The below paragraph is an analogy that tons of media sources are parroting all over the place right now, and as much as it loathes me to repeat it, I’m going to, because the comparison is , sadly, integral to my analysis. So, here it is…
In early days of automobile production, Henry Ford shocked the industry by paying his laborers on the assembly line an astounding $5 per day wage. In doing so, he ensured that most of the people building his cars could buy his cars. And for a time, this social contract between employer and laborer worked reasonably well: pay your workers and provide them with benefits, and they will be productive and give back to the company, ensuring further economic success.
This social contract requires that there be trust and goodwill as its underpinnings. If either side gets greedy, the system doesn’t work. Now, we’re beginning to see a breakdown in this system, and unfortunately, it’s greed on the part of both sides that are to blame.
Consider the current state of the Detroit auto industry. Parts supplier Delphi is now bankrupt, and General Motors is seen as not far behind.
Now, who should we blame for this mess?
It’s easy to point fingers at GM and Delphi management. With executive pay and bonuses being sweetened the same day that Delphi throws itself upon the mercy of bankruptcy court, it goes without explanation or debate that management definitely must shoulder a significant portion of the blame, and cashing a fat paycheck while asking laborers to tighten their belts is absolutely inexcuseable, even if it is to “retain management talent.” Besides, why should a company seek to retain “talent” that drove the company into the ground?
However, the blame isn’t all with the folks in the suits. The auto workers, or rather, the unions that represent them, are also clearly showing that excessive compenstation isn’t always synonymous with wearing a tie to work.
Consider the statements made by workers on the line shortly after Delphi announced its massive wage cuts and restructuring plan. No doubt, Delphi’s plan is astoundingly drastic, but the response was equally appalling:
Bill Wineland, a 49-year-old line worker at a Delphi plant in Flint, Mich., had a different perspective.
“Who’s going to afford to buy these cars? Nobody making $10 or $12 an hour can afford a $30,000 automobile,” he said. “Henry Ford said a long, long time ago that people should have enough money to buy my product. Everybody thought that was crazy, but he made it work.”
Whoa, whoa, whoa! Since when does anyone in Average Working Class Americaville expect to waltz into a dealership and spend $30 grand on a car?! Auto workers feel they are entitled to afford to drive Cadillacs?! Not if I’m paying for it, thank you very much!
And you better believe that I’m paying for it, as is anyone else buying a GM vehicle. Pre-bankruptcy (and presumably even as of this writing) GM/Delphi auto workers were/are making as much as $27.50 an hour . They get free medical benefits, paid for entirely by their employers. And how do these people get paid? Naturally, this money comes from the sticker price on GM and other automative vehicles that use Delphi products. Delphi is currently the world’s largest automotive parts supplier; if you’re driving a car, there’s probably at least one Delphi-manufactured part inside it.
Is $27.50 per hour pls generous and free health benefits excessive? It’s debatable, but I lean towards the side that says yes. Think of it: as much as $1,100 of every new GM vehicle sold goes to GM’s health care costs alone, more than the price of the steel in the vehicle. These aren’t just dire medical needs, either; GM is the world’s largest purchaser of drugs like Viagra. The next time you hop into a Chevy, Pontiac, Buick, Saturn, Oldsmobile, Hummer or Cadillac, think hard about how much of that vehicle’s sticker price went towards some retired auto worker getting an erection. For free.
I also think the pay and benefit demands are excessive when the auto workers complain about cuts when they’ve priced themselves out the median income for most Americans. Can you easily afford a $30,000 car? I know I certainly can’t: I’m still paying off my $15,000 POS. And I sit in my Viagramobile, it’s painfully obvious to me that I’m not livin’ large like a UAW member.
And what of the Henry Ford, pay-your-workers-well comparison? Adjusted for inflation, Ford’s $5 per day wage instituted in 1916 would amount to $91.20 per day in 2005 currency. Assuming an 8 hour day, that’s $11.40 an hour, on average, and while it’s not great, it’s not a terrible wage for a blue collar job. Needless to say, the $25+ per hour wages currently earned by workers at those same jobs are quite a rise beyond inflationary pressures, and have also driven the costs of manufacturing (and thus, the price one pays to drive a shiny new car off the lot) sky high as well. Considering Delphi’s proposal of a new range of $10 to $15 per hour, with most seasoned workers likely ending up on the high end of that, I’m not sure auto workers really have a lot of room to complain, other than they’ve been used to living off the fat of other’s car purchases and must now live a little more realistically.
No, if Delphi gets their way, the average auto worker certainly won’t be able to afford a Cadillac. And I certainly don’t want to see auto workers making a pittance. However, even a modest, middle-of-the-line compromise between the two extremes would certainly bring the labor expense down, and in turn, the cost of a new car down as well. And in time, the price of not a Cadillac, but say, a Buick maybe, might just be cheap enough for all of us.