Wednesday, November 19, 2008

Unions, ctd. (& lunch-time link)

[updated, see below]

I've gotten a little push back on my 'unions' post (including one that included the phrase "Earth to John"). Let me be clear. I do not think (nor did I write) that the contracts the unions have with car manufacturers have nothing to do with Detroit's failures -- it is generally accepted and repeated that labor costs make it more costly to produce an American car in Michigan than a Japanese car in Kentucky.

What I do think, however, is that unions are being scapegoated. The primary reason the Big 3 are going under is that they completely misread the market and continued to make cars that no one would want to buy.

Further, let's look at the executive salary structure of the Big 3. According to this article in USA Today, "GM CEO Rick Wagoner earned $9.3 million in salary and bonus in 2006" and "Ford's new CEO, Alan Mulally, got $27.8 million in salary and bonus in his first few months on the job." Now compare that to the Japanese:
Japanese companies are not required to break out salaries and bonuses for top
executives. Instead, they lump them together. Last year, Toyota's top 37
executives earned a combined $21.6 million in salary and bonuses, according to
filings with the Securities and Exchange Commission. U.K. firm Manifest
Information Services, which analyzes proxy information, estimates Toyota's top
executive, Hiroshi Okuda, earned $903,000 in 2006.

So perhaps the Big 3 could save some dough not by cracking down on health care for their unions but rather not paying their apparently incompetent executives so damn much.

I've got no particular love for unions -- I'm not in one and probably never will be. But to blame the collapse of a long-decaying auto industry on a bunch of laborers is scapegoating at its finest.

[update]: Matt Yglesias provides a nice link, noting that the Big 3 Execs aren't exactly doing any belt-tightening as their companies go under.