TRAVERSE CITY, MI – The 2011 United Auto Workers union negotiations in Detroit should avoid the “bad old ways,” says Jim Stanford, economist for the Canadian Auto Workers union.
For him, this includes paying CEOs “$100 million or more, and the people who make the cars can’t afford to buy them,” due to a stagnant North American economy.
Industry observers have a wrong idea if they think lower UAW wages – about $18.50 an hour less for “all-in” costs including benefits – is the reason the auto makers have recovered, Stanford argues.
“A disproportional focus on labor costs misleads people into ignoring deeper structural issues,” he says at the Center for Automotive Research’s Management Briefing Seminars here.
General Motors and Chrysler have saved several billion dollars because wages are lower, but they have saved tens of billions because they have closed plants, reduced employment and lowered their interest payments while in bankruptcy, Stanford says.
And their general and administrative expenses have decreased because they are smaller companies.
Additionally, he says, the Detroit auto makers have raised their average revenue per car sold from $23,500 in 2006, the last year before the 2007 UAW contract, to $28,200 in 2010.
Detroit auto makers have been helped because the yen has appreciated 60% against the dollar since 2007, giving the Americans room to raise prices against Japanese competitors.
The CAW negotiates next year with the three domestic auto makers.