The auto bailout loans announced by the White House this morning, and those expected to be unveiled tomorrow by Ottawa, call for among other things wage and work rule concessions that will make unionized auto workers "competitive" with foreign auto makers by the end of next year.
Which foreign auto workers?
The non-union Honda workers at the Greensburg, Indiana plant that earn $14.84 per hour (all figures in U.S. dollars)? Or the Toyota workers in Georgetown, Kentucky earning $27-$30 per hour? Or the Kia workers now being hired in rural west Georgia for $14.90 an hour? Or the Toyota workers in the Prius factory set to open in Blue Springs, Mississippi? They are expected to earn about $20 an hour in 2010?
It's certain that if the Detroit-based auto industry is to survive, the United Auto Workers and the Canadian Auto Workers will be taking a pay cut above and beyond anything already negotiated. But how big a pay cut? What's the number? Will it be an average of what all the workers at foreign-owned plants earn right across the United States and Canada? Just the U.S.? Will Mexico, a NAFTA country and one with a decent-sized auto industry, also be included?
Here is an equally important question: Will the "wage" reflect just hourly earnings of auto workers, or will it reflect the total hourly labour costs to the car companies taking bailout money. The distinction matters.
If the wage number reflects mere hourly earnings, the unionized workforce is close to being in the same wage ballpark as the non-union workers at the best-paid plants - about $28 an hour. The UAW's new contract also includes a clause that stipulates that new workers will get $14 an hour as the contract is phased in.
So let's be clear: New workers in union shops are slated to be paid about the same, perhaps a bit less, than new workers at non-union plants. And existing union workers are being paid about the same as the best paid non-union workers.
Surprised? Surely you have read that auto workers for Detroit-based car companies earn $70 an hour, correct? You might have read it in the New York Times or any number of other publications - even here in the Globe and Mail.
But what that number actually reflects is the wage cost of unionized workers. Felix Simon explains what is going here in a posting on portfolio.com. 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.
The actual numbers: GM's hourly labor costs are calculated by dividing the financial obligations paid to more than 700,000 workers, retired workers and surviving spouses divided by the actual hours worked by about 180,000 GM workers on the job today. That's where the $70 an hour numbers comes from; that's how a wage of $28 an hour becomes a labour cost of $70 an hour.
It's worth remembering that health care costs for the Detroit auto companies are coming out of that calculation based on the new UAW agreement that moves health care to a UAW-run trust. Health care is worth about $5-billion a year to GM alone, so this is no small number. The new UAW deal, then, takes a big whack at that $70 an hour labour cost.
In any case, the question remains: in these bailout deals are we talking about hourly earnings or hourly costs?
As for the uniquely Canadian perspective, the CAW has refused wage concessions similar to those agreed to by the UAW and continues to do so in public. And because we have a nationalized health care system, there has been no health care deal in Canada similar to the cost-saving one struck by the UAW with the Detroit-based auto companies.
I expect you can see the problem facing the Canadian and Ontario governments who have signaled they will match on a relative basis whatever help the U.S. government gives the Detroit car industry.
Not only do government officials - offering help on behalf of taxpayers - need to define whether the discussion revolves around hourly earnings or hourly costs, they also face a CAW with a very different and apparently less flexible approach than the UAW.
