[ZTWsquared]

meford4u,Oct 24 2006, 10:58 PM Wrote:And the fact a Japanese worker makes about $1 an hour didn't come into the equation?[right][snapback]213248[/snapback][/right]

Very cute … but hardly accurate and not at all instructive in terms of really trying to understand what’s going on. This is not a simple situation to be condensed into one misleading statement about Japanese workers making a $1 / hour and it shouldn’t be just about the union either.

Assuming that the highly-intellectual denizens of FocusCanada.net are interested, I’ve assembled just a few facts about Ford’s situation (and auto industry in general) that both support and refute the notion that union negotiated benefits are at the heart of the problem NA manufacturers currently suffer.

1) Japanese auto workers in Japan benefit from union representation and they make a lot more than $1 / hour – generally about 85% of what NA workers make; although it is difficult to pin down a number because their system of tiered suppliers is different.

2) Because of Japan’s social structure Japanese auto manufacturers operating in Japan are not saddled with the health care and pension costs that burden their U.S. competitors – very much the same advantage we enjoy here vs. the U.S.

3) On the other hand … Japanese manufacturers pay much higher taxes in Japan than GM, Ford or Chrysler pays in the U.S. – which supports Meford and OAC’s assertion that the problem is with the way the company is run and not with union benefits.

4) But then again … more than 65% of Japanese makes sold in NA are made in NA – which means that it doesn’t really matter how much or how little an auto worker in Japan earns anyway.

5) Most foreign-owned auto plants in the U.S. are non-unionized. Their workers are not as generously compensated as Ford’s workers, but they are relatively well-paid with good benefits. And because their employers are not saddled with the uneconomic pension and healthcare costs of a UAW contract, they can produce cars at a more competitive price. Ford’s toughest competition these days is not from Japan, but from Ohio, Kentucky, Tennessee, Mississippi, South Carolina and Ontario.

6) As I mentioned earlier, healthcare costs alone impose an average cost of about $1,500 per Ford vehicle; and unlike most U.S. private-sector workers, Ford’s unionized workers pay low or no deductibles on their health coverage. In the U.S., hourly Ford workers pay only 7 percent of their total healthcare costs, compared to 27 to 32 percent paid by the average U.S. salaried worker. The differential (20-25%) is an added cost borne by the Company.

7) The East Asian financial crisis of ’97-98 significantly changed the labour scene there, and now the far east (especially the ASEAN-4) is generally a union-hostile environment (governments and industry together) … however the auto products made in that region are generally sold in the region.

8) Having said that … much of the profits made by Japanese companies are generated in these markets; and it is this overall profitability that helps them compete so strongly in the NA market – so there is a case to be made that Japanese makers are taking market share in NA on the backs of workers in Thailand, Taiwan, Malaysia, Philipines, Indonesia etc., etc.

9) Having said that … in these markets GM, Ford and Chrysler operate in the same anti-union way and have the same opportunity as the Japanese makers to profit from this market condition; the difference is they do not have the right product to compete successfully against the Japanese and the Koreans and therefore do not profit much at all.

10) The union’s claim that the problem is the fault of the company is supported by the fact that Toyota once operated in many ways like Ford still does. It was hierarchical, command-and-control driven, and bent on exploiting workers to the maximum legally permissible extent. But Toyota now works differently today and has a much more collaborative relationship with its workers than Ford … and it could be said that this is a significant factor in its profitability.

11) There is a recent theory in business management that says that the “shareholder-driven” business model practiced by Ford (and GM) is outdated and cannot compete with the “stakeholder-driven” business model practiced by the Japanese manufacturers.

The “stakeholder-driven” model seeks to align and serve the interests of all stakeholders – not just shareholders – and seems to generally work better because it leads to a more stable and happier work force (that also costs less), and it also lends itself to quicker responses to challenging changes in conditions that arise, often with little warning – a gasoline price crisis, for example.

Bottom line IMO: the union agreements are significant factors in creating a non-competitive environment for NA manufacturers but certainly not the only factor … and while unions may have to modify their mandates and success metrics as a part of any solution, companies like Ford and GM will also have to make significant changes to their business model if they are to survive, regardless of anything the unions do.