Today New York Times business columnist David Leonhardt (12/10/08) weighs in on the $73-an-hour autoworker. His verdict is somewhat mixed–the Big Three do have to pay the so-called legacy costs that are part of this calculation, but it’s misleading to conflate that with current earnings of autoworkers:
So what is the reality behind the number? Detroit’s defenders are right that the number is basically wrong. Big Three workers aren’t making anything close to $73 an hour (which would translate to about $150,000 a year).
And he adds a little media criticism:
The Big Three built up a huge pool of retirees long before Honda and Toyota opened plants in this country. You’d never know this by looking at the graphic behind Wolf Blitzer on CNN last week, contrasting the “$73/hour” pay of Detroit’s workers with the “up to $48/hour” pay of workers at the Japanese companies.
One of Leonhardt’s main points, though, is that the chatter about union wages is mostly irrelevant to the bigger problems of the Big Three (emphasis added):
So here’s a little experiment. Imagine that a Congressional bailout effectively pays for $10 an hour of the retiree benefits. That’s roughly the gap between the Big Three’s retiree costs and those of the Japanese-owned plants in this country. Imagine, also, that the U.A.W. agrees to reduce pay and benefits for current workers to $45 an hour–the same as at Honda and Toyota.
Do you know how much that would reduce the cost of producing a Big Three vehicle? Only about $800. That’s because labor costs, for all the attention they have been receiving, make up only about 10 percent of the cost of making a vehicle. An extra $800 per vehicle would certainly help Detroit, but the Big Three already often sell their cars for about $2,500 less than equivalent cars from Japanese companies, analysts at the International Motor Vehicle Program say.