The Truth about UAW Members and the U.S. Auto Industry
The Truth about UAW Members and the U.S. Auto Industry
Q: Are UAW members really paid $73 an hour?
Wages for UAW members at Chrysler,
Ford and GM range from about $14 an hour for newly hired
workers to $28 an hour for assemblers to $33 for skilled
Typical hourly wages at Honda,
Nissan and Toyota are only slightly lower. Due to the
effect of profit-sharing formulas, however, there have
been some recent years in which a typical Toyota worker
has taken home a larger annual paycheck than a typical
The $73 an hour figure is outdated and
inaccurate. It includes not only the costs of health
care, pensions, and other compensation for current
workers, but also the costs of the pensions and health
care benefits of retired employees spread out over the
active workers. Active workers never receive any of this
compensation in any form, so it is not accurate to
describe it as part of their "earnings."
addition, overall labor costs at Ford, GM and Chrysler
were dramatically lowered by mid-contract changes in
2005 and the 2007 UAW labor agreement. As a result of
major changes in retiree health care, lower wages for
newly-hired workers, and other contract concessions, the
labor cost gap between domestic and foreign nameplate
producers will be nearly or completely eliminated. One
independent analyst has projected that GM could soon
have lower labor costs than Toyota. (Detroit Free Press,
January 13, 2008)
Q: Do labor cost make up the
majority of the cost of producing a vehicle?
Labor costs are about 10% of the costs of producing a vehicle. The other 90% includes research and
development, parts, advertising, marketing and management overhead.
Q: But aren't labor costs going up every year, creating an additional burden for Ford,
GM and Chrysler?
As noted above, contract concessions in 2005 and 2007 have actually decreased labor costs at the domestic automakers.
In 2005, for
example, UAW members agreed to forego a 3% wage increase
to contribute to the cost of health care, and health
care benefits were modified for retirees. In 2007 wages
for new hires were reduced by half, and new hires were
excluded from the traditional retiree health care and
defined benefit pension plans.
Also, in 2007 the UAW
and the auto companies reached a landmark agreement that
transferred retiree health care liabilities from the
companies to an independent VEBA fund. The changes in
the 2005 and 2007 contracts reduced the companies'
liabilities for retiree health care by 50%.
the legacy costs at Chrysler, Ford and GM so high
because of rich pension and retiree health care
The main reason that Chrysler, Ford
and GM have higher legacy costs than the foreign
nameplate operations in the U.S. is not because their
retiree benefits are much higher. It's because they have
so many more retirees. Because the domestic auto
companies have been operating in this country for many
years, they have large numbers of retirees. But the
foreign nameplate operations only started operating in
this country 25 years ago, and therefore have very few
In addition, the overwhelming majority of
retirees from Toyota, Nissan, Honda, BMW and Mercedes
live in countries where national health systems spread
the costs of providing health care across the entire
societies. The real solution to the high health care
costs which burden all American employers - not just
automakers -- is the enactment of national health care
In the negotiations with the domestic
automakers in 2007, however, our members realized that
we could not wait for the government to act. We took
action ourselves, addressing retiree health care costs
by establishing an independent trust - called a
Voluntary Employee Beneficiary Association (VEBA) - that
will take over the companies' obligations for providing
retiree health care benefits.
Q: How is the VEBA funded and what impact will it have on company costs?
A: The VEBA will save GM, Ford and Chrysler billions
of dollars by assuming full responsibility for retiree
health care costs. It is funded by employer and employee
contributions, including wage deferrals and modified
Q: Have the UAW "Jobs Bank" and other job security measures prevented domestic auto
companies from "rightsizing" their workforce?
As a result of decreasing market share, each
of the domestic companies has sharply reduced its
workforce. Five years ago, there were approximately
300,000 UAW members working at Chrysler, Ford and GM;
today, that figure has been reduced by half, to fewer
The "Jobs Bank" concept was pioneered
by Japanese auto companies, who have had a no layoff
policy in place for many years. The policies currently
in place at Honda and Toyota, which pay workers full
salary for an indefinite period, are more generous than
job security programs in UAW-negotiated contracts.
With 4,500 workers earning their full paychecks
while its San Antonio truck plant was idle this summer,
Toyota had more workers in its version of the "Jobs Bank" at a single plant than Chrysler, Ford and GM
currently have in all of their factories put together.
Q: Do union work rules make domestic companies less
efficient than their non-union competitors?
According to the latest data from the Harbour Report, an
independent study of factory efficiency, nine of the ten
most efficient auto assembly plants in North America are
union plants, represented by either the UAW or the
Canadian Auto Workers. (Harbour Report 2008, Media
presentation, available at
addition, when factories are compared by vehicle
segments - a compact car plant vs. a compact car plant,
a pick-up truck plant vs. a pick-up truck plant - union
plants are scored as the most efficient in eight out of
nine vehicle segments.
The Harbour Report measures
the number of person hours required to assemble a
vehicle. The results noted above would not be possible
if union work rules caused "bloated" or inefficient
operations on the factory floor.
Q: Since Chrysler,
Ford and GM have closed most of their plants outside of
the Midwest in recent years, won't the effects of the
auto crisis be confined to just a few Midwestern states?
The U.S. auto industry remains a national
industry, purchasing hundreds of billions of dollars of
goods and services from large and small companies in
every state of the union.
The failure of the
domestic auto companies would cause a domino effect that
could lead to the loss of as many as 3 million American
jobs. Workers at thousands of small, medium and large
businesses are at risk, including those who
work at auto suppliers, auto dealers, steel
manufacturers, glass manufacturers, tire companies, and
The failure of the domestic automakers
will lead to the failure of numerous supplier companies,
who will be unable to function without business from one
or more of their principal customers. Because of the
interlocking automotive supply chain, this means that
all automakers - domestic and foreign-based - will be
confronted with a lack of parts and supplies. The
inevitable result will be a catastrophic drop in overall
U.S. industrial production at a time when the U.S.
economy is already in the middle of a severe economic
More than one million retirees, their
spouses and dependents receive pensions and health care
from Chrysler, Ford and GM. In the event of a failure of
the domestic automakers, the retirees will face cuts in
their pensions and will lose their health care benefits.
About forty percent of the retirees are under 65 and
ineligible for Medicare, and thus could join the ranks
of the uninsured.
In addition, the cascade of
business failures that would result from the collapse of
the domestic automakers would lead to the cancellation
of pension plans for hundreds of thousands of workers at
smaller companies, causing a severe strain on the
federal pension insurance program.
The loss of so
many employers and workers would also cause a
precipitous drop in federal state, local tax revenues,
at a time when all levels of government are already
struggling with budget shortfalls and increasing demand
The U.S. economy is already facing a deep, long recession. The loss of one or more major
automakers would cause additional instability, job loss
and business failures. This could turn the current
recession into a depression, and delay any economic
recovery for an indefinite period of time.
(In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. Martin County Democratic Executive Committee has no affiliation whatsoever with the originator of this article nor is Martin County Democratic Executive Committee endorsed or sponsored by the originator.)
BACK TO TOP