically explained that their labor cost figures do not include the cost of past work. General Motors states in its filings with the Securities and Exchange Commission that:
GM maintains hourly and salaried benefit plans that provide postretirement medical, dental, vision, and life insurance to most U.S. and Canadian retirees and eligible dependents. The cost of such benefits is recognized in the consolidated financial statements during the period employees provide service to GM.[8]
In other words, GM records the expense for retiree benefits when workers earn the benefits, not years later when they collect their benefits. In less technical language, Ford explains that their total average hourly labor costs include:
(1) All the dollars paid to employees, (2) the cost of contractual benefits for employees, and (3) the cost of statutory payments, such as Social Security and Workers’ Compensation–all calculated on the basis of hours worked by employees.[9]
Average hourly costs include the costs of wages and benefits (current and future) to employees divided by the number of hours worked by those same employees. It does not include the benefits paid to retirees.[10] This is in accord with standard accounting principles that require the Big Three to report their costs as they occur. Labor costs are the costs to the Detroit automakers of employing its current workers, not paying former workers for services performed decades ago.
Retirement Benefits Alone Cost $31 an Hour
The argument that retiree pension and health benefits inflate the hourly labor costs of the Detroit automakers cannot withstand basic scrutiny. For instance, General Motors UAW retirement plan paid $4.9 billion to 291,000 retirees and surviving spouses in 2006.[11] That works out to $31.04 an hour when apportioned among active workers.[12] That figure accounts for virtually all GM’s benefit costs–before accounting for health care costs, disability benefits, supplemental unemployment benefits, or any of the other benefits GM provides. GM pays too much in retirement benefits to have labor costs of only $70 an hour if that figure included benefits to current retirees.
Labor Costs Similar Despite Retiree Differences
The Detroit automakers pay similar wages at each company despite having very different numbers of retirees to provide for. Table 1 shows the average hourly labor costs for the Big Three and the ratio of retirees to active workers at each company. General Motors has far more retirees per active worker than Ford or Chrysler. For each active worker at GM, there were 3.8 retirees or dependants in 2006. At Chrysler this ratio was half as much: two retirees for each worker. At Ford there were only 1.6 retirees per worker. If the hourly labor costs included retiree benefits, hourly wages at GM would be much higher than at either Ford or Chrysler.
But this is not the case. General Motors did not have the highest hourly labor costs despite having more retirees. Chrysler paid $2.60 an hour more in labor costs in 2006 than GM did. Ford paid only $2.75 an hour less than GM did, despite having half as many retirees relative to workers to provide for. All three automakers had roughly the same hourly labor costs despite having very different numbers of retirees to provide for. Hourly labor costs account for the expense of providing wages and benefits to current workers but do not include legacy costs.
Taxing the Many to Pay the Few
UAW spokespeople have roundly condemned the estimate of labor costs in excess of $70 per current worker hour. They assert these figures include the cost of current retiree pension and health benefits. They have done so, however, without marshalling evidence to support their case.
The Detroit automakers explain in their SEC filings that their benefit expenses are for current workers, not former employees. This is because they follow generally accepted accounting principles in preparing these estimates. If the figures did include current retiree benefits, the average hourly amount would be much higher than they actually report. UAW employees earn far more than most Americans do. Congress should not tax all Americans to bailout the Detroit automakers in order to preserve high earnings for a few.
James Sherk is Bradley Fellow in Labor Policy in the Center for Data Analysis at The Heritage Foundation.
[1] See Media Matters, “Media Still Wedded to $70+ Per Hour Autoworker Falsehood Despite GM’s Recent Statements to the Contrary,” December 6, 2008, at http://mediamatters.org/items/200812060002 (December 8, 2008).
[2] General Motors, Inc., “GM Manufacturing and Labor Resources, Media Handbook,” p. 29, at http://www.media.gm.com/manufacturing/ha
ndbook/other_benefits.pdf (December 8, 2008).
[3] Ford Motor Company, “2007 UAW-Ford National Negotiations Media Fact Book,” p. 49, at http://media.ford.com/pdf/07_UAW_Negotiations.pdf (December 8, 2008). GM and Chrysler Pay Similar Overtime Premiums.
[4] General Motors Inc., “GM Manufacturing and Labor Resources,” p. 28.
[5] Ibid.
[6] The December 15, 1992, FASB Statement of Accounting Standard No. 106 has required companies that provide post-retirement benefits to recognize the future costs of those benefits in advance. Thus, the cost of labor includes the calculated present value of future retirement benefit outlays. See David Langer, “Planners Cope with SFAS 106. (Statement of Financial Accounting Standard) (Personal Financial Planning),” CPA Journal, December 1992.
[7]DaimlerChrysler Corporation, “Chrysler Labor Talks ‘07: Media Briefing Book,” p. 41, at http://chryslerlabortalks07.com/Media_Briefing_Book.pdf
[8] General Motors Corp., Securities and Exchange Commission Form 10-K for the Year Ending December 31, 2006, note 19, page 153, at http://www.sec.gov/Archives/edgar/data/40730/
000095012407001502/k11916e10vk.htm (December 8, 2008).
[9] Ford Motor Company, “2007 UAW-Ford National Negotiations Media Fact Book,” p. 8.
[10] Heritage Foundation analysts contacted a spokesman for Ford Motor Company by phone. The Ford spokesman verified that average hourly labor costs excludes the cost of benefits paid to current retirees.
[11] General Motors, Inc., Form 5500 filed with the IRS and Department of Labor, Schedule H, for the 12 months ending September 30, 2006.
[12] Heritage Foundation calculations based on General Motors Form 5500 data. The figure is the $4.88 billion paid out to retired workers divided by 85,000 active hourly workers in the pension plan, each working 35.5 hours a week for 52 weeks in a year.
I have a Ford and a Toyota in my garage. I will not buy another of any Company vehicle that gives Millions of dollars for the homosexual/lesbian magazines.
Hey Mr US car dealer and maker. I think you over looked something here. You can toss numbers around all you want cause you picked the survey’s you wanted to quote. But fact here is, people are not stupid and enough of your cheap cars. What happens to fords and chevy’s ay 60 to 70 thousand miles? I will tell you what, they are piece of crap. Rusted, paint fading, or falling off, cluch gone, or automatic trans problens. Engine problems, timming belts, you name it. This is the quality we are talking about. How many Hondas on the road still running strong from about 20 years ago, how many fords? Jesus get real you can’t even think you can compare htese cars. US cars are crap and so are people like you that tries to convince people they are great cars. Suuuuure they are. As long as you sell another one and pocket money. I think you would be a little bias here huh?????
OMG is this stupid baby maker of 3 serious? First of all your loving hubby’s BA degree is from some stupid trade school that does not mean crap. Second of all you have to ask yourself why he has a job? Could it be because all these cheap fords and othe american cars are breaking down maybe????? Hmmmmm? YES dear…he works hard and gets cuts and things cause these miserable cars need it!!!. Dah…Thanks you for assuring us of the bad quality. And no it won’t affect all of us if they get they are gone. To hell with them. They are all just a bunch of fast talking stupid sales people that wants to make a buck. And why in the hell would they be paying people to make these cheap ass cars $70 and hour? Could it be because of the worthless union? Yeap!!! another wonder story of how Unions run companies down the tubes 🙂 What the hell did you all expect each time your great union made it so the company had to pay you more and give you more benifits? What did you think, you could just go on and on like this? ha you got what you wanted. You got over paid, and took the company down. You are to blame no one else. So shut up and take it like the rest of us do when our company goes out.
gary king, “this stupid baby maker of 3”, just keep talking , Einstein.