Are not German cars more high ennd then the typical American car?On Monday, September 11, 2023 at 05:26:33 PM GMT+5, Chas Freeman via Salon <salon@listserve.com> wrote:If Unions Are Breaking Automakers, Why Are BMW and Mercedes So Rich?
In Germany, auto workers get paid well and their companies still profit. Author Thom Hartmann on why living wages and corporate success don't have to be mutually exclusive.
Aug 29, 2014When the financial crisis of 2008 sent U.S. automakers to the precipice of failure, conservatives, notably Mitt Romney, urged the Obama administration to let the car companies go bankrupt. Neoconservatives blamed “high wages” paid to unionized autoworkers for the inability of GM, Ford, and Chrysler to compete. In his book The Crash of 2016, author Thom Hartmann points out a flaw in the argument that high wages to American workers are the problem. He says:
Actually, Germany paid their autoworkers about $67 an hour (including wages and benefits). But the United States paid its average worker only $33 an hour (also including wages and benefits). On top of that, German car manufacturers were highly profitable, despite the comparatively large paychecks of their workers. BMW earned a before-tax profit of 3.8 billion euros, and Mercedes-Benz hauled in profits of 4.6 billion euros.
So how did Germany just completely blow up the myth that car companies have to pay their workers less to be more profitable and manufacture more cars? How can Germany do the opposite: pay their workers more, be more profitable, and make more cars?
The answer: democracy.
First, Germans have completely democratized the auto plant by unionizing nearly every single autoworker in the country—under IG Metall, the German autoworkers union. With such a high union membership rate, autoworkers hold a lot of sway when they threaten to go on strike. That’s how workers have been able to keep wages high and working conditions satisfactory. But as Horst Mund, the head of the International Department of the German autoworkers union, pointed out, unions hardly ever go on strike in Germany “because there is an elaborate system of conflict resolution that regularly is used to come to the sort of compromise that is acceptable to all parties.”
How did Germany just completely blow up the myth that car companies have to pay their workers less to be more profitable and manufacture more cars?
One reason for the more collaborative relationship between CEOs and workers is that, unlike in the United States, unions aren’t under attack and there aren’t any “right to work for less” zones in Germany to which car manufacturers can flee so they can ignore the voice of organized labor.
Another and perhaps more powerful reason is that there is a constitutional amendment in Germany that forces corporate executives to listen to labor unions. The Works Constitution Act requires every factory to set up a works council that gives representatives of the workers a seat at the table in every decision-making process at the factory. That is the democratization of capitalism, expanding the decision-making process to not just the corporate elite but the entirety of the company, from the bottom up.
This, according to Mund, is the real reason why the autoworkers union has a loud voice in the German economy. Pointing to the adversarial relationship between employers and labor unions in America, Mund says, “The accusation that American unions are more radical and destructive … definitely has to do with the hostile environment in which the unions have to act. How can they be constructive and friendly if their asses are kicked all the time?” He goes on to say that without the Works Constitution Act in Germany, “employers would not talk to us either if they had the choice.”
But intentions aside, the empowerment of labor unions in Germany and the democratization of the workplace through an enforced constitutional amendment have been an economic boon for Germany, as demonstrated by car sales, employee wages, and profitability.
As Mund concludes, “We have strong unions, we have strong social security systems, we have high wages. So, if I believed what the neo-liberals are arguing, we would have to be bankrupt, but apparently this is not the case…the economy is working well in Germany.”
So how do we democratize capital in the United States and give workers more of a say in how our economy is run?
![Thom Hartmann]()
View in browser The United Auto Workers union is threatening a strike against at least one and perhaps all three of Detroit’s auto makers - GM, Ford, and Jeep/Chrysler (Stellantis). The complaint is that the union workers are not being paid enough, that the gaps between what new and older workers are paid is too great, and that job security must be better guaranteed.
To put things in perspective, let’s review what the auto workers are being paid now and what they would be paid if their demands are met by the three Detroit based U.S. auto makers. Bear in mind that other makers in the United States such as Honda, Nissan, BMW, and Volkswagen are not union shops and thus not part of the negotiation.
Today, at Ford, the average auto worker is being paid $78,000 annually or about $37 per hour (this roughly holds also for GM and Chrysler).That compares to the average U.S. manufacturing wage of about $27 per hour. Compare all that to the average Honda USA assembly line workers $51,000 annually.
The UAW is now saying that the Detroit auto companies are cheapskates who need to raise wages by forty six percent to somewhere over $100,000 annually over the next four years or else the union will go on strike.
MARKET SHARE AND AMERICAN CARS
I can remember when GM made half the cars sold in America, when what we called the Big Three (GM. Ford, Chrysler) made virtually all the cars sold in America. Indeed, I can remember when the Big Three were the world Big Three as well as the U.S. Big Three. Okay, I am an old guy (just turned 82), but just saying.
Now, we don’t call them the Big Three any more. Rather, they are the Detroit auto makers. GM is down to about 17 percent market share. Number two in the U.S. market is not Ford, but Toyota. Taken together the Detroit makers account for barely half of the cars made in America with Toyota being joined by the likes of Honda, Nissan, Hyundai, Subaru, BMW, Mercedes, and Volkswagen to make the other half.
But here’s the real kicker. Ask yourself the question of who makes the most American cars, that is to say the cars with the most made in America parts and content. It is not any one of the Detroit Three. Rather, it is Tesla, the new Electric Vehicle maker which holds the top four spots for made with American parts and labor ratings. Okay, maybe that is to be expected since Tesla is a whole new, revolutionary type of vehicle that was relatively recently invented in America. So let’s look at who follows Tesla in terms of most U.S. content in their cars. Well, it is no one from Detroit. Rather it is Honda. All of the slots from number four to eleven are Honda with the exception of number five which is Volkswagen. Toyota pops up at number twelve and then the next three slots revert to Honda. Ford finally shows up at number sixteen and from there on Detroit does somewhat better. But, if you are looking for the major maker of real American autos that are not Tesla, it’s Honda. Indeed, given that Honda sells more cars in America than in Japan, and that it makes the most American cars, I suggest that Honda be designated as an American citizen.
KEY POINT
The really key point in all this is that the UAW, which used to represent virtually all auto workers in America, no longer represents much more than half and declining. And just to show you how it is declining, let me mention my own recent foray into the market.
I have mentioned this in an earlier article, so please bear with me for a bit of repetition. I am in the market for an EV. It could be Tesla, but something like the Ford Mustang is more to my taste. Except, guess what. The Mustang is not made in America. Rather, Ford makes it at a factory in Mexico. Mexican workers, of course, are not paid $75,000 annually and are not threatening to go on strike if they don’t get a 46 percent increase. Indeed, I can imagine that Ford executives are planning to move production of other lines to Mexico as fast as possible.
REAL TOUGH GUYS DON’T DO SUICIDE
All the numbers show that the UAW has been on a losing streak for at least the past forty five years. It’s membership is way down. The cars it makes are not doing well in competition with those of its Japanese, Korean, European, and soon Chinese competitors. Indeed, one might think that it would be interested to see how its competitors operate and increasingly take all the jobs. Of course, the come back to that is to say that the foreign competitors pay low wages. Some do. But not all. The European and Japanese auto makers also have unions. Indeed, the European unions are so strong that they are often represented on the auto maker’s board of directors.
Just ask yourself. Have you ever heard of a strike at Toyota or at any of the German auto makers? No, you have not, Toyota has a big union. In fact, large numbers of the Toyota management team are members of the Toyota in house auto union. In Germany, union members are on the Board of Directors of companies like BMW and all the companies meet together with the union as well as with government officials in one major compensation setting effort every four or five years. There is no talk of a strike. Rather the discussion is of the prospects for the industry in the next five to ten years and of the needs of the workers in the context of the national economy and likely evolution of the global industry.
It is a peculiarity of Anglo-American manufacturing history and tradition that labor and management are always expected to be enemies doing their best to undermine one another. It is time to put paid to this tradition. They are not true opponents. The union should not be looking for a fight, but for a way to work with management so that its workers can remain competitive with those in Europe, Asia, and Latin America.
This is not just a matter of the Auto Workers Union. All too often in America, labor and management see themselves as at war with each other. It is far past time to acknowledge that they are at war, but not with each other. Rather they are in life or death competition with the cooperative labor/management teams of other countries that are developing new products faster and making them with higher quality and for less cost than we Americans are doing.
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