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Free Market Project

2/18/2006 7:15:52 PM

Updated 01/25/06

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‘In Depth’ Report on Detroit’s Woes Skirts Heavy Union Costs
NBC’s Thompson skipped the millions spent on paying laid-off UAW members.

By Ken Shepherd
Free Market Project
Jan. 25, 2006

Send this page to a friend! (click here)     Covering recently announced layoffs at Ford, the evening newscasts have ignored the role labor union costs have played in the number two automaker’s woes. The January 24 “NBC Nightly News” report filed in the “In Depth” segment on the auto industry came close, but still skipped over the issue. Reporter Anne Thompson left out the millions of dollars domestic auto companies lose annually paying laid-off workers.

     “Patriotism has been replaced by pragmatism. Americans bought 6.8 million foreign vehicles last year,” NBC’s chief financial correspondent lamented before presenting Csaba Cbeba of Car and Driver magazine who argued that Ford (NYSE: F) and General Motors (NYSE: GM) “have to be better than the foreign competition to really get the sort of attention that's going to supercharge those sales.”

     Beyond the need for Detroit to produce better cars, Thompson added that “some believe no matter how many plants and jobs Detroit cuts, what the Big Three really need is a new deal with the United Autoworkers Union that reduces retirement and health-care costs.”

But rather than delving further into the issue as the “In Depth” tag for her segment would suggest, Thompson avoided mentioning the hefty price tag Ford’s jobs bank program generates. Instead she chalked up foreign advantage to non-union plants “with younger, cheaper workers.”

     But on Jan. 23, the Detroit Free Press reported that Ford is already paying more than 1,000 former employees in its jobs bank, running up a tab of $140 million a year.

     Ford is hardly the only company saddled with heavy costs from jobs banks, which were established by Detroit automakers as a concession to the United Auto Workers (UAW) union in the mid-1980s. In the Oct. 17, 2005, Detroit News, reporter Bryce Hoffman noted that General Motors had 5,000 such workers while auto parts maker Delphi was losing $400 million-per-year on its 4,000 former workers in its jobs bank.

     Other media outlets have recorded the heavy cost of labor unions on Detroit’s profitability. On Dec. 19, National Public Radio’s Diane Geng compared among other things average hourly pay, health care, and labor costs between Toyota (NYSE: TM) and General Motors, the number two and number one car companies in worldwide sales volume, respectively.

     Geng found that while paid less on average, non-skilled assembly line workers at Toyota still earn on average $27-an-hour, or more than $56,000 yearly, well above the median wages for Kentucky, California, Alabama, West Virginia, and Indiana, where
most Toyota cars and engines sold in the United States are produced. Of those states, only Alabama is a right-to-work state.

     Toyota spends an average additional $21 an hour in benefits for its employees.


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