mmarshall

I generally don't agree with much of what the Occupy-Wall-Street crowd says. But one issue, IMO, where they may have some credibility is the enormously-wide gap between CEO/Executive pay and that of typical workers/employees, particularly in the auto-industry. Yes, it can be argued that high wages and benefits put a damper on the Big Three's profitability for years. But it also guaranteed that workers could make an adequate living for themselves and their families. And, of course, it also helped insure that workers would have enough in the bank to buy their company's own products. A auto company is in buisness, of course, to sell cars, and, the more it pays its own employees, the more those employees, in turn, can afford to support the company itself by taking home one of those new vehicles right off the assembly-line.

Henry Ford himself, many decades ago, knew this. Even in the days before the UAW, he voluntary paid his factory-people more than the going-rate of his competitors, so that his own employees could take home new Model Ts.....the car, of course, that put America on wheels. Every job-opening at the River-Rouge plant, and at Ford's other facilities, had line of people standing outside, waiting to fill out job-applications for it....everybody wanted to work for Old Henry.

Here's a good article by Car and Driver's Aaron Robinson, from the February 2012 issue:

http://www.caranddriver.com/columns/...hanging-column

Some sympathy is in order for United Auto Workers president Bob King. Here he was last March, about to enter negotiations with the Big Three on labor contracts that were certain to be crap sandwiches for his brothers and sisters on the line, and Ford announces that it’s paying CEO Alan Mulally an extra $56.5 million in stock for doing a good job.

In comedy, timing is everything. At Ford, where 41,000 UAW members have gone without a raise for eight years, timing appears to be irrelevant. “Alan Mulally is a great CEO, but I don’t think any human being in the world deserves that much money,” spluttered King. “It’s outrageous.”
Nobody said a word about executive chairman Bill Ford also being handed $42.4 million in stock for doing nothing more brilliant than firing himself and installing Mulally back in 2006, when the company was headed toward a cliff. Well, Bill’s last name is on the building, which would be the building mortgaged, along with the name on it, by Mulally for the $23.5 billion in loans that narrowly saved Ford.

General Motors and Chrysler missed that money train and, after the banks went bust, collapsed into the arms of the government.  As a condition of the federal bailouts, the UAW is barred from striking at GM and Chrysler until 2015. Since a strike is a union’s only real cudgel, and nobody in Detroit wants to jump up and down on ice made thin by the recession, the UAW’s negotiating position this year was just slightly worse than Custer’s at Little *Bighorn.

Union priorities included profit sharing when there’s profit and a promise for more hiring later. Also important, though, was securing a wage increase for “second-tier” workers, or those hired in recent years at substantially lower pay and benefits under a two-tier system that has spread through the industry like soybean rust.

The two-tier system guards the wages and benefits of older workers at the expense of newer ones, who typically earn about half that of their graying work mates. Thus, employees making about $29 an hour stand next to those making roughly $15. What automakers euphemistically call “entry-level” employees range from 3.5 percent of the hourly  workforce at Ford to 12 percent at Chrysler, but the numbers will climb with retirements. Chrysler says entry-levels will be 25 percent of the force by 2015.

Most automaker suits see the tier system as their salvation from the higher labor costs they’ve long blamed for their lack of competi*tiveness. Many in the rank and file see it as a sellout by the union. Indeed, only a union over a barrel, as the emasculated UAW has been while Detroit burns, would have accepted two tiers in the first place.

Undoubtedly, King & Co. were hot to get second-tier workers a raise both to reestablish credibility in the disgruntled ranks and to establish it in foreign-owned plants where the UAW hopes to crusade for unionization. In their new contracts, the entry-levels at GM and Ford do get a raise over the four years, increasing to almost $20 an hour. However, the vast majority of hourly staff gets no raise despite having surrendered plenty over the past few years in concessions. Those who voted “yes” voted mainly for job security. What choice did they have?

GM’s 48,500 members ratified their contract first, in late September. Ford’s workers eventually said “yes” despite some shop-floor revolts, especially in the Chicago Taurus/Explorer assembly plant. Chrysler’s skilled-trade workers balked, but the union overrode their complaints and declared the contract ratified on October 26. The issue is still in dispute as of this writing.

Both GM and Ford figure their contracts will contain labor costs to an increase of just one percent per year (though prices of food, gas, clothes, and other necessities of life won’t be so bound). Reuters described the GM contract as the “leanest deal that the company has negotiated in four decades with the UAW.” Hey, nobody says Detroit’s CEOs aren’t working hard for their bonuses.

Some idiots believe the world will end in 2012. For Detroit, the actual year of the apocalypse may be 2015, when the strike constraints fall away. If the industry is raking in profits then, much of it will be because of sacrifices made by the workers, and they’ll want payback. “Just wait till 2015” is a popular refrain on union chat boards.

Then there’s this complication: Fiat-Chrysler CEO Sergio Marchionne wants to put toothpaste back in its tube by ending the two-tier wage. The union would love it but not necessarily by Marchionne’s way, which is to inch up pay for entry-level workers while greatly cutting it at the top. Management and labor will bicker over what yard line on which to place the football as surely as the moon *follows the sun. And even if Chrysler scraps two-tier, the tradition of pattern *bargaining dictates that the UAW will be compelled to ask GM and Ford to go along.

Oh, yes, just wait till 2015.

Meanwhile, should you find yourself in a checkout line delayed by somebody *fumbling with food stamps while the kids whimper, be kind to them. Tomorrow they may be assembling your next car.

raptor22

i just think executives in general, regardless of industry, make too much.
<off topic rant> as do sports and entertainment stars <end rant>

LexFather

MX5NES350

Good CEO's are worth every penny and if one business doesn't pay for them then someone else (Foreign or Domestic) will. Same thing goes for Doctors, Lawyers, etc.

Bad CEO's... well they just shouldn't exist if you pay for real performance vs. golden parachutes.

I really did not agree with some or the provisions of the auto CEOs (and their minions) but guess what? That's the way their agreements were written. Can't blame them for taking advantage of stupid people or faovrs owed. It's the American way

mmarshall

Isn't that also the case for workers? But you don't see many of them taking home six, seven, or eight-figure-salaries.

I think part of it is that most positions that high in the corporate world tend to be based more on company-politics than on actual job-performance or competency. You get promoted because of nepotism, smooth-talk, putting on a smokescreen, or because you can brown-nose your superior better than the person next to you.

I think that, to some extent, verifies what I just said above.

spwolf

companies who promote and pay bad managers, dont get good results... companies with great management, get great results.

more irreplaceable you are, better paid you get.

it is really simple.

I have lived in socialist regime where everyone had similar salaries and where everyone lived in same buildings... in some ways it is good, but it does not promote work, it makes people lazy. Which is fine if it doesnt affect production, but it does. It reduces competitiveness greatly. In the end eastern block fell apart because of that, despite free health care, free schools and decent salaries.

i like the american way... if you make yourself important part of the company, you get bigger paycheck. if all you want is to screw a screw, and chinese can do it a lot better than you, then what can be done there? not much.

mmarshall

Problem is.....companies have only so much money to spend. The pie is not limitless. The more they pay their top-dogs(even if those top-dogs do a good job) the less is available for other critical needs in the company, as well as simply meeting day-to-day expenses. Why should a company balk, for example, at the small added-cost of putting some simple things on their vehicles, like I tend to harp about in reviews (body-side mouldings, hood-support-struts, real spare tires, etc.....) when they think nothing of giving a 9-figure salary to their CEO or President?

spwolf

you think investors would not rather pay 6 figure salary to the CEO?

FrankReynoldsCPA

This is why CEO's make so much, particularly the good ones. You need their service, it becomes a seller's market.

LexFather

LOVE IT!!

J.P.

Whatever it was worth to avoid bankruptcy and gov bailouts is what Alan is worth.

Recruiting someone to be a turnaround exec at a $500MM is slim enough in regards to succeeding, let alone an auto giant with top exec problems all the way down to the unions.

Alan may have been 1 of 4 that could have done this, and all of them would have carried the same price tag.

mmarshall

Compared to what they are making today, six figures would be chump-change to most CEOs and top-execs. They are used to making eight and even 9. The question is....is eight and nine actually justified, even for the good ones?

mmarshall

Mulalally is good, no question about it. But half-a-billion dollars? IMO, He could live an incredibly lavish-lifestyle on one-fifth that amount, or even one-tenth. And those extra hundreds of millions not being paid to him could be put to use for other critical company needs....or for a raise for the workers starting out at at some $11 an hour.

J.P.

And everyone on here with a new Lexus could have bought a Ford and donated their money to help others in their community.

When you are 1 of very few that can do something worth billions, you get to name your price, welcome to America.

mmarshall

Have you priced some new Fords lately? A top-line Explorer, with options, can run 50K. And you won't want to know how much a new F-150 King Ranch, with options, can run.


I agree, but that price shouldn't be so high that it can (or does) negatively impact on other needed-funds in the company. One has to think of more than just himself or herself...a CEO's job is not an excuse for an unlimited gravy-train.