Biggest problem: Average per-worker cost for GM: $73/hr. Average per-worker cost for Toyota? $48. That’s in American factories.
Obviously, this puts GM at a huge competitive disadvantage. It has in the past tried to make up for it by cutting parts costs, and their cars became junk. Now it’s doing it by the novel approach of selling each car at a loss. It has no other options. Making cars is labor intensive, and the United Auto Workers have priced GM out of the game.
For example, health care costs at GM represent about $1525 per vehicle. For Toyota, it’s $201. Right off the bat, Toyota can afford to put $1300 more into the car in terms of better materials or better engineering, and still meet GM on price. Add in other advantages, and Toyota vehicles just have a natural advantage over GM’s which is hard to overcome.
That’s the big problem with a bailout - all you’re really doing is create a welfare system for highly-paid auto employees. GM will have the same structural problem after the bailout money is used up. Then what? Bail them out again?
What needs to happen is that GM needs to go bankrupt so that new buyers can renegotiate a deal with the union and lower labor costs to the point where GM can compete.
Yeah, it’s not pretty. I’m reading their latest 10-q and they mention something that I heard about but promptly forgot as it was happening during the market meltdown: GM drew down it’s revolving credit lines, all $3.4 billion. Bet the banks were just thrilled about that!
I know it’s a tangent to go out on, but if our health care system wasn’t so damned expensive, the benefits package wouldn’t be so expensive either.
And executive salaries are crazy. Nearly $39mil for the top 5 guys alone. cite
You can hire a lot of workers, even at (so-called) high union wages, for $40mil/year. FTR, the average assembly line pay is $28/hour plus benefits. New workers make about $18/hour on average plus benefits. So at $50k/year we could hire close to 800 workers for the same cost as just the top 5 execs.
But without good designs, good engineering and quality parts, the best labor force in the world won’t be able to build a good car. And they don’t.
To figure total cost, you can’t just look at the hourly wage that ‘plus benefits’ part is huge. The UAW has negotiated very sweet medical and retirement benefits.
800 workers is a drop in the bucket anyway. The top 5 guys could work for free and it wouldn’t begin to touch the structural problem that GM has with its union contracts and liabilities. GM employs over 100,000 blue-collar workers, and over 35,000 white collar workers. It is also paying retirement benefits and health care to 460,000 retired workers. Executive salaries are just about a rounding error in those kinds of numbers.
My wife’s best friend and her common-law husband both had Cavaliers at one point. Or as they came to call them, Crapaliers. They didn’t earn the nickname for no reason.
All the Big Three have huge manufacturing capabilities in Canada, where, of course, basic health care is insured by the provincial governments. For quite a long time, and it may still be true, the province of Ontario made more cars than the State of Mighigan. Nothing’s stopping the Big 3 from transferring more manufacturing to Canada… but their Canadian operations are being killed by Toyota, Honda et al. just as much as their American manufacturers.
Similarly, companies like Nissan and Toyota seem to be having no trouble competing with their American facilities.
GM is failing because GM is a poorly run company. Roger Smith was part of the problem, but it went a long way past him. There’s no one specific reason, but there it is. They deserve to go under and it’s best in the long run if they’re allowed to.