Ford Motor Company is a company with US top executives and American employees which builds cars in factories in the United States, under US industrial regulations, with US tax and pension and health care obligations, for sale in the US market. They are hemorrhaging money hand over fist, to the point where on Monday they announced that they have to close so many factories (for inability to pay the bills at them) that they're having to lay off roughly one out of every five of all the world-wide employees of the corporation.
Toyota Motor Company is a company with Japanese top executives and American employees which builds cars in factories in the United States, under US industrial regulations, with US tax and pension and health care obligations, for sale in the US market. They're hiring, and building new factories in the US every year, almost as fast as they can clear the land.
According to a separate survey that was reported in the same day's Wall Street Journal, the average American CEO earns 475 times what his average employee earns -- not counting executive perks that aren't required to be reported as salary, yet, so the actual number is probably higher. The average Japanese CEO earns 11 times what his average employee makes.
As
the_geoffrey always quotes, "Coincidence? Or ancient astronauts?"
Maybe, just maybe, not enough American auto companies have gone out of business. Maybe the job we need to be outsourcing the most urgently is "CEO."
Toyota Motor Company is a company with Japanese top executives and American employees which builds cars in factories in the United States, under US industrial regulations, with US tax and pension and health care obligations, for sale in the US market. They're hiring, and building new factories in the US every year, almost as fast as they can clear the land.
According to a separate survey that was reported in the same day's Wall Street Journal, the average American CEO earns 475 times what his average employee earns -- not counting executive perks that aren't required to be reported as salary, yet, so the actual number is probably higher. The average Japanese CEO earns 11 times what his average employee makes.
As
Maybe, just maybe, not enough American auto companies have gone out of business. Maybe the job we need to be outsourcing the most urgently is "CEO."
- Mood:
okay


Comments
CU
I say let them go out of business and leave car-making to someone who actually can make a good car - like the Germans or the Japanese.
American auto execs, unfortunately, can't really make good decisions towards improving design because they have bad taste and are thus bad judges of design.
C'est la vie. Let them tank. While there'll be a lot of workers who are going to be in dire straits should it happen, it's worse to keep producing bad cars and get eaten alive by the Japanese and the Germans with their better designs. Someone may even come out of the design sections of the US car companies and start a company that'd make the American car into a quality artifact again. Until then, though, I'm not holding my breath.
Of course, it's a Ford Aspire, and Kia made it FOR Ford before they started marketing vehicles under their own name.
Personally I've always thought it sounds rather insulting when I hear about a company handing out multimillion dollar salaries along with bonuses to management, while simultaneously asking employees to accept no raises or even pay and benefit cuts, "Because we're struggling to survive right now and can't afford to do more."
I wonder what it would happen if a bankruptcy judge told one of these companies, "You can do whatever you want with employee salaries, but every cut to employee salaries must be matched by an equal percentage change executive compensation."
More seriously; from what I have heard they also actually try to get along with their employees so they're not stuck with this hostile unionized workforce.
(Sorry for the triple post--LJ had helpfully logged me out and then I thought that being logged in would affect back-tracked screens.)
Perhaps we could begin by firing everyone with an MBA.
The "average employee" is not stupid, and is not prone to accepting a relationship in which all the bonds of loyalty flow in one direction.
Now, I'm not unsympathetic to the idea that US executives are overpaid. They are, and the mismatch between executive compensation and salaries is a serious issue (though don't be surprised to discover that Japanese CEOs have some of the hidden compensation that used to be standard in US firms -- Japan's business regulations aren't up to US transparency levels yet.)
However, you make an implication here that doesn't really hold up under scrutiny. You write that both US and foreign carmakers in the US face "US tax and pension and health care obligations." True, but irrelevant. The costs that are doing in the US firms aren't legislated, they're the result of specific contracts with their unions. The new factories run by the foreign carmakers have different, and far less expensive contracts with younger and cheaper workforces. The underlying Ford, GM, etc. contracts were originally negotiated decades ago when it made more sense under the prevailing accounting rules to defer costs where possible -- pensions and health care costs were not booked when the contracts were signed, so they were cheap add-ons that made unions happy and didn't cost much up front to the companies. And if health care costs had stayed where they were in the 1970s and even 1980s, that might have been a smart bet. But they didn't.
On top of that I think it is common to have a perception of CEO's as hero/god-king and not just someone who is doing a very specialized job. This warps many aspect surrounding the CEO which further hinder the CEO from doing a good job. It is natural to listen more to your own opinion then someone else when you are The Saviour.
Or to sum up: While the situation of Japanese vs. American car makers might not be totally identical, the cultural differences surrounding CEOs and executives in general( in part represented by compensation) has not only certainly made nearly as much difference as deals that were made 20 and 30 years ago but almost certainly exacerbated those very problems.
or,again, so it seems to me.
First a disclaimer - I live in the United Kingdom, where we have free healthcare via a National Health Service. It costs us quite a bit; it's one of the largest employers in the country (employing over half a million people directly), and cost us 68.7 billion pounds in the 2003-4 fiscal year alone.
Which, for a country of 59 million people, makes for a pretty impressive set of stats I think.
So, the question is simply this:
What is stopping companies like Ford from instead pressing for a free National (Whoops, sorry, Federal of course - forgot about the US political system!) Health Service in the US? Because by the sounds of it, one of the reasons that foreign companies have a competitive edge is that they have different healthcare costs. If Ford were able to offload those costs onto the populace as a whole, via federal government, then they could regain a little competitive edge.
And it would benefit society as a whole anyway, of course. So it can't possibly be a bad move "in the community". They could get their muscle behind healthcare reform, along with other US industries that have similar problems. Once adequate healthcare is a right provided by the state, there's no need for their union-agree contracts. Renegotiate, to trim down the costs, and back comes your competitive advantage...
It's only tackling a small part of the problems that Ford has. But I was just wondering why nobody has made this part of the argument for healthcare reform.
Then again, much of American politics (and occasionally economics) just doesn't make sense to me anyway. But I look forward to enlightenment, if you feel you can bestow it. ;-)
There's a US big-company think tank and lobbying group called the Business Round Table, and they've been lobbying hard for single-payer health care for just that reason. But they're being fought hard by their usual allies at the US Chamber of Commerce, by the entire Republican Party, and by the largest coalition within the Democratic Party, because of two things they "know" to be true:
1) Single-payer health care is socialism, and the thin entering wedge of communist rule in America, and ...
2) Corporations provide services more efficiently, more flexibily, and at lower cost than government agencies do.
When it comes to health care, I am at this point 100% confident that they are wrong about both of these things, that privatized health care makes no more sense than privatizing the police, the Army, or the fire department. But then, 3/4 of the police in America are privatized.
I share your confidence on who's right and who's wrong, but I'm guessing you knew that already. Personally, I cannot comprehend why we should allow a profit to be made on the essential services that help hold our society together. Not-for-profit trusts seem to be the lesser of all evils, based on my experience - but that only extends to housing and healthcare.
The idea of privatised police is just scarey.
Someone should mention to the Democrats that they'll have great difficulty getting any power whilst they oppose healthcare reforms, by the way. Most people I know in America who'd consider themselves Democrats would disagree with that coalition.
I'll mention it to them next time we speak. Every little helps, and all that!
By the way, your LJ is quite often fascinating. Thank you very much! :-)
"Take a close look at the track record of this company, and you'll see that we've gambled in markets traditionally regarded as non-profit: hospitals, prisons, space exploration. I say good business is where you find it." - Richard "Dick" Jones, OCP.
Basic benefits and administration should be cost-neutral for the patient. I honestly think there should be buy-on, secondary insurance, and I can see the insurance industry stepping into that suplemental role. The margins will be narrower, sure, but it needs to happen. It's not like the entire industry doesn't have procedures in place to handle secondary insurance roles.
By billion, do you mean 109 or 1012? If the former that sounds like a pretty great deal! Slightly more than 1,100 pounds per person for medical, dental, prescription drugs, all told? Checking my paycheck, I am paying $3500/year for two people. (Which is far from all inclusive. I will probably go at least $500-$1000 on top of that.)
A quick check shows that the US last year spent $1.8 trillion on healthcare last year, or $6,270 per person. So you are spending 1/4 as much as us. Are we getting four times the value? You know, I don't think so.
The NHS is pretty good value. But we don't get everything free. As a full-time employee with a good wage, I don't get prescription drugs for free for instance. If I were unemployed and on housing benefit, then I would get a substantial discount - or even free, I think. I'm not sure - I've not been unemployed for a while!
Our approach to healthcare is pragmatic. Broken limbs get dealt with on the NHS, and you get basic physiotherapy to assist the recovery. But basic is the key word. If you want intensive/extensive physiotherapy, then you'll have to go private and pay for it.
So yes, we pay for less per head - but bear in mind that we might be getting less as well, depending on what exactly you were paying out for. If I want any cosmetic treatments - surgery or dental - then I'll have to pay for that anyway. But if I need my tonsils or appendix out, then the NHS will likely be my first port of call.
Private healthcare is popular here to avoid waiting lists - which can be as long as six months (or longer! for "mild irritations" and non-life threatening conditions; it's also popular as a way of just getting more pampered or getting your own room rather than sitting in a ward. You pay your money, you take your choice - but you get no rebate on your taxes if you decide to "relieve the NHS of the burden of your treatment".
Personally, I believe that's the correct thing to do. The NHS is for everyone, and if you chose to opt out and pay someone then you should still be paying for the NHS anyway - because next year, you might not be able to afford to opt out, and it'll still be there for you. Maintenance bills will be there regardless of your decisions...
It's the healthcare safety net of our society, so everyone should contribute to its upkeep.
Finally, a note on the line between NHS and private treatment:
A friend of mine recently went private, at great expense to herself, because she just couldn't wait. (It was a hand injury, and she didn't like feeling helpless like that.) Yet all that did was buy the same NHS consultant's time RIGHT NOW, rather than in three months. It sounds odd, but it makes sense in a way. I can't say I'm absolutely thrilled with it - I dislike the idea that someone should have to wait three months for specialist hand/wrist surgery. But at least it shows that the NHS is more under a budget constraint than a skills one...
There is no healthcare panacea. But there should at least be a minimum provision for the whole of society. For America, deciding to have healthcare for all will actually be the easy part. What that level is will be where the really big fights occur, believe me!
There are certain chronic illnesses that will give you free prescriptions for life - diabetes is one. I guess the theory is making sure those illnesses are well managed saves money in the long run. And pregnant women don't pay for drugs while they are pregnant and for a year after the birth. Which is just insanely socialistic :)
[1]Aimed at the US readers, rather than
Thank you for wallpapering over the cracks in my knowledge! :-)
Another big price is malpractice insurance. Especially for certain practices, the risk of litigation is significant and can put a medical group out of business.
Single payer simplifies things.
As you've given the matter some scrutiny, perhaps you can answer some questions I've been asking myself lately.
Do you happen to have a source or two that might show the difference in expenditures between the two blocs? I'd be interested in seeing just how much less they can offer and still avoid unionization.
Also, do you happen to know what the total combined burden of the unionized workforce at those companies costs, per year, versus the cost of the top-tier executives? I'd be interested in seeing how those compare.
Not that it happened to me or anything ;>
Actually, that's my catch-phrase. Does the_geoffrey say it a lot as well?
Weird.
I would certainly agree with that!!
Take a look at Larry Johnston, CEO of Albertsons. (I think that we don't have any stores in the St. Louis area...)
He was the CEO for GE, which I guess he helped out of a slump. So the BoD hired him as CEO for a grocery/drugstore company... No experience in retail, and they hire him. (and they wonder why the company has been going downhill...)
His contract is up in June. His 'Golden Parachute' gives him 3x his base salary and immediate vesting of his stock options is the company is sold before his contract is up.
Guess what he announced last Monday? That the company had been sold. Deal to probably close mid year.
How much you want to bet everything closes 1week before his contract is up, and he gets triple his YEARLY salary, for selling us out one week before.
{/bitterness}
sorry... didn't mean to rant that much...