The Truth About Cars » Wages http://www.thetruthaboutcars.com The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Wed, 16 Apr 2014 22:47:47 +0000 en-US hourly 1 http://wordpress.org/?v=3.8.1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars editors@ttac.com editors@ttac.com (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » Wages http://www.thetruthaboutcars.com/wp-content/themes/ttac-theme/images/logo.gif http://www.thetruthaboutcars.com UAW Backs Off Transplant Organizing Goal, Attacks Hyundai http://www.thetruthaboutcars.com/2011/11/uaw-backs-off-transplant-organizing-goal-attacks-hyundai/ http://www.thetruthaboutcars.com/2011/11/uaw-backs-off-transplant-organizing-goal-attacks-hyundai/#comments Wed, 30 Nov 2011 20:23:15 +0000 http://www.thetruthaboutcars.com/?p=420851

At the beginning of this year, the United Auto Workers pledged that it would launch a campaign to organize the foreign-owned, non-union “transplant” factories in the US, threatening to tar uncooperative automakers as “human right abusers.” The campaign initially lost steam, but the UAW stuck to its pledge, re-iterating on several occasions that it would organize “at least one” transplant factory by the end of 2011. With one month left to accomplish that goal and no signs of progress in sight, the UAW has officially called off that goal. In fact, the UAW now hopes to simply pick an automaker to target by the end of 2011. Spokeswoman Michelle Martin tells Bloomberg

At this point, our hope is to make a decision about who we’re going to target by the end of the year. But obviously, we won’t have the organizing campaign completed by the end of the year.

This is not too surprising, considering the UAW announced last week that it would be focusing on dealership pickets initially rather than factory organizing. And sure enough, the first dealership picket has begun, targeting Hyundai dealerships. And yet, says Martin

This has nothing to do with the domestic organizing campaign. Hyundai is not the target.

Huh? If the UAW is not committing to organizing Hyundai’s assembly workers, why picket Hyundai dealerships?

The Freep explains that the union is targeting 75 Hyundai dealerships, in order to show international solidarity, a recurring theme in the presidency of UAW boss Bob King. Says King

The UAW has embraced a global vision of social justice and will mobilize its membership to defend labor rights here and in other parts of the world

So, what is the UAW picketing in solidarity with? Martin tells the Freep that Hyundai’s Korean unions are picketing across Korea to protest the firing of a worker whistleblower. According to Martin

The worker, who is employed by a Hyundai subcontractor, was fired after she reported the sexual harassment in 2010 to Korea’s National Human Rights Commission… The commission ruled in the worker’s favor and ordered the subcontractor to pay damages and rehire the worker, but the subcontractor has refused.

A UAW statement adds

Holding banners that read, “Stop Sex Discrimination at Hyundai” and “Reinstate Ms. Park,” UAW members from Los Angeles to New York, at more than 75 different dealerships, informed American auto buyers about an injustice to an autoworker on the other side of the globe.

“Though we may work for different companies and in different countries, as workers, we support each other’s struggles and know that one of the best ways to hold our employers accountable is through consumer action at dealerships,” said Mike O’Rourke, an 33-year employee and president of UAW Local 1853 at General Motors’ Manufacturing Facility in Spring Hill, Tenn.

Hyundai Motor America’s response: the worker was an employee of a subcontractor at Glovis, a Hyundai “affiliate,” therefore

the issue has nothing to do with Hyundai Motor Company

In other words, the UAW will be alienating itself from Hyundai’s US workers and dealers over one person who doesn’t even work for Hyundai. Standing on principle is great, but trying to block sales of cars will not exactly endear Hyundai’s assembly workers to the union. Meanwhile, similarly to the UAW’s last protest against Hyundai, there doesn’t seem to be as much moral clarity on this issue as the UAW would like it to appear. Of course sexual harassment has no place in the workplace, and  the circumstances of this case in particular do not sound good, but by hammering on the treatment of contracted employees, and by associating the contracter “affiliates” with the automakers they work for, the UAW opens itself up to criticism along the same lines.

The Freep is also reporting today that the UAW has called off a protest that was planned at GM’s Orion Assembly plant, over contract negotiations with a supplier at that plant. Workers at the GM affiliate supplier LINC, who organize and deliver parts for the Orion plant, make ten dollars per hour, less even than the “Tier Two” wages that most Orion assembly workers make. And yet, with GM’s stock (which funds part of the UAW’s VEBA account) remaining weak, it seems unlikely that the union will actually protest, let alone strike, over the LINC wages. Which raises a tough question for the union: why are they so concerned about transplant workers making $14.50 per hour and up when they are working alongside folks making $10 per hour? And if workers at a Hyundai supplier are Hyundai’s responsibility, why isn’t the UAW livid at GM for allowing LINC to hire workers for such low wages? And in light of these fundamental contradictions, a single case of apparent injustice half the world away seems even less relevant.

]]>
http://www.thetruthaboutcars.com/2011/11/uaw-backs-off-transplant-organizing-goal-attacks-hyundai/feed/ 20
Is China’s Cheap Labor A Thing Of The Past? http://www.thetruthaboutcars.com/2011/09/is-chinas-cheap-labor-a-thing-of-the-past/ http://www.thetruthaboutcars.com/2011/09/is-chinas-cheap-labor-a-thing-of-the-past/#comments Thu, 29 Sep 2011 17:13:33 +0000 http://www.thetruthaboutcars.com/?p=412966

The prospect of a Chinese auto industry growing at insane speed thanks to a booming market and resiliently low wages has long kept auto industry execs up at night, most notably inspiring Sergio Marchionne’s acquisition of Chrysler. But basic economic principles dictate that you can have a high rate of growth or low wages… but not both. Growth inevitably drives inflation, which drives up wages, which in turn slows growth. And according to a report in the Wall Street Journal [sub], that dynamic is already taking hold.

Jae-Man Noh, head of Hyundai’s joint-venture operations in China, said average manufacturing-worker wages in China—about 27,000 yuan ($4,200) a year per worker in 2009—are likely to double by 2015 from current levels.

Auto makers are expected to be affected as much as other industries by the trend, if not more, Mr. Noh said, adding that wage costs for many foreign auto manufacturers already have doubled in less than a decade. He said that a rival foreign auto maker that Hyundai has researched has seen worker wages in China rise to 49,000 yuan a year per worker in 2010, up from 24,500 yuan a year in 2003.

“We need to let go of our perception that the Chinese market is a low-cost production base,” Mr. Noh told a group of reporters at Hyundai’s office in Beijing. He didn’t offer specifics on Hyundai’s wage costs in China.

 And though the laws of supply and demand made this development inevitable, the story of the decline of China’s low-wage manufacturing base is a lot more interesting than you might think. After all, economic and historical forces may seem mechanical in the abstract, but on the ground level they work in dramatic, disruptive ways.
Anyone who has spent the last decade or so in China will have witnessed incredible economic growth, but along with it has come a creeping inflation. Despite widespread accusations of currency manipulation, certain commodities like food and real estate have driven prices incredibly high in recent years. This selective inflation was already underway when I visited China in 2007, and according to Frau Schmitto-san, grocery shopping in Beijing has become nearly as expensive as it is in Tokyo. And in another sign of how bad inflation for basic consumer goods has become, China recently opened its “strategic pork reserve” in an effort to keep prices affordable. Another dynamic playing into Chinese inflation: the penetration of economic development and infrastructure into the country’s interior has reduced the  wage and opportunity differential between the coast and the interior, reducing supplies of cheap migrant labor.
But the tipping point for the auto industry came last year, when a series of strikes hit Honda and Toyota assembly plants in China as part of a wave labor unrest that has its own Wikipedia entry. Work was halted at Honda and Toyota plants, as well as at key suppliers like Denso and Omron, and production ground to a halt for weeks. Calling the strikes, which were largely triggered by demands for better wages and working conditions, a “wake up call for Japan,” the NY Times reported

Japanese companies see the Chinese as crucial consumers of their goods to make up for a shrinking and aging market at home. Some of the most profitable Japanese companies, like Fast Retailing, which runs the budget clothing line Uniqlo, have relied on production in China since the 1990s to keep prices low.

“Japan is starting to realize that the age of cheap wages in China is coming to an end, and companies that looked to China only for lower costs need to change course,” said Tomoo Marukawa, a specialist on the Chinese economy at Tokyo University.

And make no mistake, foreign firms clearly have more to lose from newly-empowered workers, as the BBC reported
The BBC’s China editor Shirong Chen says the government has tolerated strikes at foreign-owned plants, which are obliged to respect workers’ rights, but maintains strict control at Chinese-owned factories for fear of widespread social unrest.

But for foreign firms, the protest must have seemed like “widespread unrest.” As LaborNotes documents, in an in-depth study of the strike wave

the events at Honda Nanhai triggered a chain reaction among workers in auto supply and electronics factories throughout the Pearl River Delta. According to the Guangzhou Federation of Trade Unions, more than 100 strikes occurred, of which only a small number were reported in the media. Around Toyota’s ultramodern factory in Guangzhou Nansha, eight of 14 core suppliers had labor conflicts. And action spread to other areas: workers in several electronics factories near Shanghai and at a Toyota supplier in Tianjin struck for several days.

The strike movement not only scared multinational corporations in China, it challenged the system of labor control. Typically, tacit coalitions between capitalists and local government rule over conditions inside the factories. Unions play a role in former state-owned enterprises and flagship joint ventures, but not in most private companies. Often, local governments back up violations of labor law by major investors, as has been documented in many cases for suppliers to multinationals such as Wal-Mart, Apple, and Nike.

But under conditions of rapid growth and highly modern production, the methods of control have become ineffective. Hundreds of labor conflicts occurred in the wake of the global economic crisis, affecting millions of Chinese workers in 2008 and 2009. Following the recovery, workers are seeking a voice. Workers’ wages have been falling continuously as a share of China’s national income since the 1990s, when the shift toward capitalism really took off, and the government is now officially calling for higher wages in order to raise domestic demand.

If underlying economic fundamentals have been pushing China towards wage inflation for some time, the dam broke in last summer’s wave of strikes. Now Hyundai is publicly acknowledging the reality that every foreign auto firm must face: low costs alone aren’t reason enough to be in China. But as the WSJ notes, even though the glory days of cheap Chinese labor may be over, Hyundai (and others) still have plenty of incentive to stick with their Chinese market plans.

China still offers other draws, including strong economic growth, an increasingly affluent population and a quickly growing car culture.

Plus, Hyundai’s average factory labor cost in China is still one-fifth of that in South Korea, Mr. Noh said. What concerns him most is the dramatic rate of increase, he said.

This trend is “inevitable” as the Chinese economy grows and society improves, Mr. Noh said.

Despite rising labor costs, China’s auto exports will continue to increase in part because of excess auto-production capacity in the country, he said. China’s central government will also continue to focus on automotive exports, he said.

The growth of the Chinese car market in recent years has been nothing short of freakish, and was overdue for this kind of correction. But even though costs are increasing, China’s continued growth and still-low costs relative to other manufacturing centers continue to make it an attractive target. Foreign firms just have to work a little harder than they used to, and as Chinese wages rise, workers there and around the world will only benefit from a narrowing assembly cost gap.

]]>
http://www.thetruthaboutcars.com/2011/09/is-chinas-cheap-labor-a-thing-of-the-past/feed/ 17
Who’s Unhappy About Higher Wages, Stronger Currency in China? The Japanese. For Starters http://www.thetruthaboutcars.com/2010/06/who%e2%80%99s-unhappy-about-higher-wages-stronger-currency-in-china-the-japanese-for-starters/ http://www.thetruthaboutcars.com/2010/06/who%e2%80%99s-unhappy-about-higher-wages-stronger-currency-in-china-the-japanese-for-starters/#comments Tue, 22 Jun 2010 10:19:52 +0000 http://www.thetruthaboutcars.com/?p=359276

It stands to reason that Japanese car makers would rejoice over rising wages in competing China and over an appreciating Chinese currency. Rising wages make production there more expensive, a rising Yuan makes exports more expensive. Both should give the Japanese more breathing room. That reasoning is falling by the wayside. The Nikkei [sub] reports that these developments pose ”serious threats to Toyota’s profitability in China, strategic challenges that other Japanese companies must also deal with.” Just goes to show that you need to be careful what you wish for. And wait who else should worry.

As chronicled here, Honda and Toyota had to stop the lines because they were left partless by strikes at some of their parts makers.

Over the weekend, the world joined a chorus of “ding-dong, the peg is dead” , after – in a lead-up to the G20 summit – China announced it would be a bit more lenient with their Yuan/Dollar valuation. Today, the USD/CNY official mid-rate stands at 6.7980 vs 6.8275 yesterday, a breathtaking 0.5 percent “bounce.”

So why would that bother the Japanese? Says the Nikkei: “The price of new cars in China is similar to that of Japan. This translates to fat profit margins in China — now the world’s largest auto market — thanks to lower production costs. But rising wages are likely to reduce those margins, warned a Toyota executive.”

That’s just the beginning. Many parts used in worldwide production are made in China. Rising wages and a stronger Chinese currency make those parts more expensive abroad. This is not just a Japanese concern.  What’s more, a stronger Yuan makes it cheaper for Chinese companies to import the latest manufacturing machinery from abroad, strengthening their competitive posture in the long run. Students of economic history will remember Germany and Japan.

Foreign automakers with joint ventures in China have short term reasons to be worried.  Exports amount to one third of China’s GDP. A stronger currency and higher wages make Chinese exports less competitive in international markets. A more frigid business climate will most certainly result in a cooling-off of China’s red-hot auto market.

“The booming sales that continued until March have gone,” said a Toyota dealer to the Nikkei. “Sales growth could slow further if falls in exports choke economic growth.”

If you think that’s a great problem for Toyota to have, think again:  Guess who’s also unhappy about higher wages and a stronger currency in China? General Motors. GM sells more cars in China than in the U.S. The Europeans can take a more sanguine posture: The Euro had dropped so much in value against major currencies that they can shrug off wage increases and an 0.5 percent rise in the Yuan. Volkswagen will “significantly exceed” last year’s results, mostly because of China. One country’s depression is the other country’s euphoria.

]]>
http://www.thetruthaboutcars.com/2010/06/who%e2%80%99s-unhappy-about-higher-wages-stronger-currency-in-china-the-japanese-for-starters/feed/ 5
UAW Fires Back On Wage Parity http://www.thetruthaboutcars.com/2010/05/uaw-fires-back-on-wage-parity/ http://www.thetruthaboutcars.com/2010/05/uaw-fires-back-on-wage-parity/#comments Wed, 12 May 2010 16:26:48 +0000 http://www.thetruthaboutcars.com/?p=356276

Yesterday, we greeted news that Detroit had reached wage parity with transplants by noting that it hardly makes the UAW look great in the eyes of its membership. Sure enough, UAW boss-in-waiting Bob King is firing back in today’s Detroit Free Press,  arguing that a return to a 16m unit market would yield “astronomical” profits to GM and Chrysler. As a result, he said,

There was equality of sacrifice, there’s got to be equality of gain. It’s our responsibility to make sure that in that turnaround, our members are treated fairly

Before becoming heir apparent to UAW President Ron Gettelfinger, King was the union’s chief negotiator with Ford. Recently, King filed a grievance against Ford for restoring benefits to salaried workers without reciprocating to union members. And despite the fact that the UAW went to bat (symbolically, of course) for Delphi’s salaried employees when they lost benefits, and the fact that GM still pays its white-collar employees more than the transplants, King is still hopping mad about it. He tells AFP:
I’m very upset with the situation (at Ford) where there were merit increases and 401K (retirement plan contributions). That’s wrong. None of that in my view of the contract should have happened without our membership, getting the same thing. Our membership made tremendous sacrifices. We had an understanding about equality of sacrifice. We’ve filed grievances on that and we’re close to resolving one piece of that.
Again, GM pays its average white collar worker over $50k more than its average hourly worker, while the differential at transplants is about $10k per year… but the union is OK with it because it owns 17.5 percent of that company. Ford, on the other hand, is the bad guy. You have to imagine there’s a little nostalgia for the “good old days” of pattern bargaining in Dearborn right about now.
]]>
http://www.thetruthaboutcars.com/2010/05/uaw-fires-back-on-wage-parity/feed/ 22
Center For Automotive Research: Detroit Beating The Wage Gap http://www.thetruthaboutcars.com/2010/05/center-for-automotive-research-detroit-beating-the-wage-gap/ http://www.thetruthaboutcars.com/2010/05/center-for-automotive-research-detroit-beating-the-wage-gap/#comments Tue, 11 May 2010 18:40:40 +0000 http://www.thetruthaboutcars.com/?p=356183

Speaking at the same Detroit conference on the auto bailout that Steve Rattner and Ron Bloom attended, the Center for Automotive Research’s Sean McAlinden proclaimed the end of Detroit’s era of unsustainable high wages. In 2007, said McAlinden, building a car in North America cost GM about $1,400 more per car than it did Toyota, thanks largely to a $950 health care charge. Since then, GM’s bailout and renegotiated wage and benefit contracts with the union have actually brought GM’s hourly compensation to just under what the CAR says the transplants pay. The AP reports that McAlinden’s estimate of GM’s average hourly worker salary is $69,368 while the transplant average is $70,185. Better still is McAlinden’s prediction that

between 2013 and 2015, Toyota could even be paying $10 more per hour than GM unless the Japanese company reacts and lowers wages.

And all it took was giving the UAW a $17.5 stake in the new GM!

Of course, there’s some question as to the veracity of anything that comes out of the CAR. Largely funded by unions and the Detroit automakers, CAR’s assesments have been plenty controversial in the past. This time though, it’s hard to see how cooking these numbers helps anybody. After all, the UAW hardly comes out of this looking like roses with its membership… unless we see these numbers used in a union counterattack.

And that’s not a scenario that’s entirely out of the question. After all, GM may be beating the transplants on hourly worker wages, but compare white-collar salaried employee compensation, and it’s clear that GM still pays its non-hourly workers quite well by comparison. According to McAlinden,

Salaried workers at the Detroit automakers made $122,963; at foreign competitors, they made $81,506.

That won’t make the union too happy. But then, they won’t really have much to say until their VEBA fund is able to monetize its stakes in GM and Chrysler. And if those stakes don’t yield enough cash to meet VEBA’s obligations, expect things to get nasty all over again. And then there’s the issue of pensions, which the GAO recently warned could compromise the whole auto bailout. It’s not clear if McAlinden includes these looming pension bills in his compensation analysis, but it’s likely he doesn’t considering GM has no public plan for how to deal with the looming crisis.

]]>
http://www.thetruthaboutcars.com/2010/05/center-for-automotive-research-detroit-beating-the-wage-gap/feed/ 16