It#8217;s no wonder why the Big Three automakers face a financial crisis

Published 12:00 am Wednesday, July 11, 2007

The Big Three automakers are confronted with a financial crisis as they restructure themselves while fighting to retain their share of the market in a highly competitive environment. The jobs bank was an extraordinary luxury when they were flush. In today’s conditions, it is an impossible luxury.

The jobs bank, which pays workers not to work, is a vestige of the past that no longer has a place in the modern, global auto industry. Increased productivity and efficiency as well as advances in technology mean that cars and trucks can be built with fewer workers. Just ask those who worked for Ford at its now-closed Norfolk plant.

That means the chances are slim that the estimated 4,200 people sitting in jobs banks for Ford Motor Co., General Motors Corp. and the Chrysler Group will be called back to the assembly line. Though tens of thousands of other auto workers took buyouts and early retirements in the past two years have thinned the ranks of those getting paid their full salary and benefits not to work, the impact of those who remain is still too high to ignore.

It is estimated the Big Three pay up to $130,000 a year per worker to keep them in the jobs bank, or $546 million this year.

The practice of paying people not to work has survived for two decades largely because the auto companies saw it as a cost of doing business and a way to avoid labor unrest. But the costs are too high and no matter how thin the jobs bank number gets, it remains a symbol of an industry resistant to change.

Some workers who were shifted into the jobs bank have been in them for a decade or longer.

And they have no incentive to leave. They report “to work” and read, watch television, or in some cases do community service and still accrue time toward their pension as well as get paid.

United Auto Workers’ executives are aware of the drain this puts on the companies’ finances and have agreed that the current benefits are “unsustainable” as UAW President Ron Gettelfinger said earlier this year, but they’ve maintained they’ll protect laid-off workers at all costs.

The companies are at fault, too. They waited too long to insist that the UAW reopen contracts to change health care provisions and they’ve ignored the billions the jobs banks (and other expensive contract rules like 30-and-out retirement provisions) have cost because they could recover those losses through the sale of highly profitable sport utility vehicles and trucks.

Not anymore. Competition from Asian automakers in large trucks and SUVs is further shrinking the Big Three market share and pressure from environmental groups and Congress to move away from these vehicles also puts more strain on the bottom line.

The elimination of the jobs bank is one of many significant changes that need to be made. Once done, Detroit’s automakers will have a stronger chance to survive and remain a significant part of Michigan’s economy.

Reprinted from The Detroit News via the Copely News Service.