A Closer Look at GM/UAW Hourly Wages
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?
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GM now wants $30B more… yikes.
The GM restructuring plan is online, you can read it here.
I did a quick search and the word “Lean” does appear a few times, actually.
Pg 5, it says, “The Plan was a blueprint for a new General Motors in the United
States, one that is lean, profitable, self-sustaining and fully competitive.”
Hmmm… sounds like colloquial lean (smaller), not Toyota lean.
Pg 24 says, “In addition to these consolidations, General Motors has been implementing an integrated
Global Manufacturing Strategy, based on common lean manufacturing principles and
processes. Implementation of this Strategy provides the infrastructure for flexible
production in its assembly facilities where multiple body styles from different
architectures can be built in a given plant.”
Ah, there’s real Toyota-style Lean — improved processes and flexibility.
The document ends with:
“The Company extends an open invitation to the U.S. Department of the Treasury to visit
General Motors to view first-hand the many product programs, advanced propulsion
technologies, lean manufacturing facilities, and its capable and energized workforce.
General Motors Corporation
Good article (sad) about the shutting down of brands, like Saturn:
Mr. Shapiro, the analyst, said G.M. should have rethought its divisions in the 1980s, when a number of new brands appeared in the United States, including Acura, Lexus and Infiniti, the Japanese luxury brands, and the Korean makers Hyundai and Kia.
“There were always good short-term reasons for not doing something,” Mr. Shapiro said.
— Principle #1 of the Toyota Way is to think long-term. Seems like GM wasn't able to do that, and that's definitely management's fault.
Edwards Deming was probably a strong believer in management having the ultimate responsibility for creating efficient, sustainable work for it’s employees.
He probably read about that topic on page 26 of ‘The Principles of Scientific Management” by Fred Taylor- written around 1911.
It is sad they needed 117 pages to do what should have been put on an A3, it is a reflection of a bloated G.M. Very little Hansei, mostly why they are not to blame…. Odds are they are a bottomless pit unless management changes, they don’t get it.
I was a bit surprised by Toyota’s wages although that plant has been in Georgetown for what, 15 years?
As a comparison, the new Kia assembly plant that’s under construction here in Georgia has a starting wage of $14.90 with a cap at $23.50.
Dr. Edwards Deming was brought into GM around 1986 by Bill Hoglund, a GM VP after he saw the TV program “if Japan can do it, why can’t we”.
I attended one of Dr. Deming’s four-day seminars held at GM in 1987. On the last day, Dr. Deming asked “Who are these people at the table in front?” He was told that it was the general manager of the Cadillac Division and his executive staff and they were there to answer questions. Deming’s response was “where where they for the last 3 days? They’re not sitting at at my table!” A little abrupt and not real diplomatic, but that was Dr. Deming.
I attended a number of “Crowd Meetings” with Dr. Deming at GM over the next 3-4 years. The plant in Pontiac Michigan producing the Fiero was really into the Deming philosophy, until it got shut down when the Fiero was discontinued due to poor sales – the UAW workers at that plant felt betrayed; likewise, the GM truck plant in Oshawa Canada with one of the highest productivities of all North American plants per Harbour was recently closed as part of the GM restructuring.
The UAW definitely has not been blameless over the years. But the UAW had nothing to do with the subprime mortgages made by GMAC – I remember what heros GMAC and particularly the ResCap part of if (subprime) were in the days of the large subprime profits, and I’m sure their bonuses reflected it. Likewise, the problems with the Saab, Saturn and Hummer brands cannot be blamed on the UAW.
I don’t think the Toyota CEO is underpaid. I think the GM CEO is grossly overpaid!! The same with employees making $70/hr. Thats why cars are $40k!! Many people live on $12-15/hr.
Telsa21- nobody was “making” $70 an hour before taxes. That number includes benefits, payments to all of the retirees, and other factors.
From my post:
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
Toyota has FEWER retirees, which was the reason for the cost gap. Not the unions, not the current employees.
The Toyota CEO is fairly paid. It is all the narcissistic USA bosses that plunder corporate coffers that are overpaid. http://management.curiouscatblog.net/2008/10/22/ceos-plundering-corporate-coffers/
The failures of leadership at Chrysler, GM and Ford were huge (matching their huge payouts to senior executives). http://management.curiouscatblog.net/2008/12/15/big-failed-three-meet-the-successful-eight/ Yes Ford seems to have done well in the last couple of years, but they were failing to deal with their biggest problems just like the other 2, for decades. None of them effectively dealt with exploding health care costs and unsustainable retirement/retiree health care costs.