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.