GM is in a lot of trouble but not because it pays its workers $73 an hour.
Big 3 auto workers in the US make about $28 an hour compared to about $25 an hour for foreign company auto workers in the US. Those rates are pretty close.
In order to get to the $73 an hour number you have to throw in a lot of costs including about $30 an hour for the costs of retired workers.
The NY Times has a recent article on the break down of the $73 hour that gives one take on labor costs. There are other breakdowns running around but this is about the best I have seen.
[T]he main problem facing Detroit, overwhelmingly, is not the pay gap. That’s unfortunate because fixing the pay gap would be fairly straightforward.
The real problem is that many people don’t want to buy the cars that Detroit makes. Fixing this problem won’t be nearly so easy.
That figure — repeated on television and in newspapers as the average pay of a Big Three autoworker — has become a big symbol in the fight over what should happen to Detroit. To critics, it is a neat encapsulation of everything that’s wrong with bloated car companies and their entitled workers.
To the Big Three’s defenders, meanwhile, the number has become proof positive that autoworkers are being unfairly blamed for Detroit’s decline. “We’ve heard this garbage about 73 bucks an hour,” Senator Bob Casey, a Pennsylvania Democrat, said last week. “It’s a total lie. I think some people have perpetrated that deliberately, in a calculated way, to mislead the American people about what we’re doing here.”
So what is the reality behind the number? Detroit’s defenders are right that the number is basically wrong. Big Three workers aren’t making anything close to $73 an hour (which would translate to about $150,000 a year).
But the defenders are not right to suggest, as many have, that Detroit has solved its wage problem. General Motors, Ford and Chrysler workers make significantly more than their counterparts at Toyota, Honda and Nissan plants in this country. Last year’s concessions by the United Automobile Workers, which mostly apply to new workers, will not change that anytime soon.
And yet the main problem facing Detroit, overwhelmingly, is not the pay gap. That’s unfortunate because fixing the pay gap would be fairly straightforward.
The real problem is that many people don’t want to buy the cars that Detroit makes. Fixing this problem won’t be nearly so easy.
The success of any bailout is probably going to come down to Washington’s willingness to acknowledge as much.
Let’s start with the numbers. The $73-an-hour figure comes from the car companies themselves. As part of their public relations strategy during labor negotiations, the companies put out various charts and reports explaining what they paid their workers. Wall Street analysts have done similar calculations.
The calculations show, accurately enough, that for every hour a unionized worker puts in, one of the Big Three really does spend about $73 on compensation. So the number isn’t made up. But it is the combination of three very different categories.
[See the article for the details of the breakdown.]
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