Rick explored why Mitt Romney is compelled to bury his home state of Michigan and the automobile industry that generated his family’s wealth. Let’s also explore the fertilizer he’s using.
In his New York Times oped, Romney says: “First, [the US automakers’] huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota.”
But that’s already been done. As the UAW president testified yesterday (via Working Life):
The truth is that in 2005 the UAW agreed to reopen the contracts mid-term, and accepted cuts in workers’ wages and in health care benefits for retirees. Then, in the general 2007 collective bargaining negotiations, the UAW agreed to what industry analysts have called a “transformational” contract that fundamentally altered labor costs for the Detroit-based auto companies. This contract slashed wages for new hires by 50%. Furthermore, new hires will not be covered by the traditional retiree health care and defined benefit pension plans. In addition, this contract stipulated that beginning January 1, 2010 the liability for health care benefits for existing retirees would be transferred from the companies to an independent fund (a Voluntary Employee Beneficiary Association, or VEBA). This agreement has subsequently been approved by federal courts, which have appointed a majority of the trustees who will be independent of the UAW and responsible for managing the VEBA. Taken together, the changes made by the 2005 and 2007 contracts reduced the companies’ retiree health care liabilities by fifty percent.
As a result of all these painful concessions, the gap in labor costs that had previously existed between the Detroit-based auto companies and the foreign transplant operations will be largely or completely eliminated by the end of the contracts. [emphasis added] Indeed, one industry analyst has indicated that labor costs for the Detroit-based auto companies will actually be lower than those for Toyota’s U.S. operations.
Jonathan Cohn of the New Republic reported this week that those new contracts have already produced results:
Ford led the way years ago by reaching site-specific “competitive operating agreements” with locals at different plants, rather than sticking to one national agreement, thereby enabling it loosen work rules and engage in the sort of collaborative quality management on which industry leader Toyota made its reputation. Then, last year, the UAW reached a breakthrough agreement in which it granted the companies similar flexibility, agreed to a two-tier wage structure for new hires, and set up a separate trust fund to finance future retiree health benefits. The companies would provide the initial money for this trust, but, henceforth, the unions would manage it–thereby taking off the companies’ books a tremendous burden that had, on its own, accounted for about half the gap in compensation between unionized workers for the Big Three and non-unionized workers for foreign-owned automakers. “I think they’ve shown unprecedented ability to change and transform the union,” says Kristin Dziczek, who directs CAR’s Automotive Labor and Education program. “They understand what is at stake.”
So far, the results are promising. According to the most recent Harbour Report, the benchmark guide for manufacturing prowess, Chrysler’s factories now match Toyota’s for the most productive, while both Ford’s and GM’s are improving. (A Toledo Jeep factory was actually named the nation’s most efficient.)
Furthermore, while several union-bashers in Congress are repeating the phony stat that UAW workers make more than $70 a hour, Felix Salmon, business journalist for Conde Nast Portfolio, shot that down:
The average GM assembly-line worker makes about $28 per hour in wages, and I can assure you that GM is not paying $42 an hour in health insurance and pension plan contributions. Rather, the $70 per hour figure (or $73 an hour, or whatever) is a ridiculous number obtained by adding up GM’s total labor, health, and pension costs, and then dividing by the total number of hours worked. In other words, it includes all the healthcare and retirement costs of retired workers.
Now that GM’s healthcare obligations are being moved to a UAW-run trust, even that fictitious number is going to fall sharply. But anybody who uses it as a rhetorical device suggesting that US car companies are run inefficiently is being disingenuous. As of 2007, the UAW represented 180,681 members at Chrysler, Ford and General Motors; it also represented 419,621 retired members and 120,723 surviving spouses. If you take the costs associated with 721,025 individuals and then divide those costs by the hours worked by 180,681 individuals, you’re going to end up with a very large hourly rate. But it won’t mean anything, unless you’re trying to be deceptive.
Romney tries to blame retiree costs as well, writing: “Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers. That extra burden is estimated to be more than $2,000 per car.”
But with that $2,000 stat, Romney is 1) conflating retiree benefits with health benefits in general, 2) using an estimate from 2005, before these new contracts, and 3) ignoring that foreign automakers are based in countries with government guaranteed universal health care. (Ian Welsh at Firedoglake notes that relieving US automakers of the burden of providing health care via a universal system would eliminate the manufacturing cost differences between US and foreign car makers.)
Yes, the Big Three’s management has been terrible. Yes, no government loans should be given without a management overhaul and a strong commitment to clean green cars.
But don’t blame the workers and don’t make them pay a heavy price for the failings of others.
UPDATE: Marcy Wheeler takes down Mitt, concluding:
In short, Mitt offers one good idea (cuts in executive salaries), one horrible idea (renege on pension promises to retirees), and refuses to do one more thing that needs to happen to turn around the auto industry.
I don’t know whether he’s just this dumb, this unaware of what has been going on in the auto industry for the last half decade. Or whether he just wanted to get on the NYT op-ed page so he could call for cutting union wages.
But I don’t understand how this festival of stupidity is going to help him run for President in 2012.
LiberalLucy at Michigan Liberal is displeased with the state’s former son:
Your daddy may have been governor almost half-a century ago, and you may have called Michigan home at one point, but you’re no auto insider, and you’re certainly not in any place to be giving suggestions on how our state should be run or what our auto industry does or doesn’t need.
Frameshop’s Jeffrey Feldman calls out Romney’s inability to put clean energy front and center:
In the end, words like ‘energy,’ ‘environment,’ and ‘sustainability’ do not even show their faces in Romney’s plan. All of those core issues that must define the future of the industry–if it is to have a future–are front and center in the minds of American voters, but they are decades away from a Republican party that has ridiculed them as liberal hoaxes.
UPDATE 2: Errington Thompson has additional thoughts on Romney at LiberalOasis.