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According to CNN and other news sources, the CEOs of the Big Two and a half have agreed to salaries of $1 for 2009 if the government hands over the $25 billion in aid that they seek. As Swade and others have said, this won’t be a difference maker in the long run, although it’s nice of them to make the gesture.
Rick Waggoner made $15.7 million in salary in the last complete GM fiscal year.
Alan Mulally made $22.8 million in salary in the last complete Ford fiscal year.
Robert Nardelli’s salary isn’t publicly known since Chrysler is, ostensibly, private.
Even if Mr. Wagoner forgoes his salary, and Maximum Bob Lutz and all of their cronies over at GM took $1 million pay cuts in 2008, how much would that help? For argument’s sake, let’s assume that about 20 or so executives at GM (other than Mr. Wagoner) make enough money each year that they could pony up a $1 million pay cut in 2009. That would be $35.7 million returned to the coffers next year. For the 74,000 UAW employees in GM’s employ, that amount would buy another 6.3 hours of pay for each UAW worker at the current rate of $77 per hour. It doesn’t even buy another day of operating cash!!
Even if we expand the executive pay cuts and reduction in executive privileges to $100 million in savings for 2009 (a number that likely exceeds reality), that only buys 17.6 hours of employment for all UAW workers employed by the General. Just over two additional days of operation.
On the other hand, if the UAW cuts to the same pay structure that Toyota workers in Georgetown, Kentucky or Honda workers in Marysville, Ohio enjoy, that’s a $30 per UAW employee per hour savings. Multiply that by a standard 40-hour work week year (2080 hours), you’ll derive over $4.6 Billion in additional cash for the corporation. As a point of reference, I estimate that Saab’s annual sales are just below that amount (about 125,000 vehicles at $35,000 per car*). The delta in UAW vs. Toyota pay is, for GM, larger than Saab’s entire budget.
Do I agree with exhorbitant executive pay and privilege? No, I don’t. I don’t think that Rick Wagoner or Alan Mulally are worth anywhere near the amounts that they get paid. For that matter, I hope that the GM board gets their come uppance for steering this company into the rocks in the first place, and those rocks include this inflated executive pay and lifestyle.
However, my point is this: the cost of the UAW is so huge that other cutbacks pale in comparison to the reductions needed there. Yes, cuts are needed across the board, but unless the UAW cuts to a competitive wage, everything else is for naught.
* – Remember that you have to consider that Saab only makes money on dealer cost, not selling price, so I feel that $35,000 per vehicle is about right.
10 responses so far ↓
1 Richard
// Dec 3, 2008 at 5:35 am
Really…? $77 an hour? I knew these unions were out of touch, but that is just ridiculous in the extreme. Stack on top of that the various benefits that GM pays out and I’m guessing the costs are closing in on $100 an hour. Point well made there EnG. There is the Big Three’s loss of advantage. And despite the fact that it is those well paid employees that do support the economy in part by consuming things, there’s going to be far less of them to continue consuming if a change of tack isn’t made very very soon on these sinking ships.
And I wholeheartedly agree that executive remuneration should be tied DIRECTLY to how well the company is performing. Which, in this case, should mean that Wagonner, Mulally and Nardelli should be PAYING OUT to continue captaining these companies.
2 max
// Dec 3, 2008 at 5:53 am
I can tell you in all honesty I don’t know of 1 Saab dealer in the US that would support keeping the Double Cheeseburger for $1.00 at the top of GM….at this point its all small fries…..
3 Bernard
// Dec 3, 2008 at 5:55 am
Richard,
I believe that the $77 per hour includes benefits.
4 eggsngrits
// Dec 3, 2008 at 6:34 am
Yes, the $77 per hour figure includes benefits. $30 per hour delta brings them to $47 per hour, which is about $8 higher than the average non-union auto worker salary.
This, of course, doesn’t do a thing about the suppliers that are all UAW, etc. The number is actually much bigger than $4.6 billion per year. But, hey, it’s a start.
5 detroitsaab93
// Dec 3, 2008 at 6:52 am
Don’t forget the UAW job bank that pays laid off members for sitting around, playing board games and some community service work………What a waste!!!! Retiree pension and health benefits are another real problem that the Big 2.5 deal with that the others don’t.
6 Fredrik
// Dec 3, 2008 at 6:58 am
Official statement from Fritz Henderson:
SAAB IS TO BE SOLD !!!
7 Talonderiel
// Dec 3, 2008 at 7:01 am
I’m a complete novice to corporate law and bankruptcy laws…. But I still think the one benefit from Chapter 11 would be the shedding of the leeches of the UAW. I’m sure I’ll get blasted for this, but it is like most large political entities: The hardworking people that make-up the workforce aren’t the political leaders of the organization slowly driving their employers into the ground. I’m all for the worker but for the Union as a whole… I think they have seen their hay-day. Unions were great when the economy was thriving and the little man needed to be watched for, but at what point to we maintain this facade in tough times for a company?
8 Arnold
// Dec 3, 2008 at 3:37 pm
Good perspective eggsngrits.
9 Paul Guinnessy
// Dec 3, 2008 at 11:25 pm
A reminder that the current GM workers support 4.5 retirees in health benefits and retirement pay, so what you are all calling for, is for the retirees to have their pension slashed by more than 40%.
I’m not disagreeing that there cost structure is high, but I do think there is an built in assumption here that its ok to halve pensioners pay. How would you like that to happen to you?
The cheapest way out of this mess might be for the US to bring about universal health care. That’s probably unlikely in the short term.
10 eggsngrits
// Dec 3, 2008 at 11:32 pm
Paul: That cost has been specifically separated from the $77 per hour figure by the UAW for some time. The real numbers are higher.
Additionally, according to GM and UAW the pension plan is fully funded and has been handed to the UAW to manage. Any pension cuts from early this year forward would come at the hands of the union folks, not GM.