The bold claims that union auto workers at GM, Ford and Chrysler are being paid in excess of $70 can only be made if one adds in all of the legacy medical care and pension pledges made to retirees, and then divides that aggregate number (current wages and benefits + medical and pension payments due to retirees) and then divides it by the number of current employees. That number is smaller than the historic workforce due to a lot of "off-shoring" of manufacturing to Mexico and the closure of US plants. The net effect is that if one divides the smaller number of current employees into the pool of legacy costs, and then one fudges a bit, yes you can come up with a Big Scary Number. A lot of the impetus behind that drive to hammer that kind of bogus statistic into the public's head appears to be (a) Republicans hate unions (b) they like the idea of all three auto companies going bankrupt, so they can renege on their pledges to retirees.
The "fact check" makes a key point: the foreign auto manufacturers have, without exception, chosen to build their plants in the South where they were able to avoid unions and, importantly, receive massive tax breaks. In addition, none of those manufacturing plants has been there long enough to have too many retirees. Yet. So to compare their hourly average (about $26.50 an hour) to the big three (about $29.50 an hour) is not all that dramatic a differential. It is a bit more than a 10% differential. Since labor is less than 10% of the cost of making a car, that would mean that in terms of current wages the difference in cost basis would only be 10% of 10% = 1%. How one factors in the legacy costs is difficult to agree on. While the foreign firms have built up manufacturing structures in the US, to have a high domestic content, Detroit has built up its manufacturing in Mexico and Canada... to cut their costs. Sorting out which savings are offset by legacy costs is a complicated one, but as many have suggested, if domestic manufacturers were building more interesting cars the odds are good that they would be doing better. In the meantime domestic manufacturers are offering unprecedented discounts. All of the "Hummers" are priced to move, as perhaps the brand name most reflective of our recent "age of exuberance".
The latest talking point is that the New Deal was actually a crock, that it was a vast p.r. stunt that did not bring our country out of the depression, but which actually got in the way of the "wisdom of the marketplace" which would have made everything better again, if those darned regulators had just let them do so. I hope we are now at a point where we can recognize that an entirely unregulated financial market often morphs into a feeding frenzy for those with less than pure moral codes.
Arthur
The "fact check" makes a key point: the foreign auto manufacturers have, without exception, chosen to build their plants in the South where they were able to avoid unions and, importantly, receive massive tax breaks. In addition, none of those manufacturing plants has been there long enough to have too many retirees. Yet. So to compare their hourly average (about $26.50 an hour) to the big three (about $29.50 an hour) is not all that dramatic a differential. It is a bit more than a 10% differential. Since labor is less than 10% of the cost of making a car, that would mean that in terms of current wages the difference in cost basis would only be 10% of 10% = 1%. How one factors in the legacy costs is difficult to agree on. While the foreign firms have built up manufacturing structures in the US, to have a high domestic content, Detroit has built up its manufacturing in Mexico and Canada... to cut their costs. Sorting out which savings are offset by legacy costs is a complicated one, but as many have suggested, if domestic manufacturers were building more interesting cars the odds are good that they would be doing better. In the meantime domestic manufacturers are offering unprecedented discounts. All of the "Hummers" are priced to move, as perhaps the brand name most reflective of our recent "age of exuberance".
The latest talking point is that the New Deal was actually a crock, that it was a vast p.r. stunt that did not bring our country out of the depression, but which actually got in the way of the "wisdom of the marketplace" which would have made everything better again, if those darned regulators had just let them do so. I hope we are now at a point where we can recognize that an entirely unregulated financial market often morphs into a feeding frenzy for those with less than pure moral codes.
Arthur
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