Subscribe to Common Dreams News Updates
Most Popular This Week
Popular content
Today's Top News
Cutting Wages Won't Solve Detroit 3's Crisis
In the 1980s, Chevrolet proclaimed itself the "Heartbeat of America," but today the American auto industry barely registers a pulse. As Washington considers Detroit's plea for life support, the only place where pundits, politicians and Big Three executives seem to agree is that auto workers must make do with less or watch their jobs disappear.
Some lawmakers have complained that unions are the source of the problem, but they fail to understand some inconvenient truths. According to the latest figures from the U.S. Commerce Department, every worker in Big Three factories could work for free and only shave 5 percent off the cost of their cars. The auto companies pay as much for hubcaps and fenders as they do in wages.
Data from the Harbour Report -- the industry's gold standard -- reveal that even including their benefits, labor costs in the Big Three's plants account for less than 10 percent of the sticker price.
No matter how you cut the numbers, demolishing auto workers' living standards will not transform the industry. The Big Three have been trying for years. They have slashed at least 200,000 jobs since 2004, and they last year wrung billions of dollars in concessions from the United Auto Workers. The union instituted a second-tier wage of $14.50 an hour for new hires, lower than pay in the nonunion, foreign-owned auto companies in the South.
The impact is all too apparent in auto communities across the Midwest. Forty thousand Detroit homeowners are in foreclosure, and the unemployment rate has hit double digits in many auto towns. That suffering will multiply if one of the Big Three collapses, or if retired auto workers are punished for decisions they had no hand in.
Automakers' decisions have been disastrous. While competitors developed gasoline-electric hybrids, Detroit mined the gas-guzzling truck and SUV market, making $104 billion in profits between 1994 and 2003. Wall Street and Congress weren't calling for more research and development or curbing the company's dividend payments and high-flying executive salaries back then.
Pundits crow for us to "Dump Detroit," but they don't advertise that through a bailout or the bankruptcy courts taxpayers will shoulder the burden of the automakers' colossal missteps.
Washington shouldn't back into a bailout -- it should jump in feet-first. What's needed is not a half-measure, a cash infusion in exchange for selling the corporate jets. Now is the time to take a sweeping look at the country's needs.
Our first steps should confront global warming and oil dependence through a comprehensive overhaul of the transportation system. Federal policy hasn't changed since the 1950s, when gas was a nickel a gallon.
Detroit, the Arsenal of Democracy, retooled in a matter of weeks when we needed tanks, not cars, in 1941. We could produce this century's answer to the interstate highway system and build mass transit and high-speed trains.
That same sense of urgency is needed for vehicles that don't run on petroleum. If American engineers can build satellites that read your license plate from outer space, they can develop an alternative to the gasoline engine.
Automakers need direction as much as financial support from Washington, just as Japan's government molded Toyota into a world-class performer.
In every other industrialized nation, government has stepped in and given their auto companies a significant edge. Most important, they all adopted national health care and pension systems decades ago.
General Motors alone provides health coverage to a million people -- workers, retirees and families. The annual price tag is about $5 billion, which, as CEO Rick Wagoner is fond of pointing out, is more than GM spends on steel.
That burden could be lifted, to the benefit of 47 million uninsured Americans, by adopting a Medicare-style program for everyone. It would save the nation as much as $350 billion per year now spent for insurance companies to shuffle paper and deny claims.
The fate of the Motor City captivates us because it speaks to our future. For 30 years, politicians have bowed to Wall Street, sitting by while wages for most workers stagnated. Big Three workers have maintained their living standards better than most, in no small part because they have a union. In a country where investment bankers gave themselves $30 billion in bonuses last Christmas, have we reached a point where $58,000 a year with benefits is too much to ask?
We once promised the pursuit of happiness to all, including the workers who make our factories run, not just those who trade credit default swaps. Now more than ever, we need to recapture that spirit with a thoroughgoing plan to rescue the environment, care for the sick and transform transportation.
- Posted in
24 Comments so far
Show AllGreat article. Finally someone points out that blaming unions is not the answer. There are progressive, positive solutions to many problems. These solutions must be heard by the American people, yet no MSM will talk about them.
Some solutions I have read about recently:
-The big three continue producing cars WITHOUT the combustion engines to allow those whose livelyhoods depend on the automakers not to suffer. Focus large sums of money on developing an electric engine that is viable with the money that might go for a bailout, i.e. free money. Produce a means to retrofit existing vehicles with the new engines and provide subsidies to allow many people to do such retrofiting.
-Invest in our public transportation system heavily for those who cannot buy new cars or retrofit their existing ones. There will still be gas for their car but at a huge price, so they will be forced into public transit. Europe has been doing this for years and their public transit has become amazing. Mag-Lev technology has reached a point where it is more economically viable than flight.
-Fix our power grid and invest in solar, wind, and geothermal to power this grid. These technologies are becoming more and more viable and require only a one time expenditure, which also has added benefit of creating millions of jobs. Coal must go, and those in the coal workers union can find jobs helping build up the new grid or the green power industries.
Most importantly, stop thinking of the cost of these projects and start to think about the RESOURCES required. We have the man power to build and man these project easily. We have the materials to back these projects as well. All we need is the will and the understanding of how cooperation as a nation is the only way to overcome the problems of today. A major change will occur soon... will it be for progress or regress?
www.zeitgeistmovie.com
“I have no doubt that we will be successful in harnessing the sun's energy... If sunbeams were weapons of war, we would have had solar energy centuries ago.”
--Sir George Porter
Putting hard working Americans into provery will not fix any manufacture's problems; it just makes working citizens hungry, angry, sick and desparate. More people out of work, fewer consumers to buy products at any price. In fact, to really save money, maybe the executives who make balzillions of dollars, need to have their salaries, perks and bonsas slashed. Why pay for what literally doesn't work? Obviously, their "expertise" hasn't benefited the company a bit.
The fact that GM pays for private insurance for about a million people is amazing; the Medicare fix would help them greatly. Unless of course, "someone" thinks taking away healthcare from a million people is going to solve a problem; probably will cause more problems than it fixes; the Medicare solution would be great!
ALL car companies are having difficulty; why, because, Americans buy most big-ticket items on credit and the credit markets are frozen, even for those with the best credit-ratings.
Congress is right to demand changes of Detroit. Congress should have demanded a lot of changes from the finance and banking industry way before handing out all the cash, which hasn't seem to help the credit markets, yet. What's good for the goose is good for the gander as the saying goes; make the money lenders grovel before Congress; they are the ones who started the mess in the first place and they should be the ones who pay first. The ones suffering from their stupidity, greed and arrogance shouldn't be pushed into paying for a mess not of their doing.
Congress should also re-regulate the finance and banking industry and set standards for mortgages and other big-ticket items just as a number of European countries have done. Norway and Sweden comes to mind. This "no down payment" attitude with less than credit worthy people has got to stop! And, paying executives who don't perform all these outrageous salaries has also got to stop.
Yesterday, Detroit once more begged for tax money. Yesterday, GM leaked part of its "plan" to the public. GM plans to keep four "core" brands and dump the rest. Among those being dumped is Saturn, the only division that has been doing well. Among those being kept is Cadillac, the symbol of American waste and insensitivity to the environment. I would not have a problem with helping GM produce clean, efficient, Chevies, but I draw the line at the symbol of the ugly American.
Excuse me, I have always wanted a Cadillac; I like it more than a Lexus, Benz or BMW or Volvo; hybrids are on the way. I would love an Oldsmobile, but they are part of history now. Wanting a GM car is not a symbol of the ugly American; being intolerant to difference is what is ugly.
If Congress mandates a fleet average for miles per gallon with a certain pollution percentage for this fleet (probably what all the compromises will produce at the end of the legislation) you can bet that the fleet average will be produced with high mileage Chevolets and gas-hog Cadillacs. Can you imagine a four cylinder Caddy? The Caddy will be the symbol of waste until Congress tells all the manufacturers that they cannot sell any vehicle in the US that does not meet minimum standards for efficiency and pollution.
Of course, because totalitarianism is the answer.
No, but common sense sustainability is. And it is quickly becoming apparent that our rapacious consumerism is nearing an end. Greed has accelerated this change. The geniuses of the 'free trade' agreements seemed to believe that we could go on forever consuming more than we produce (many still do); they cannot send the jobs away fast enough. Advertising can create all the desire within us it wants, but without jobs we cannot afford the crap they peddle at any price. Another thing I've found is that there is little difference now between brand names, especially with a lot of appliances. Many of the brand name companies that have come to signify quality currently produce crap. Your wash machine and Microwave last only half as long as they used to, and even the food you buy may be tainted or poisoned. Totalitarianism? Nah, maybe corporatism or banksterism--if they can only get us to consume again!
Great article, but you needn't go past the part where the author explains what portion of the sticker price is labor. The golden rule of our empire: He who has the gold, makes the rules.
Hoa binh
"Automakers need direction" ......goes to the core of the solution to the current financial and economic meltdown in the U.S.
Corporate capitalism in America has forever hated interference or direction from governemnt. With deregulation, our government has allowed corporations to do just that, giving them the sufficient rope of unlimited greed to hang themselves . Unfortunately, the American people now find themselves in its' destructive wake of social upheaval, greatly distorted social values and environmental devastation.
In light of the the curent crisis in America, democratic socialism warrants greater respect. What socialism best provides is public purpose. In its fear of socialism, America has lost sight of the important aspect of government direction and public purpose. Maybe it is time for America to consider just a little bit of democratic socialism.
When Grover Norguist spoke of shrinking government down to the size where we can drown it in the bath tub, what he was referring to was the burden of public purpose. Unfortunately corporate capitalism wants to be free of public purpose in order to freely plunder and rule America for its own selfish purposes.
The point that always seems lost in these discussions is the consumer. Why did Detroit focus on the SUV.. BECAUSE THE CONSUMER WANTED THEM and was willing to pay a premium for them. The profit margin on a Ford Focus is very small, Detroit has to price them at near cost or nobody will buy it. On the other hand they could sell SUVs marked up to a huge margin and the consumer gobbled them up. Detroit can make the most "green" fuel efficient car we could conceive and it will flop unless the consumer wants it.
The consumer wanted to buy them because of the witchraft of Madison Avenue. Such advertising to expand consumption through machismo, sex and feeling good is destroying the world.
You can delude yourself that way if it helps you sleep better at night. The consumer wanted them because safety records aside you "feel" safe in a larger vehicle and they provide the conveninece of carrying several passengers or a lot of cargo in comfort and the ability to tow your jet ski to the lake on the weekend.
A "green" car with styling people like, good passenger/cargo space, good performance (at LEAST comparable to same class vehicle gasoline engine) at a competitive price and it will be a success. Without ALL those attributes it will be a niche vehicle for the "green" crowd.
You can delude yourself as well to believe the world is not destroying itself with selfish consumerism. That is why the U.S. goes to war, to support a greedy consumer society.
Great... and your solution is what? If you REALLY think that you are going to "transform" people so that they don't want "nice" things for themselves then say hello to the unicorns and the fairies for me. If you want solutions then find a way to make the things that are "good for the environment" attractive to consumers as well. As stated, a "green" vehicle that looks as good, performs as well, and is priced comparably to as a fossil fuel car will sell like hotcakes. One that is slow, ugly, and underpowered will be a niche vehicle for the self righteous crowd no matter how much "Madison Avenue" tries to push it.
I'd also add if it was all "Madison Avenue Withcraft" they would have worked their magic on the Geo Metro and the Taurus so they could have mark them up 20% or 30% instead of 4%. Advertising helps, but an ugly econobox is an ugly econobox no matter how much advertsing money you spend to make it "sexy".
From what I can gather from Industry and the Government, we are all supposed to "compete" to get smarter and smarter in order to get the "good" jobs. At what point do we realize that all people need "good" jobs regardless of IQ or education or country of origin?
People with "good" jobs, regardless of what country they live in, buy things and create more good jobs and if they have a little excess money they might not complain about paying their taxes to support wars and bail-outs.
Less of our wonderful competition and more cooperation would go a long way. As long at the rich are happy to ignore the American middle class and the American middle class is happy to ignore the rest of the world, we're all in for an eventual "bad" time. If there are too few resources on this planet to afford people a decent standard of living, then we're only postponing the inevitable much deeper plunge.
Great points dmg. It reminded me of my son's high school freshman orientation. The speaker was telling the kids how the high school would attempt to give them a competitive edge in the current job market. I took this as meaning they would be competing with their fellow students as well for a decent livelihood. It's the loser-winner mentality. Cooperation for the betterment of the whole always has been and always will be the best way to go, but modern society worships social Darwinism. Our present system has bred the Robber Barons as much as they have continued to breed and feed it. In a pyramid scheme you cannot have a top without the bottom, and the bottom is crumbling. Implosion anyone?
Sioux Rose
CHESSGAME: A synchronicity moment: I just used the pyramid/implosion metaphor in a posting on a different CD article before seeing you were resonating with the same exact image/lesson. Hmm...
That's interesting, Rose. In which article did you post it?
I'd have to disagree with the "smarter and smarter" part of your comment. It's been my observation for the past couple years that the employees I see everywhere are being hired according to their ability to smile and make small talk and make customers and bosses feel good. In other words I see a whole workforce of ass-kissing know-nothings. Big corporations don't want people who think, they want people who are smiling robots.
I'd have to disagree with the "employees I see everywhere are being hired according to their ability to smile and make small talk and make customers and bosses feel good" comment. Too many employees are hired for their gender or ethnicity rather than their qualifications.
If I call for customer assistance I want someone who can speak English clearly. I also want fireman who are strong enough to carry me out of a burning building and teachers who teach subjects rather than opinions.
American capitalism has been defeated by American capitalists begging the people/government. What our legislators are debating over is, in essence, whether or not to admit this fact to themselves and their constituancies. To admit the fact is to take responsibility for managing the economy in a way that is unheard of but absolutely called for. The major problem is that the population in general has been programed to distrust the wrong parts of the inherent/native system (really ourselves as a society), and in turn to trust the wrong parts (advertisers and opportunists).
Sell the automakers to Spanish companies, the most advanced builders of high speed trains and public transportation, with the condition that they hire Americans first.
"Some lawmakers have complained that unions are the source of the problem, but they fail to understand some inconvenient truths."
Would these lawmakers be the same ones who give themselves "automatic" pay increases every year while they continue to drive this country into the ground; destroy the lives of millions of U.S. citizens and borrow money from China and Japan to keep the Christmas lights on in the White House?
The most blatant inconvenient truth is that these lawmakers believe that they deserve to have the best salaries, healthcare protection and vacation benefits that tax-payer money can buy while they simultaneously destroy the economy with their thoughtless and reckless behavior.