Letter to the editor:

A real-world look at retiree benefits

Graham H. Tye, North Las Vegas

Tuesday, Dec. 16, 2008 | 2:03 a.m.

An editorial in Sunday’s Las Vegas Sun (“A real outrage”), referring to the argument centering on auto production labor costs (Big Three: $70; American-based foreign car companies: $30), states: “That $70 an hour includes the amount the Big Three pay for health care for their thousands of retirees, a cost the foreign automakers don’t have.”

But whichever column of the balance sheet you put the dollars in, retiree costs are a real and significant factor contributing to the Big Three’s production cost disadvantage vis-a-vis their foreign competitors. Since they cannot be ignored, should retiree costs, along with other production costs, be adjusted?

An autoworker interviewed recently on a television news program felt, understandably, entitled to the benefits he had earned through 35 years of work in the industry. But there are tens of thousands of people who, having worked for 35, 45, 55 years, also feel entitled to the benefits they’ve earned.

Unfortunately, today’s financial reality has robbed them as their savings/retirement incomes have disappeared in the “financial meltdown.”

Are autoworkers, current and retired, to blame for this? No, and nor are non-autoworkers.

Are autoworkers, current and retired, a special case entitled to a protection from adversity not enjoyed by others, yet paid for by them? No.

Discussion: 11 comments so far…

By LasVegasRocks

12/16/08 at 4:01 a.m.

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"Are autoworkers, current and retired, a special case entitled to a protection from adversity not enjoyed by others, yet paid for by them? No."

Not sure how an autoworker, current or retired, who is working for wages and benefits, becomes a special case "paid for by others." Autoworkers - just like all other workers - are paid for work accomplished, period. The consumer pays, period. When autoworkers are paid (some $35-$40/hour ... not the misleading $70/hour that corporate managers or disingenuous southern Senators would like you to believe), money is set-aside for benefits. This "benefit" money is invested for pensions and retiree health-care. There is no "paid for by others." There are no special cases.

A quick lesson in economics: this is not the same as stockholders, who, by the very nature of their investment, can gain (the price of the stock goes up) or lose (the price of the stock goes down) as others pay the company for goods and services. I applaud those who (especially in there trying time) make money.

Don't be fooled that the autoworkers are "special." Likewise, don't be fooled that company directors and managers are not liable. Just like the financial industry executives wants taxpayers to believe the banking collapse is due to solely on faulty mortgage loans (it's really BANKING INDUSTRY GREED), the Big 3 - and disingenuous southern Senators - want you to believe that the autoworkers' wages and benefits are to blame (it's really mismanagement and subsidies provided to foreign automakers by their governments).

This particular fiasco is nothing more than a modern day attempt (specifically by those disingenuous southern Senators) at union busting and, in turn, an effort to reduce wages and benefits for the middle and lower classes.
By uddeboda

12/16/08 at 8:14 a.m.

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$70 an hour which includes all sorts of benefits is still "ginormous"

Comparing this to the Swedish car worker who earns $22 an hour, and the company pays in to the state a further 31%, $6.82 which pays for the workers health, dental care, state pension, higher education etc.

If we look at the workers taxes, a Volvo worker will pay about 31% of his wage in tax, assuming he has no tax reductions at all. All workers have a personal allowance, and if they are living with a mortgage then the interest paid is deductible, as are all interests paid, so the usual income tax is about 22%, leaving $17.16 of his wage. We dont have diff state taxes, but we have the same nationwide VAT taxes, food 12% other items 25%, this figure is very similar across Europe.
We of course do not have to buy medical insurance, education is completely free no matter what age you are, and one even gets a substantial monthly sum to help with lodgings food etc etc.
Despite the difference in wages from coutry to country and what one gets back from the taxes one pays, it would appear that the USA car workers get extremely high wages. I read an article on CNN website, saying that a USA school bus driver gets paid $8.60 an hr, I mean this is like the minimum wage??
By Houstonjac

12/16/08 at 9:58 a.m.

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This is in response to numerous editorial and reader comments printed in the Las Vegas Sun regarding the US automaker bailout. The left lives in fear all the time in these matters, and will not accept the reality of the fundamentals that exist in both the marketplace(supply and demand)and within each firm (revenue, cost, profit, productivity). These fundamentals(not fear tactics) dictate how businesses must behave to survive.

The Big Three auto makers have been defying these fundamentals for decades and need to reform and restructure in order to survive. Total labor costs--wages plus labor burden such as fringe and retirement costs- are out of alignment with the fundamentals of their marketplace. They also must downsize their product lines, and plants.

A bailout will not prevent layoffs. Bank of America received a $25 billion TARP payment and then announced a layoff of 35,000 employees. That's because B of A is attempting to run its business by the fundamentals.

The US car makers need to get their internal steering mechanisms right. These are out of alignment with the real fundamentals in their market. John Ensign is smart and he is on the right track with his proposal. Why should US car maker employees get preferential treatment over other employees in other industries during times of an economic downturn--they shouldn't. It has already been stated above that recipients of TARP funds like B of A layoff employees to reach necessary equilibrium between external market fundamentals, and their internal operating metrics.

It is wrong to compare the TARP funds and their use with the car maker bailout. TARP is designed to thaw out the credit markets in general--it is an macroeconomic program. The proposed automaker bailout is designed to save individual firms, all who have known highly flawed business models--it is a microeconomic initiative.

John Ensign made a proposal to allow these companies to go into a Chapter 11 bankruptcy where they would be forced to restructure/reorganize under the direction of bankruptcy judges who would force them to restructure their business models. Ensign did not propose that these businesses be forced to shut down and liquidate, and layoff all their workers. Ensign's plan would remove the oversight of the restructuring from politics, and substitute business judgement instead. Ensign's proposal would allow the use/lending of taxpayer money to guarantee warranty obligations, and to help in the repayment of debtor obligations. That's a legitimate and ultimately better option than using taxpayer money to finance a temporary bailout with no long term changes that would allow the car makers to permanently survive.
By jfnance32

12/16/08 at 10:32 a.m.

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In 2007 GM sold around 9.3 million in cars and it takes them around 33 labors hours to make one car. ($71 per labor cost per car - $44 per labor cost per car) * 33 labors hours * 9.3 million cars/trucks = $8.3 billion competitive disadvantage per YEAR

For each $10 in labor hour savings GM can achieve them $3 billion a year in cost savings. Do that for all the big 3 then you are taking about $9 billion per year in labor cost savings for all of them.

Yes, UAW should agree to immediately reduce their wages and benefits to match what US auto workers make in Japanese plants. This is still way above what most blue collars workers get in the USA.

Also, they should agree to reduce the future retirement benefits so when they retire it will not be a big burden on the company.

Lastly, current retirees should reduce subidizes that they are getting for private health care plans. It is not the taxpayer duty to fund somebody else platinum health car plan.

UAW should do this because it is in their best interest to do so. It is highly unlikely that GM or Chrsyler will survive after 5-10 years even with these labor savings and with the bailout money. If UAW wants GM or Chrsyler to have a half-a-chance to survive then they should agree to these reasonable request.

Taxpayers, their children and their children's will be paying on debt that will be used to pour money down these money losing operations.

We, the taxpayers, are not making an unreasonable request. If you want taxpayers' money to be pour down the drain into doomed companies then UAW members need to make some reasonable concessions.
By jfnance32

12/16/08 at 10:34 a.m.

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http://www.thelocal.se/10402/20080311/

"Based on figures taken from the tax authorities in both countries, Danes now have a tax burden of 48.4 percent, compared to 47.8 percent for Swedes."
By uddeboda

12/16/08 at 10:55 a.m.

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jfnance,

YEP!!

However, I still own my own home, a holiday cabin, 2 Mercs, and take a couple of hols a year in Thailand, not bad on only 52.2%
By KDR81

12/16/08 at 2:56 p.m.

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The Big Three pay retirees by forcing younger workers to work at lower pay and or forcing consumers to buy cars that are more expensive.

The foreign manufactures pay retirees through market driven programs, not the backs and wallets of current workers and consumers.
By Future2012

12/16/08 at 3:45 p.m.

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This is a tiring debate.

I will only by the best value car.

I will vote with my wallet.

So if the big three and the Union does get after it.

We just want the Bridge loan back.
By uddeboda

12/16/08 at 11:50 p.m.

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The foreign manufactures pay retirees through market driven programs, not the backs and wallets of current workers and consumers.

KDR 81,

Please explain what you mean by this statement.
By pbatour

12/27/08 at 5:52 p.m.

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I get $3700 a month, full medical and dential, and a 2% pay raise every year. That ain't much for 22 years. Bill W.
By pbatour

12/27/08 at 6:03 p.m.

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That's retirement, I am refering to above, plus ss when I get 62. You see the benifits are not no good.