RE: [Pen-l] labor and the auto companies

["David B. Shemano" <dshemano@xxxxxxxxxx>]

A year ago I suggested that the UAW simply buy GM and the employees could then pay themselves whatever they wanted.  The total market capitalization of GM today is around $1.5 billion, which is essentially nothing.  A mind-boggling number for a company that had $165 billion in sales for the past year.  If $1.5 billion is too expensive for the UAW, GM could file chapter 11 and UAW could propose to exchange some claims for the equity and own the reorganized GM.  SOCIALISM NOW!

David Shemano


--- Original Message---
 To: Progressive Economics <pen-l@xxxxxxxxxxxxxxxxxx>
 From: Rudy Fichtenbaum <rudy.fichtenbaum@xxxxxxxxxx>
 Sent: 11/19/2008  9:49PM
 Subject: [Pen-l] labor and the auto companies

>> We keep hearing from conservatives and even a number of liberal
>> commentators that the reason the big three auto companies are not
>> competitive is because of high labor costs due to the fact that their
>> workers are unionized. I just looked at Compensation (Payroll plus
>> Benefits) as a percent of the Value of Shipments for Automobile and
>> Light Duty Motor Vehicle Manufacturing  in the Annual Survey of
>> Manufacturers. Compensation for all workers, not just production workers
>> is about 7.2% of the Value of Shipments. Of course this includes both
>> transplant as well as the "big three." Assume for a moment that GM, Ford
>> and Chrysler accounted for 50% of auto sales and their labor cost was
>> 50% higher than the transplants. That would imply that Compensation for
>> the big three was about 9% of sales compared to 6% for the transplants.
>> That would make labor costs about 7.5% for the industry average. If that
>> were the case and we cut labor costs at the big three in half that would
>> reduce the cost of producing an automobile by 4.5%. Does anyone
>> seriously believe that this would make the big three competitive?
>> 
>> Doesn't this expose the myth that the problems of the big three are due
>> to high labor costs? Am I missing something?
>> 
>> Rudy
>> 
>> --
>> Rudy Fichtenbaum
>> Professor of Economics & Chief Negotiator AAUP-WSU
>> Department of Economics
>> Wright State University
>> Dayton, OH 45435
>> Phone: 937-775-3085
>> Fax: 937-775-2441
>> 
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