Posted on 11/23/2015 5:20:38 AM PST by markomalley
New union contracts negotiated at American auto manufacturers will lead to a spike in labor costs after years of belt tightening.
The United Auto Workers approved significant contract adjustments at Ford and General Motors on Friday after months of tense negotiations. Those decisions—one by membership vote, the other by union leadership—come soon after Fiat Chrysler approved a new deal with dramatic pay boosts. Each of the contracts could reverse “much of the savings achieved by the companies over the last eight years,” according to a study first published in the Wall Street Journal.
The new GM deal would raise labor costs from $55 to $60 an hour, a 9 percent hike, according to a study of the deals from Kristin Dziczek of the Center for Automotive Research and Art Schwartz, a former GM labor executive and president of Labor and Economic Associates. The union contract at Ford also reached the $60 hourly rate over the next four years, a 5 percent increase from its current rate of $57. Those hike pales in comparison with Chrysler, where average hourly wages will spike nearly 20 percent from $47 to $56.
The Detroit automakers were forced to impose labor cuts in the wake of the 2008 recession that led to a multi-billion dollar taxpayer bailout of GM, which entered bankruptcy, and Chrysler, which was sold to Fiat. Ford turned down bailout assistance.
The new contracts would reverse many of the pay freezes adopted to control costs, as well as offset the tiered payment systems that allowed the automakers to hire new employees at lower pay and benefits than previous generations of union members.
Edward Niedermeyer, an auto epert who has closely followed UAW negotiations, told the Washington Free Beacon that the talks have ended up splintering workers, while driving up labor expenses at a fragile time. American-owned companies can afford short-term hikes because of high demand and large profitability of SUVs and trucks—classes of vehicles that are vulnerable to global fuel prices, which have been steadily falling.
“Workers better make smart investments with their new wage and bonus increases, because they come at the cost of their long-term position. They’ve weakened their long-term job security and they’ve failed to bandage the festering wound that is two-tier wages,” Niedermeyer said.
The union ran into snags getting the deal approved by its membership at GM and Ford plants. At GM overall membership approved the new contract 55-45, but skilled workers voted down the deal by a significant margin.
“Following receipt of these ratification results, meetings were held with the UAW skilled trades membership at each GM worksite in order to determine the issues for their rejection of the tentative agreement. Based on this feedback from the skilled trades membership, I have determined that further discussion with the company was needed,” Dennis Williams, the union’s president, said in a Nov. 13 press release.
After meeting with the company and skilled workers, the UAW executive council announced that it would ratify the new contract on Friday. Hours later, UAW membership at Ford narrowly voted to approve its deal.
“The voice of the majority has secured a strong future that will provide job security and economic stability for themselves and their families,” Williams said in a release.
Niedermeyer said that economic stability is largely dependent on gas prices and lending rates remaining low—something that may not be true in the future. Spiking labor costs only a few years into economic recovery could bring about the same conditions that led to the collapse of American auto manufacturing in the first place.
“This is a cyclical business, and the UAW has prioritized maximizing its position now at the risk of losing out big in the next downturn,” Niedermeyer said.
Let’s use your figures then. @50% that $15 burger flipper cost the employer $300 for a 40 hour week not counting wages.4 employees per shift time 2 shifts=8- 40 hour shift=$2400 cost,not counting wages, for five day work week. That’s a lot damn Happy Meals.
In the UAW's case, it's a 100% bump, because of the absurd, nowhere-else-on-earth bennies. That's not even counting the absurd work rules and the incredible difficulty involved in firing slackers and saboteurs.
Before I retired, the company I worked for paid on the average about $50- $60 for labor, this was an industrial manufacturer using skilled labor, welders, fitter,assembly , employee pay was anywhere from $15- $25 an hour for hourly employees, yes we had good bennies and lots of overtime.
Would that be union labor in TX?
No, it was non-union. Yes it was oilfield related. Last Nov. stock was trading about $46 a share, today it is around $16.
The hourly rate used to include total benefits, not just salary. Not sure how it’s being used here.
That over simplifies the jobs.
Thanks for the explanation. That makes much more sense. I found this site to have a good description of many of the additional expenses that go into employee compensation.
http://www.accountingcoach.com/payroll-accounting/explanation/4
I buy what ever gasoline 7-11 sells. But... if some station went in that could guarantee that they only sold gasoline that was produced from American oil wells... that' where I'd trade. And I'd pay extra to trade there. But that's me. I support Trump. I want to make America great again. I buy American. I want American companies to prosper, and American workers to prosper. And, I don't apologize for it.
Ding ding ding.......we have a winner.
Having worked in that industry for a few years earlier in my career......I can ABSOLUTELY corroborate your statement.
Here's your sign.... "Make America Great Again... Buy Foreign"
If you are a business major you'll even study about the Japanese advertising schemes they used in the late 70's and early 80's.
The free market will put the big 3 out of business but big washington won’t allow that. The big 3 and their union plague will be back in washington hand out asking for yet another bailout within four years.
81 82 was when they took pride in their cars. During the mid 80s the company decided to cut corners and build crap. It was clearly a design/management decision because there were so many issues. I can list them if you like. BTW we did not drive the car hard. The dealer could have made it right and work with us but they told so long when the warranty expired. We dumped the POS at 14 K miles. Our recent experience was with a Jimmy. We had to have the engine rebuilt at 100 k miles. We’ll it needed a valve job. Turns out the incompetent boob tech misdiagnosed the problem. It needed a new computer chip. This was after we spent $2000 trying to get it to run reliably.
Then insult to injury the Feds bailed them out with my tax money. I am betting that they never improved their quality because they didn’t have to.
That I understand. The oil business is feast or famine. The workers can be furloughed or laid off when prices plunge.
Oil company stocks have held up remarkably well. The expectation seems to be that oil prices will start rising in short order. What's your take? (Mine is that all natural resource companies have been spoiled by a couple of decades of a boom of unprecedented magnitude, which will probably be followed by a bust of similar dimensions).
Oh, wait a minute. I forgot. They already do that as government unions. Everybody is on the same team. Never mind.
That is “labor costs” not wages per hour.
Just for the record, I am active union labor in Michigan. Low wage in our shop is 19 high is 27. We pay 50 a week for our health care, almost 60 per month for dues. We make military hardware. Anyone who works here and votes democrat, votes to eliminate their own job. Our company says labor costs are almost 70 bucks per hour.
“
Wait a second. GM has been screwing us for years”
How, exactly? Gm has done more to develop automotive technology than all other car companies in the world together. While they did not invent the product, they made it the commercial success it is today.
Yes, Detroit labor is expensive, but the blame is in DC, not with the unions. Crushing regulatory costs impact employees every bit as much as it does employers. America is an expensive place to work and live, try living in Michigan on the same amount of money as someone in Korea or China, you will find that the homeless here have a higher income than the workers that assembled your wondercar. Force foreign companies and employees to pay the same costs, and their product will be no where as affordable or have near the quality the American made example will have.
Plus, by sending all the money and sourcing overseas, short sighted Americans are just slitting their own throats the same as a dairy farmer can enjoy fresh steaks today, but have no future income because he killed his own means of production, and has no money to replace it.
Money that stays in our economy is re-spent many times over, providing income and even taxes well above the initial expenditure. Send it overseas and it is gone forever.
I directly attribute GM’s business failures and recent bankruptcy to their poor quality. After all, we (and others like us) might still be customers if GM had handled our situation differently. It was clear to me that GM were cutting corners at the expense of quality.
I get a little angry when GM waves the American flag and uses the buy American mantra. Clearly they were only interested in making the sale with us and could care less about America or our satisfaction with their product.
More details, my sad stories with GM...
The Trans Am.
GM had an opportunity to save face but they chose not to do so. The Transam was in the garage numerous times under warranty and when the warranty expired, it was a battle to get them to cover the repairs. They weren't fixing the problems. Worst of all, my wife almost got into two accidents when the darned thing stalled out on her when crossing in front of oncoming traffic.
We finally gave up and traded it in. The car stalled out on us on the highway as we drove it up to the dealership to trade it in. And the rear end was making an expensive ominous clunking noise and there was some weird misalignment problem with the wheels, the lower panel decals were peeling, etc. etc. The car was completely stock and we didn't drive it hard. Simply put, it was an expensive lemon and it was obvious that GM were not going to make it right for us.
The Jimmy.
Actually, the Jimmy had around 80K miles when it started stalling and missing. We spent approx $2000 to get it running so that we could sell it and we finally gave up when the technician told us that we needed to grind the valves which would be another $1500. In perfect condition, the car was only worth $3500. We sold it to a friend for $500 who was able to trace the problem to the computer chip. Clearly, the GM tech didn't know what he was doing and our friend even suggested the same. If we had followed GM’s recommendation, we would have put another $1500 into the car and still wouldn't have been repaired.
Its push button 4WD had failed too. The electrical system had fried. A stupid design idea, IMO.
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