As GM and Chrysler were going back before Congress today, they have been back in the news again lately. I have gotten tired of hearing blowhard analysis on the news channels that “the problem is the UAW.” I can't count the number of times I've heard that oversimplified blanket statement. I'm sure we'll hear it more on the news tonight.
One analyst, this morning, tacked on the comment, “GM isn't blameless.” To say the least!
You could reverse all of the statements and say “the problem is GM management” and that the UAW is also “not blameless.” I don't hear that sentiment much. I don't think the blame game is really very productive, but much of the union bashing seems uninformed.
The UAW is blamed for what's considered to be outrageous pay. One thing to keep in mind with any of these onerous UAW contract conditions (high pay, great benefits, “Jobs Bank“) is that GM management agreed to these contracts. They weren't forced on them by the government. Other problems like restrictive work rules were also agreed to (and have harmed GM's attempts to “get Lean.”)
It's often thrown around that GM labor costs are $75 an hour. That's another oversimplification and it's not accurate. It's not like each GM workers takes home that much in pay and benefits, before taxes.
This website (PolitiFact) is very helpful in breaking down some of the real numbers to compare GM (unionized) and Toyota (non-union in the U.S.).
- Real GM hourly wage is $28/hour
- Toyota Georgetown (Kentucky) pays $27 to $30/hour
- Adding in GM benefits, the current employees cost about $51/hour
- At Toyota, they cost up to $55/hour including benefits
So where does this $75 number come from? Where is the wage gap where GM is getting killed on cost?
Look at the retirees.
When you add in retiree health benefits, you get the $75 number. Toyota just doesn't have as many retirees here in the U.S. because they've only employed people for about 20 years.
Consider this: At the end of 2007, GM had 365,000 retired hourly employees, as opposed to 62,000 active hourly employees.
When you have roughly SIX retirees for every worker, that seems pretty unsustainable. That's the problem right there. That's the way Social Security is bound to look some day, but that's a different discussion for a different blog.
Why does GM need fewer workers today compared to the past? Some of it is due to productivity improvements, but a lot of it is certainly due to falling market share (from 60% to the low 20% range) . Whose fault is it that market share has plummeted or they couldn't anticipate that the competitive environment would get tougher over the past few decades?
That certainly can't be blamed on the union. As Dr. Deming would have said (I believe), that's all top leadership's responsibility. That's why they make the big bucks.
Look at the wage gap between Toyota's CEO and GM's CEO… GM's CEO, Rick Wagoner, makes 14 TIMES what Toyota's CEO makes. Considering their track record of growth and strategic thinking, the Toyota CEO is very underpaid, don't you think?
Don't want to miss a post or podcast? Subscribe to get notified about posts via email daily or weekly.