Cavuto and Limbaugh Agree That Retirees Should Save The Auto Industry

In today’s shows both Neil Cavuto and Rush Limbaugh made articulate recitations on the need for retirees to take it on the chin to allow the auto companies the opportunity to get themselves out of their current predicament. There are some issues that I’d like to argue.

First would be Cavuto's reference to the steel industry. Unlike the current situation that the retirement funds of the auto workers are in, the steel workers retirement funds were massively overfunded. Wall Street came up with the scheme that would allow them to purchase these companies using the employee pension funds as their preferred funding source. After a few take-over’s any weakening in the economy was enough to tank them, forcing the fed to assume their pension responsibilities.

You can argue that it was the cheap Japanese imports that caused the steel industries failure, but the pension funds were fully funded prior to the long series take over’s that raided their pension funds.

Next would be the assumption that the retirees have to accept reduced benefits so that the companies can be saved. That may be the case today but if these companies were forced to adequately fund their commitments instead of filling the funds with promises; we would not be in this position today.

Today everyone is falling all-over themselves to save companies where managements have taken their companies to the brink of failure because of some past decision that were made to obtain some short term gain. At some point we have to make companies live up to the agreements made to their staff or it will be open season on retirees forever.

Obama's Plan On Autos - Take Over The Pension Funds

The unions AND the auto companies want Obama to land the big one; the retiree’s pension responsibilities. Neither one wants that on their plate.

I believe that Obama has a deal with the unions that trade major concessions by the auto unions in return for Card Check and government guarantees on the pension funds.

The one issue that is never discussed are the workers that have put in their forty years and are demonized for having a retirement plan that is inferior to the average politician. The unions knew that this would happen when they made the deal, and the autos were more than happy to squeeze their way out of negotiations with just a promise of future payment.

UAW, General Motors Corp., Ford Motor Co. and Chrysler Fight To Survive At Retirees Expense

Over the years auto workers have given up wage-gains, allowing the company to walk away with a promise of improved retirement benefits. Now that the future is here, the companies are going to attempt to negotiate their way out of those promises.

Last year the combined big three (B3) lost $15 billion and face legacy costs of $114 billion from those previous “promises”. The auto makers priorities are no secret; transfer those legacy costs to a shrinking UAW, drastically cut wages, shift the healthcare and retirement costs to their current workforce, implement a two-tier wage schedule and increase the use of part-time workers.

As written about in Toyota Is Running A One Person Hybrid Race, the B3 made a conscious decision to give up the small car market preferring the higher margins obtained by pumping out petrosauruses. That decision has allowed the small car manufacturers to capture the U.S. market putting the B3 at a huge disadvantage.

As the contract negotiations get underway there are a few other current events that help shape the UAW’s position. In the recent contract signed with bankrupt (financially and morally) Delphi, the Future of the Union writes:

“A federal bankruptcy judge approved this morning a new labor deal between Delphi Corp and the United Auto Workers that offers senior workers cash payments in exchange for accepting lower wages."

“Delphi will close 11 of 21 UAW represented plants. It will operate 4, while 7 will be sold and operated by other companies. As a result, the 17,000 UAW members at Delphi will drop to 10,000 or 11,000 in the next few years —“

But it would appear that the UAW is getting help laying down the rules for the “part-time” designation, from a Business First of Buffalo article Delphi faces out-of-state hurdle by Thomas Hartley:

”A union representing more than 2,000 workers at Delphi Corp. plants in Ohio, Alabama and Mississippi said Friday that it has filed a contract termination notice with the bankrupt automotive-parts supplier.”

From Delphi accepts equity bid; judge approves union deal by Vinnee Tong
of the Associated Press and printed on the journalgazette.net:

“Wages will drop to a range of $14 to $18.50 an hour from $27 an hour. The cuts are effective immediately."

Equal work, unequal pay Josee Valcourt / The Detroit News

"BELVIDERE, Ill . -- At $18.50 an hour with limited benefits, Forrest Ammons earns a decent living building cars at Chrysler's Belvidere, Ill., assembly plant."

"But Ammons toils side-by-side with workers who make $10 an hour more than he does and enjoy full health care coverage, generous vacation time and a host of other benefits and protections."

"Ammons, 35, is what's known at the Belvidere plant as an "enhanced temporary worker," a designation that not only sets him apart from his full-time co-workers."

From the Dayton Business Journal article Delphi union initiates strike plan:

“The IUE-CWA labor union said Friday that it has filed a contract termination notice with Troy, Mich.-based Delphi. The notice allows the local chapters to strike after midnight Oct. 13.”

“As part of the notice, the union also revoked its permission for Delphi to continue to use temporary employees in IUE-CWA represented facilities. The union said Delphi has the option of reducing production output or hiring the workers as permanent.”

From Contract showdown begins by Josee Valcourt / The Detroit News

”Nothing less than the future of the U.S. auto industry is at stake in this year's bargaining. Automakers want to eliminate a $30 gap in hourly labor costs that puts them at a competitive disadvantage with their Japanese rivals.”

“The key issue is can we have competitive firms and middle-class jobs?"

“Amid shrinking sales and mounting losses, Detroit automakers have cut tens of thousands of jobs since the last round of bargaining in 2003.”

“In an unprecedented move in 2005, the UAW agreed to shoulder more health care costs at GM and Ford because of the companies' financial problems. Under those deals, active workers agreed to give up pay raises to help finance retiree health care while retirees' out-of-pocket expenses increased.”

From Powerless, retirees fear losing benefits:

“Retirees are typically fiercely proud of their auto careers and staunch defenders of the United Auto Workers union. But they are growing increasingly concerned about the fate of their health care coverage and pensions during upcoming contract talks.”

“They will have no vote on a contract that could dramatically overhaul their benefits, known as automakers' legacy costs. And many current workers say they expect to approve a deal in which everyone, including retirees, will have to make sacrifices.”

“The deals slashed $1 billion from GM's retiree health bill and more than $850 million from Ford's.”

"We took benefits instead of wages a lot of times, so our feeling is we've already paid for our benefits. Why should they be able to take it away?"

“With new workers paid far less than their colleagues doing the same job, Chrysler's Belvidere plant may be the future.”

IUE threatens strike against Delphi By DON SHILLING VINDICATOR BUSINESS EDITOR

The bottleneck in negotiations follows a settlement between Delphi and its largest union, the United Auto Workers. A bankruptcy court judge Thursday approved that contract, which cuts hourly wages from $27 to between $14 and $18.50.

"The union had allowed temporary workers as a goodwill gesture as long as talks toward an acceptable contract were progressing," Clark said. "Hopefully with this action, progress may improve."

Packard needs the temporary workers because of a large cut in its hourly work force last year. Nearly 3,100 of its 3,800 hourly workers in the Mahoning Valley at the time accepted buyouts and early retirement offers.

From a Bill Koenig article UAW Chief Stuck Between Reuther Legacy, `Crashing' Car Industry:

“At the same time, Gettelfinger's union is shrinking. UAW membership in December was 538,448, about one-third of its 1.5 million peak in 1979, as GM, Ford and Chrysler have cut jobs while losing U.S. market share. Thousands more members are departing GM and Ford this year in UAW-negotiated buyout programs.”

G.M. Buying 50% In Italian Diesel Manufacturer

A follow-up to the last article.

G.M., listen up, the answer is not to keep remaking the “super tank” segment of the car market but to bring true American ingenuity into the small and medium market. Take your Saturn brand and make it a superior American made vehicle and they-will-come.

From the Business First of Buffalo bought a 50% stake into the V.M. Motori S.p.A. from Penski Corp.. As stated in the last article the auto manufacturers see diesel, not Hybrids, as the next step in combating foreign oil and pollution.

In Toyota Is Running A One Person Hybrid Race we stated that G.M. will put diesels into their larger vehicles, from the article:

“The plant announced in June that it would start producing a new 4.5-liter turbocharged diesel engine in late 2009 for light duty pickup trucks and the Hummer H2.”

“GM will use a 2.9 liter, V-6, made in Italy by VM Motori, in the Cadillac CTS and Saturn Aura.”

Toyota Is Running A One Person Hybrid Race

Jerry Flint, in a Forbes.com article, paints a clear picture of the market and the near-term prospects for the hybrid auto industry. The MSM has hyped hybrids as our only current solution we have to save America from the evil oil companies, at least till ethanol production and distribution spreads across the country. But that’s another article.

Toyota has five hybrid models that have combined sales, for the first six months of 2007, of 140,000. The Prius accounts for 94,000 or two-thirds of the hybrid sales for Toyota and Lexus combined.

For the same six months the Honda Civic Hybrid sold 17,141, the Ford Escape Hybrid 11,444 units, while its half-brother the Mercury Mariner sold only 2,028 and Nissan’s didn’t bother to distribute the Altima hybrid nationally.

While Detroit will offer the Ford Tahoe and the Chrysler Durango with a hybrid option this fall, it appears that they still haven’t learned their lesson. The big three gave up on the small car market years ago, when oil was under $20 a barrel. They made a conscious and deliberate decision to capture the large (high margin) vehicle market with luxury sedans, pick-ups and vans. That decision worked for awhile but today the “Big 3” has become the small 3 and they are falling-over-themselves to send manufacturing offshore.

Other than Toyota, Flint does not paint a rosy picture for hybrids. He feels that the next reasonable step for the auto makers is in diesels. Honda has plans for a four cylinder diesel and again the “3” plan them larger vehicles.

They refuse to learn that margin is not always king and are making it harder and harder for Americans to buy American.

Offshoring Has Little Effect

…Other than it is good for business. That is what is repeated over and over by journalists who feel the need to write about the outpouring of American jobs. What’s the contemporary term being bandied around, workplace evolution.

From an interesting story by Kevin Krolicki of Reuters, Detroit property is selling at auction for a fraction of its value. Click on the above link because the story is interesting and is the extreme case of what is happening in some of our communities.

From the article:

“Detroit, where unemployment runs near 14 percent and a third of the population lives in poverty, leads the nation in new foreclosure filings, according to tracking service RealtyTrac.”

“At a weekend sale of about 300 Detroit-area houses by Texas-based auction firm Hudson & Marshall, the mood was marked more by fear than greed.”

“The city, which has lost more than half its population in the past 30 years and struggled with rising crime, failing schools and other social problems, largely missed out on the housing boom that swept much of the country in recent years.”

“After selling house after house in the Motor City for less than the $29,000 it costs to buy the average new car, the auctioneer tried a new line: "The lumber in the house is worth more than that!"’

At Ford Job #1 Is To Leave Job

If your interested in what is happening at Ford, Sarah A. Webster a Free Press Business Writer, pens a must read article on freep.com. She paints a dismal picture of employee moral at Ford that is only aggravated after Ford’s proposed buyout offers were withdrawn for some of the anxious white collar staffers. The offer was originally targeted to trim 10,000 “white-collars” from Ford’s payroll, the overwhelming response in some departments, has caused Ford to rethink the program.

From the article:

“Ford began offering salaried workers three buyout packages in September 2006 in an effort to eliminate 10,000 positions. That was on top of 4,000 salaried jobs already slashed”

“Workers who talked to the Free Press said the high take rate on buyouts -- for both hourly and salaried workers -- shows employees have shaken confidence about management and the future of 103-year-old Ford…”

“Last fall,… Ford also targeted 30,000 hourly factory jobs to be eliminated… Ford reported that 38,000 UAW workers signed up for buyouts during a six-week window that opened Oct. 16 and closed Nov. 27.”

“But rescinding buyout offers for workers who want to leave is corrosive to Ford's already-dismal morale, a few of the employees told the Free Press.”

"My manager told me he knows everybody is looking for a new job," the marketing employee said. "I'm just disgusted with the entire company."

After reading the blogs by several of Ford employees, it seems that things aren’t as bad as the article portraits. The attitude from these blogs is that there is a lot of “noise” being made by a very vocal few. Things just aren’t as bad as being hyped in the press.

If 14,000 white collars are being let go, things just can’t be that great either.