Friday, May 8, 2009
Thursday, December 4, 2008
How the bankruptcy of the Big Three will save manufacturing in the U.S.
The Problem
The main problem is the cost structure of the Big Three automakers is 30% higher than their competitors, and that is what is making them uncompetitive in the auto industry.(1)
Over the past 30 years, as Toyota and Honda and other foreign manufacturers began to gain market share in the U.S., the Big Three automakers had a choice between: fiscal discipline or buying union votes - and after decades of buying the support of the UAW - the Big Three find themselves stuck in the incredible mess that they created.
Labor Costs
The U.S. manufacturers pay significantly higher labor costs, approx $25-30 more per hour, than Toyota, Honda and Nissan ($48 in labor costs per hour). (2)
GM's per hour labor cost is $73.26. Of this figure, $39.68 is in the form of wages, while $33.58 is in the form of benefits and government-mandated programs.(3)(4)
Ford ($70.51) & Chrysler ($75.86) are in the same boat as GM.(5)
Legacy Retirement & Health Care Costs
In addition to exorbitant per hour labor costs, the Big Three automakers are saddled with an $100 billion in legacy and health care costs for 400,000 retirees (former workers who are no longer producing cars).(6)
Job Bank
On top of immense labor costs and retiree legacy costs, when the Big Three automakers layoff workers - these UAW workers are placed in a "job bank" and the companies are forced to pay 95% of their salary for 2 years if they cannot find a position at another facility for them (or the worker declines the position offered).
Last year alone, the Big Three spent a half-billion dollars to fund idle workers in the job bank. Both GM & Ford had over 1,400 workers in the job bank in 2007, while Chrysler had half that amount.(7)(8)
Work Rules & Labor Contracts
Last but certainly not least, are inflexible job rules and an enormous labor contract that dictates what the companies "are and are not allowed to do" within an inch of their corporate lives.
How will the bankruptcy of the Big Three will save manufacturing in the U.S.?
Bankruptcy Keeps the Company's Doors Open - Not Closed
Too many people hear the word "bankruptcy" and think of closed doors. But in reality, the purpose of bankruptcy is to restructure operations in an attempt to keep the doors open.
If the Big Three were to go into bankruptcy proceedings, as a price for bankruptcy protection, the bankruptcy court would require that the Big Three automakers restructure their labor contracts with the UAW to make them more competitive as compared to foreign competition.
Pattern Bargaining
Collective bargaining in an industry usually follows one of two paths:
* Small to Large - The small fish settle first, and each larger unit receive a "cost + plus differential" contract. For example, in education, a small rural school district would settle first with the union and this would be the "minimum level" for all the rest of the contracts. The larger school districts would come to the table and the union would seek a settlement that is proportionally larger due to its' larger size school district.
* Large to Small - The large fish settles first, and each smaller unit receives a "cost - minus differential" contract. Converse to the prior example, in this case the largest school district would settle first for the "maximum" amount, and subsequent settlements with smaller school districts would be proportionally smaller than that received by the largest school district.
In the auto industry, the pattern for collective bargaining has always been the UAW settles with the Big Three automakers first, and then the suppliers, and then finally ancillary organizations.
So the Big Three-UAW labor contracts set the "maximum" level of pay and benefits in the auto industry. No parts supplier could expect to be paid more than the going rate for those working in the Big Three.
The Big Three-UAW labor contracts established the wage structure for the entire U.S. manufacturing sector
The key is: the Big Three-UAW labor contracts not only established the "maximum" level of pay and benefits for the auto industry - but given the strength of the auto industry - it also set the wage structure for the entire manufacturing sector in the U.S.
So the "maximum" level of labor costs set by the Big Three - would impact far more than just their suppliers and support organizations; it would also set the "max" wages/benefit rates for workers in any manufacturing environment in the U.S.
Therefore, the wage structure of ordinary machinists, steelworkers, electricians, etc in the manufacturing sector were a function of the wage rates established in the UAW's contracts with the Big Three.
Bankruptcy of the Big Three will save manufacturing in the U.S.
Manufacturing is a primary driver of the health of the U.S. economy.
But due to an uncompetitive wage structure, the U.S. has seen the loss of over 3 million manufacturing jobs to foreign locales.9
Since the labor contracts of the Big Three automakers established the wage structure of the manufacturing sector of the U.S., and this wage structure is now uncompetitive and resulting in the off-shoring of millions of manufacturing jobs - it is imperative for the survival and future of the manufacturing sector, a primary driver of the U.S. economy - that the Big Three automaker go through bankruptcy to restructure their uncompetitive labor contracts, in the hopes of setting a new competitive wage structure for manufacturing in the U.S.
The main problem is the cost structure of the Big Three automakers is 30% higher than their competitors, and that is what is making them uncompetitive in the auto industry.(1)
Over the past 30 years, as Toyota and Honda and other foreign manufacturers began to gain market share in the U.S., the Big Three automakers had a choice between: fiscal discipline or buying union votes - and after decades of buying the support of the UAW - the Big Three find themselves stuck in the incredible mess that they created.
Labor Costs
The U.S. manufacturers pay significantly higher labor costs, approx $25-30 more per hour, than Toyota, Honda and Nissan ($48 in labor costs per hour). (2)
GM's per hour labor cost is $73.26. Of this figure, $39.68 is in the form of wages, while $33.58 is in the form of benefits and government-mandated programs.(3)(4)
Ford ($70.51) & Chrysler ($75.86) are in the same boat as GM.(5)
Legacy Retirement & Health Care Costs
In addition to exorbitant per hour labor costs, the Big Three automakers are saddled with an $100 billion in legacy and health care costs for 400,000 retirees (former workers who are no longer producing cars).(6)
Job Bank
On top of immense labor costs and retiree legacy costs, when the Big Three automakers layoff workers - these UAW workers are placed in a "job bank" and the companies are forced to pay 95% of their salary for 2 years if they cannot find a position at another facility for them (or the worker declines the position offered).
Last year alone, the Big Three spent a half-billion dollars to fund idle workers in the job bank. Both GM & Ford had over 1,400 workers in the job bank in 2007, while Chrysler had half that amount.(7)(8)
Work Rules & Labor Contracts
Last but certainly not least, are inflexible job rules and an enormous labor contract that dictates what the companies "are and are not allowed to do" within an inch of their corporate lives.
How will the bankruptcy of the Big Three will save manufacturing in the U.S.?
Bankruptcy Keeps the Company's Doors Open - Not Closed
Too many people hear the word "bankruptcy" and think of closed doors. But in reality, the purpose of bankruptcy is to restructure operations in an attempt to keep the doors open.
If the Big Three were to go into bankruptcy proceedings, as a price for bankruptcy protection, the bankruptcy court would require that the Big Three automakers restructure their labor contracts with the UAW to make them more competitive as compared to foreign competition.
Pattern Bargaining
Collective bargaining in an industry usually follows one of two paths:
* Small to Large - The small fish settle first, and each larger unit receive a "cost + plus differential" contract. For example, in education, a small rural school district would settle first with the union and this would be the "minimum level" for all the rest of the contracts. The larger school districts would come to the table and the union would seek a settlement that is proportionally larger due to its' larger size school district.
* Large to Small - The large fish settles first, and each smaller unit receives a "cost - minus differential" contract. Converse to the prior example, in this case the largest school district would settle first for the "maximum" amount, and subsequent settlements with smaller school districts would be proportionally smaller than that received by the largest school district.
In the auto industry, the pattern for collective bargaining has always been the UAW settles with the Big Three automakers first, and then the suppliers, and then finally ancillary organizations.
So the Big Three-UAW labor contracts set the "maximum" level of pay and benefits in the auto industry. No parts supplier could expect to be paid more than the going rate for those working in the Big Three.
The Big Three-UAW labor contracts established the wage structure for the entire U.S. manufacturing sector
The key is: the Big Three-UAW labor contracts not only established the "maximum" level of pay and benefits for the auto industry - but given the strength of the auto industry - it also set the wage structure for the entire manufacturing sector in the U.S.
So the "maximum" level of labor costs set by the Big Three - would impact far more than just their suppliers and support organizations; it would also set the "max" wages/benefit rates for workers in any manufacturing environment in the U.S.
Therefore, the wage structure of ordinary machinists, steelworkers, electricians, etc in the manufacturing sector were a function of the wage rates established in the UAW's contracts with the Big Three.
Bankruptcy of the Big Three will save manufacturing in the U.S.
Manufacturing is a primary driver of the health of the U.S. economy.
But due to an uncompetitive wage structure, the U.S. has seen the loss of over 3 million manufacturing jobs to foreign locales.9
Since the labor contracts of the Big Three automakers established the wage structure of the manufacturing sector of the U.S., and this wage structure is now uncompetitive and resulting in the off-shoring of millions of manufacturing jobs - it is imperative for the survival and future of the manufacturing sector, a primary driver of the U.S. economy - that the Big Three automaker go through bankruptcy to restructure their uncompetitive labor contracts, in the hopes of setting a new competitive wage structure for manufacturing in the U.S.
Friday, November 14, 2008
Who Really Is The Selfish One?
A news story in the final days of the 2008 Presidential election, Obama called those who had the audacity to criticize his "spread the wealth" comment as "selfish."
I find Obama's comment to be absolutely ironic.
* Does he not know that America's capitalist economic system is based upon "enlightened self-interest?"
Enlightened self-interest is the gasoline that the U.S. economy runs on - without it the market would cease to exist.
With views like this, it is scary to think Obama will soon have control over the levers of intervention in the economy.
* Does he not know that Americans work awfully hard for their money, it is there's and they are free to use it as they see fit.
So President-Elect Obama the real selfishness, is the selfishness of you and fellow Democrats who expect Americans to constantly pay more and more in federal taxes to fund a ever-increasing big government.
Now Obama wants to "wait" to give taxpayers the tax cut he promised them on the campaign trail.
Sounds like more selfishness to me.
I find Obama's comment to be absolutely ironic.
* Does he not know that America's capitalist economic system is based upon "enlightened self-interest?"
Enlightened self-interest is the gasoline that the U.S. economy runs on - without it the market would cease to exist.
With views like this, it is scary to think Obama will soon have control over the levers of intervention in the economy.
* Does he not know that Americans work awfully hard for their money, it is there's and they are free to use it as they see fit.
So President-Elect Obama the real selfishness, is the selfishness of you and fellow Democrats who expect Americans to constantly pay more and more in federal taxes to fund a ever-increasing big government.
Now Obama wants to "wait" to give taxpayers the tax cut he promised them on the campaign trail.
Sounds like more selfishness to me.
The Hidden 3rd Option
Here is the break-down of the Madison debate over the hotel tax.
The City of Madison has a 9% hotel tax that is expected to bring in about $8.77 million in revenue this year.
Economic Development, Small Businesses, Monona Terrace & the Greater Madison Convention and Visitors Bureau
20% of the hotel tax (about $1.76 million) is earmarked for "destination marketing" or marketing conducted by the designed Greater Madison Convention and Visitors Bureau to attract visitors to Madison.
$5.1 million is set aside for supporting the operation of the Monona Terrace Convention Center.
Another $690,000 is put in a "rainy day" reserve.
In an effort to generate more visitors and business for Madison, small businesses in Madison, the Monona Terrace and the Greater Madison Convention and Visitors Bureau want the percentage earmarked for destination marketing to be increased to 35%.
Mayor Dave & City of Madison
A little less than another 20% goes to the city of Madison (about $1.2 million) to offset operating expenses in the city's budget.
But Madison's Mayor Dave Cieslewicz has a bunch of "big idea liberal projects" burning a hole in his pocket - so he wants to increase the percentage of the hotel tax earmarked for the city by $500,000 to $1 million a year.
The Hidden 3rd Option
I want to throw out a hidden 3rd option - Increase tourism in Madison by reducing the hotel tax, which will reduce the cost for visitors, which will allow more people to visit Madison and give them more discretionary money to spend while in town.
I find it ironic that "big government liberal Mayor Dave" is pushing his proposal under the guise of "property tax relief" yet he isn't cutting a check to Madison property tax payers.
Rather instead, the hotel tax money is being used to pay for the cost of Mayor Dave's big government ideas.
Visitors to Madison worked hard to earn their money, instead of using the hotel tax to fund Mayor Dave's big government ideas, let visitors keep more of their money and I bet you'll see most of them will spend it locally as they walk through the stores on State Street.
The City of Madison has a 9% hotel tax that is expected to bring in about $8.77 million in revenue this year.
Economic Development, Small Businesses, Monona Terrace & the Greater Madison Convention and Visitors Bureau
20% of the hotel tax (about $1.76 million) is earmarked for "destination marketing" or marketing conducted by the designed Greater Madison Convention and Visitors Bureau to attract visitors to Madison.
$5.1 million is set aside for supporting the operation of the Monona Terrace Convention Center.
Another $690,000 is put in a "rainy day" reserve.
In an effort to generate more visitors and business for Madison, small businesses in Madison, the Monona Terrace and the Greater Madison Convention and Visitors Bureau want the percentage earmarked for destination marketing to be increased to 35%.
Mayor Dave & City of Madison
A little less than another 20% goes to the city of Madison (about $1.2 million) to offset operating expenses in the city's budget.
But Madison's Mayor Dave Cieslewicz has a bunch of "big idea liberal projects" burning a hole in his pocket - so he wants to increase the percentage of the hotel tax earmarked for the city by $500,000 to $1 million a year.
The Hidden 3rd Option
I want to throw out a hidden 3rd option - Increase tourism in Madison by reducing the hotel tax, which will reduce the cost for visitors, which will allow more people to visit Madison and give them more discretionary money to spend while in town.
I find it ironic that "big government liberal Mayor Dave" is pushing his proposal under the guise of "property tax relief" yet he isn't cutting a check to Madison property tax payers.
Rather instead, the hotel tax money is being used to pay for the cost of Mayor Dave's big government ideas.
Visitors to Madison worked hard to earn their money, instead of using the hotel tax to fund Mayor Dave's big government ideas, let visitors keep more of their money and I bet you'll see most of them will spend it locally as they walk through the stores on State Street.
Oh Kathleen when will you see the light?
The Dane County Executive Kathleen Falk continues to spend millions of dollars a year to buy up swampland and old farm fields (under the guise of reducing urban sprawl).
While Dane County Sheriff Dave Mahoney struggles in a nationwide manhunt for a dangerous and deadly killer due to limited financial resources.
In the next election, let's put it to a vote - put the decision in the hands of Dane County voters.
What would you use those millions of dollars annually in tax dollars for?
Option A.) Buying more swampland.
Option B.) Protecting innocent citizens from dangerous and deadly individuals.
I think the answer is clear.
While Dane County Sheriff Dave Mahoney struggles in a nationwide manhunt for a dangerous and deadly killer due to limited financial resources.
In the next election, let's put it to a vote - put the decision in the hands of Dane County voters.
What would you use those millions of dollars annually in tax dollars for?
Option A.) Buying more swampland.
Option B.) Protecting innocent citizens from dangerous and deadly individuals.
I think the answer is clear.
Capital Times' Swiftboating of Paul Ryan
Wisconsin has one of its' own in the running for the minority leader of the U.S. House of Representatives.
But instead of being proud, the communist-manifesto Capital Times newspaper has decided to swiftboat Paul Ryan's bid for the position.
Marx's newspaper criticizes him for his free-trade policies, calling them "backward and destructive economic approaches espoused by the Wall Street Journal and most of his (Republican) caucus colleagues."
The paper went on to mock him for having a plan to keep companies for outsourcing jobs overseas.
Apparently, the Capital Times hasn't figured out that the best recipe for outsourcing jobs abroad - are the policies the paper has been promoting for the past century: high taxes, excessive government regulation and intervention in the economy.
Paul Ryan has a plan to reform corporate tax rates and provide incentives for companies to keep jobs domestically - so I fail to see what the Capital Times has a problem with? Keeping companies and jobs in America? Most likely they just can't admit that their policies push companies to outsource jobs abroad.
But instead of being proud, the communist-manifesto Capital Times newspaper has decided to swiftboat Paul Ryan's bid for the position.
Marx's newspaper criticizes him for his free-trade policies, calling them "backward and destructive economic approaches espoused by the Wall Street Journal and most of his (Republican) caucus colleagues."
The paper went on to mock him for having a plan to keep companies for outsourcing jobs overseas.
Apparently, the Capital Times hasn't figured out that the best recipe for outsourcing jobs abroad - are the policies the paper has been promoting for the past century: high taxes, excessive government regulation and intervention in the economy.
Paul Ryan has a plan to reform corporate tax rates and provide incentives for companies to keep jobs domestically - so I fail to see what the Capital Times has a problem with? Keeping companies and jobs in America? Most likely they just can't admit that their policies push companies to outsource jobs abroad.
Thursday, November 13, 2008
Katy Bar the Door
Pro-Life values are under severe attack at both the national and state level.
National
At the national level, last week, voters elected "the most radical pro-abortion politician ever to serve in the United States Senate or to run for president."
Last year, Obama told Planned Parenthood that on his first day in office as the President he intends to sign the Freedom of Choice Act which would throw out all state laws on parental notification and any other limitations of abortion on demand.
This week, news reports surfaced that Obama plans to sign executive orders that would:
* Overturn the Bush ban on federal funding for groups that perform abortions abroad (aka the Mexico City policy).
* Overturn the Bush ban on new federal funding for embryonic stem cell research.
* Overturn the Bush ban on federal funding of abortions and abortion counseling domestically.
Wisconsin
In Wisconsin, Democrats are now in control of the Governor's office and both houses of the legislature.
Of course, at the top of the Democrats list is a repeal WI's abortion law.
Funny, I don't remember the Democrats talking about repealing WI's abortion law when they were on the campaign trail looking to get re-elected.
Why didn't they you ask? Because WI Democrats realize that if they did - they wouldn't get re-elected.
So Democrats talk about bread-and-butter issues on the campaign trail in the hopes of getting elected - but once in office, they push through their liberal, pro-abortion social agenda.
National
At the national level, last week, voters elected "the most radical pro-abortion politician ever to serve in the United States Senate or to run for president."
Last year, Obama told Planned Parenthood that on his first day in office as the President he intends to sign the Freedom of Choice Act which would throw out all state laws on parental notification and any other limitations of abortion on demand.
This week, news reports surfaced that Obama plans to sign executive orders that would:
* Overturn the Bush ban on federal funding for groups that perform abortions abroad (aka the Mexico City policy).
* Overturn the Bush ban on new federal funding for embryonic stem cell research.
* Overturn the Bush ban on federal funding of abortions and abortion counseling domestically.
Wisconsin
In Wisconsin, Democrats are now in control of the Governor's office and both houses of the legislature.
Of course, at the top of the Democrats list is a repeal WI's abortion law.
Funny, I don't remember the Democrats talking about repealing WI's abortion law when they were on the campaign trail looking to get re-elected.
Why didn't they you ask? Because WI Democrats realize that if they did - they wouldn't get re-elected.
So Democrats talk about bread-and-butter issues on the campaign trail in the hopes of getting elected - but once in office, they push through their liberal, pro-abortion social agenda.
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