Huge Bonuses for Auto Execs

Owen Bieber, the new leader of the United Auto Workers (UAW), denouncing the huge bonuses which the top auto executives are receiving. He thinks such big bucks are going to make his members more demanding when the UAW opens contract negotiations the the auto companies in July.
The bonuses are big — by any standard. In addition to their lucrative stock options, the top two executive at GM and their two counterparts. at Ford Motor Co. received a total of $4.53 million in compensation during 1983 — more than half in bonuses. The two top managers at Toyota and Nissan do not receive a fifth of that amount, notwithstanding the vast profits recorded by those two companies last year. According to Robert Townsend, author of the best seller, /Further Up the Organization/, top executives of the large U.S. companies are being paid 30 times more than their assembly line workers, compared to just 7 times for their Japanese colleagues.

All this wallowing in dollars affects the price you are paying for new cars. Auto workers demand more when the bosses are making it big. Then the auto moguls in Detroit complain that they cannot compete with the Japanese a d need another extension of the abominable Japanese auto import quotas. In its fourth year, this Reagan limitation on Japanese imports is costing consumers $5 billion a year extra. In case you have riot noticed, U.S. car prices have risen nearly 40% since 1980 — twice as fast as the rate of increase for all consumer prices boast of increasing their efficiency.

In the first three months of 1984, GM made $1.61 billion in After-tax profits — about half what it made in all of 1983. The giant company is making more money than ever selling fewer cars with far fewer auto workers. While GM has cut out some company fat, the major reason for its record auto profits the Japanese auto quota. Read what financial analyst, Peter Zaglio of Lehman Brothers has further predicted: with continued Japanese quotas, the three U.S. auto companies will report in 1985 an average profit of $14.62 a share. Without the quotas the Big Three would earn only an average of $6.48 a share.

Under the quotas, the Japanese are selling their cars with more extras and at price premiums of $1,000 to $2,000 above sticker in many instances. David Healy, auto analyst with Drexel Burnham Lambert, observes that “The American consumer is paying through the no se and getting rooked by the wise people in Detroit and Washington. Everyone is benefiting except the American consumers.” Arid, he might have added, those 150,000 auto workers who will never get their jobs back.

Actually, the Japanese auto quotas are the step in establishing a Japanese — U.S. auto cartel for the market. The Big Three are buying into some of the eleven Japanese auto companies. And GM has entered into a joint production venture in California with Toyota to control small car prices and test the Japanese management system on U.S. workers with a view of further weakening the UAW.

Walter Reuther, the founding head of the UAW, foresaw these developments nearly twenty years ago. At an international conference in Turin, Italy in the late Sixties, he called for a single international auto worker wage and benefit standard to avoid pitting workers against each other. Earlier, right, after World War II, Reuther challenged the auto companies that if they reduced car prices, his workers would not push for higher wages. Reuther wanted more jobs for more workers under higher volume car production. The auto makers turned him down.

In recent years, the chiefs of the UAW have been going for temporary relief — quotas, joint ventures and the proposed domestic content legislation. All these have or will backfire on workers. Automation, global sourcing, the undervalued yen, and domestic auto company mismanagement require more fundamental attention, as pointed out by Reuther.

What of the auto company executives themselves? They could compete better with the Japanese by better management such as adopting faster the inventory methods the Japanese took from America years ago. Above all, they could build a better automobile — one that is safer, more durable, expensive to maintain, more fuel efficient and more adoptive of other engineering innovations. It is amazing how little attention is paid to this most basic consumer appeal of all in the race to win sales from competitors — a better consumer product!