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Re: Ford shutting down 10 plants
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Originally Posted by Melonie
Where Toyota and Honda's non-union paychecks and benefits allow their workers to afford the occasional adult cable PPV instead of a trip to a strip club - to afford MacDonalds instead of a nice restaurant - to afford Dunkin Donuts instead of a coffeehouse - and to afford a 12-pak from WalMart instead of a night at the bar....
On what do you base that? I had time to search for about 30 seconds.
"Honda pay and benefits are the highest manufacturing wages within driving distance of its plants. With the highest per car profits in the industry the automaker pays a Big Three type wage and benefits package ..... In mid-Ohio, hiring into Honda is "hitting the lottery"."
In response to Honda and Toyota building new plants, this article: "That likely will force some Indiana employers to jack up wages and benefits to retain and attract workers pining to wear the Honda hat, observers said." I don't for a second count this as definitive evidence, but the implication from this writer is that a Honda plant is driving up local wages, not depressing them.
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Originally Posted by Casual Observer
the ONLY car that Ford is producing in its current product line that's actually experiencing sales growth. Why? Because it's a car people want to buy (it's a pretty good car, actually). When American manufacturers start building cars people want, they'll start making money again. Not to be needlessly reductionist, but it's really that simple.
Yeah, that was pretty much my exact point a while back.
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Re: Ford shutting down 10 plants
Jay, you should have taken a few more seconds to read the complete article on Honda's Ohio plant --->
(snip)"Ray Castle has been at Honda for twelve years. He says, "I was 24, young and naive, when I hired in. The woman who trained me on my first job at Honda was being moved to a different job after being hurt on that job and I thought, ‘I’m a man, I’m tough, I won’t get hurt.’
"Eight months later my right hand was in terrible pain. I had trigger finger. I found out later that I was the eighth person in three years to be hurt on that job. Honda knew that but didn’t tell me. I was told later that the company thought it was cheaper to pay for the surgeries than fix the problem.
"I got my surgery on a Friday morning and was back to work the next Monday even though the doctor said I should take six weeks off. The company gave me an occurrence for getting the surgery they had approved."
Honda workers are hurt because, as Castle learned, the company has decided it’s cheaper to pay for avoidable surgeries than it is to design work safely. Honda takes healthy young people, uses up their physical abilities, and then tosses them aside."(snip)
the rest of the article goes on to describe how a worker of 12 years service was fired without any damage award when a health problem compromised her ability to work at any job Honda management chose to assign her to.
(snip)"Honda "safety" policy is to use up workers, fight their Workers Compensation claims, and then separate them from employment. Over the past twenty years in Ohio Honda has injured thousands of workers. Tonya Blair chose to fight back. One year after the discharge Tonya filed a "wrongful discharge" suit against the company. The company, the lawsuit charged, could not fire her for not working on a dangerous job."(snip)
The Ohio courts did not grant Tonya Blair any award or compensation.
In regard to the 'highest pay within driving distance' claim, this is probably true ... given that Honda's Mariesville location was specifically chosen to be in the middle of a swamp 30 miles northwest of Columbus, where the latest census data showed a per capita average income of less than $23,000 per year. I would add that Columbus has been particularly hard hit by union auto and parts plant cutbacks and closings over the past 2 decades, which probably contributed to Honda's choice of locating on the distant outskirts. Also, having the 'highest pay within driving distance' but an estimated job longevity of less than 20 years, after which many Honda employees are left with no Honda job, no ongoing Honda health benefits, no Honda retirement benefits, and a physical condition which precludes them from obtaining another job with decent earnings potential, definitely lowers the 'lifetime average' in the earnings dep't right along with lowering Honda's 'lifetime average' costs per employee.
If course, we haven't touched on the issue that Tonya and other taxpayers living near Honda plants will continue paying higher taxes to fund the 'incentives package' their state handed out to attract Honda. Honda's newest location in Greensburg Indiana raked in $140 million in state funded 'incentives', amounting to $70,000 in Indiana taxpayer money for each of the 2000 expected new Honda employees. And like the earlier plants in Ohio, it will again probably take 10+ years of plant operation before the under-performing employee 'fallout' begins and local politicians figure out that practically no Honda workers are actually able to retire from Honda - instead they add to the state's financial burden in terms of medicaid and other social programs when 20 years down the road they become unemployed and 'unemployable' at other full capacity jobs but are still 20 years away from Social Security and medicare eligibility.
Again my point stands that where the big three contributed to local economies and workers standard of living in a big way, Honda and Toyota exploit local economies and workers instead. In fact, from a politico-economic standpoint, Honda and Toyota are dumping their employee health care costs on local gov'ts to an even greater degree than WalMart is ... albeit WalMart does it immediately and on an ongoing basis while Honda and Toyota postpone the onset by some 12 - 20 years when cumulative worker injuries / chronic health problems allow 'used up' Honda and Toyota workers to be fired.
With the very first foreign owned US auto plant just now reaching the 20 year mark, the state of Kentucky is just now beginning to connect the dots re disabled former Toyota workers, and just now beginning to make the cost projections towards providing state funded long term disability checks plus medicaid plus welfare for the next 20-25 years until they become eligibility for Social Security and medicare. But somehow I doubt we'll see the Kentucky state legislature propose a Toyota tax to cover these costs, similar to the WalMart tax proposed by the Maryland state legislature !
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Re: Ford shutting down 10 plants
No, I wasn't ignoring the article, Mel. That stuff was irrelevant to my point.
You said Honda/Toyota pays squat. The article says that Honday pays "Big Three level" wages and benefits. What about that is incorrect, other than your statements to the contrary?
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I've been involved in the whole incentives thing. I'm sure there are times when a tax base suffers from incentives. In my thriving eoncomic village, the incentives have worked in driving an economic engine that, for a while, foregoes taxes that aren't being presently paid, because there's nothing there, in order to attract a level of corporate and consumer taxes that constitute new money. And strangely enough, the property taxes and sales taxes stayed the same.
So when GM opens a plant in Tennessee, is it "helping the local ecoonomy in a big way" while Honda "hurts it"? My guess - only a guess, but logical enough - is that GM will ask Knoxville for the same incentives that Honda would. If they don't, they're stupid.
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Re: Ford shutting down 10 plants
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You said Honda/Toyota pays squat. The article says that Honday pays "Big Three level" wages and benefits. What about that is incorrect, other than your statements to the contrary?
What's correct is that Honda/Toyota pay comparably and have benefit packages comparable to 'second tier' starting level wages at Delphi and other badly 'beaten up' union employers near those areas that Honda/Toyota have chosen to site their plants ... what is not true is that this compares equally to 'first tier' union wage and benefit levels which are being earned by workers at Ford & GM plants in blue states which are going to be closed.
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So when GM opens a plant in Tennessee, is it "helping the local ecoonomy in a big way" while Honda "hurts it"?
like all good Ponzi schemes, the Toyota and Honda plants do help the local economies for the first few years of operation ... until the list of fired partially disabled Toyota and Honda workers who start signing up for gov't benefits like long term disability, welfare, medicaid etc. starts to grow long and the gov't benefit costs starts to get expensive. From that standpoint, under union work and hiring/firing rules, a Ford or GM plant would not be allowed to subject employees to working conditions or grounds for firings which would result in the sort of long term disability dismissal cases discussed in reference to Honda/Toyota thus there would be no similar pyramid of rising disability / welfare / medicaid costs to the state's taxpayers some 12-20 years after the plant opened.
As to GM opening new plants in Tennesee or other 'red states', that is pretty much a non-issue since GM like Ford seems already decided to bypass any major wave of new 'red state' US plant investment and the obligatory UAW negotiations - in favor of Asian plant investment, no union factor, and a reduction in the US content % of their future vehicles. Unlike Honda/Toyota, GM and Ford do already have lots of unionized plants in the USA who are likely to react very strongly to any attempt by GM and Ford to keep a union out of a new US red state plant.
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Re: Ford shutting down 10 plants
I undestand what you're stating, Mel. There's nothing to prevent me from saying "Honda has better working conditions and pays higher than union," and nothing to prevent you from saying, "Honda abuses its workers while paying minimum wage." (Well, I wouldn't say that because I can't back it up, but you get what I mean.)
Where is this growing list of partially disabled workers? For any company?
Honda could be a union shop. All that has to happen is for the workers to vote it in. They don't.
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Re: Ford shutting down 10 plants
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Where is this growing list of partially disabled workers? For any company?
... in 'sealed' company records as well as buried in 'sealed' state benefit agency files, which are just now starting to be collated. The only 'public' records which are available under the Freedom of Information act are those cases which have been brought to state and/or federal court.
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Honda could be a union shop. All that has to happen is for the workers to vote it in. They don't.
consider the fact that Honda's plants are in 'at will' states ... meaning that in the 'real world' any employee whose name filters back to Honda management as being a union agitator stands a high probability of 'coincidentally' being fired for some reason or another. Attempting to prove a case of 'employer retaliation' might fly in a blue state courtroom, but is much less likely to happen in a red state courtroom.
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Re: Ford shutting down 10 plants
Accusations, Mel, but you're free to make them.
Assuming everything you say is correct, although I sincerely believe otherwise, or else those factory jobs wouldn't be so highly prized and the factory practices so highly regarded (by other than unions and competitors) - so what? Honda makes cars that sell, and it's profitable and building more American plants. Ford makes cars that don't, and it's closing American plants.
You claim a dramatic wage differential but have yet to show it. Ford has even tried to emulate some of Honda's practices late in the game - here's a little snippet from that bastion of permissiveness, the Wall Street Journal:
Whatever the factors are that go into that, Ford needs to adapt or lose the market. Crying about unions/nonunions/Detroit/Marysville (and a carmaker looking to build a new shop would have to be insane to consider Detroit) won't make Ford profitable. Building cars that sell will.
So if Ford decides to outsource to foreign countries, well, whatever it takes, I guess. If Ford is incapable of building competitive cars here, it'll try to build them somewhere else. It'll work unless or until economic or regulatory change comes along that bites it.
I understand that you are opposed to Japanese cars getting imported under a favorable yen rate, depending on the time we're talking about. I also understand that you are opposed to Japanese carmakers building cars here. Of course, that leaves the Japanese carmakers very little option if both of those were prohibited - but then again, I thought libertarian capitalists were free-trade types. I'm all confused where you want this to go.
As for me, I don't want it to go anywhere in particular. I want to be able to have competitive choices for my car buying. I don't shop based upon economic propaganda but on the quality and price of the product. I'll give some favoritism to American products, and it pleases me that my Honda was built in America. This vehicle market today is to my liking. I'm a bit of a free-trader myself.
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Re: Ford shutting down 10 plants
^^^ for the record I have no problem with Japanese automakers operating US production facilities. I do have somewhat of a problem when Japanese gov't subsidies, US gov't subsidies, different de-facto 'rules of operation', and of course the BOJ manipulated Yen exchange rate, that all favor Japanese automakers' US production facilities over domestic automakers' US production facilities. Again I am not trying to 'stick up for' Ford or GM, because they dug the current 'hole' that they are in all by themselves - both by coddling union demands for decades and by skimping on engineering / product design in an effort to squeeze out more profit margin on small vehicles.
But for a fact, producing cars in America is no longer a 'level playing field' i.e. Ford or GM versus Honda or Toyota. And it appears that Ford and GM are responding by migrating away from the American playing field that is slanted in favor of their competition, and migrating to a 'new' playing field in southeast Asia which is actually slanted way in their favor in terms of corporate finance (although not in favor of their US employees).
Frankly, I'm also concerned for the taxpayers in Kentucky and Ohio and Indiana who, after 12 or so years of reaping the benefits of the 'top of the pyramid', will then have to start picking up the tab when the 'bottom of the pyramid' starts to widen i.e. state gov't costs to fund disability, welfare and medicaid benefits for 'discarded' Honda and Toyota workers start to increase exponentially. Remember that even if the 'firing rate' for Honda and Toyota workers is only 5% per year, after 20 years of 'pyramid building' this will translate into one young and healthy new Toyota or Honda employee being hired to replace one middle aged, partially disabled Toyota or Honda employee being fired. At a maximum state tax rate of what 15% between income tax and sales tax, the costs to the state to provide benefits to every fired Toyota or Honda worker whose partial disability prevents them from obtaining a 'full requirements' replacement job will vastly exceed the tax revenues generated by the replacement worker hired by Honda or Toyota ... leaving the rest of the states' taxpayers to pick up the difference.
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Re: Ford shutting down 10 plants
Pretty highly speculative on the amount of turnover, whether the theoretical turned-over employee is employable, and the theoretical amount of partial disability to be paid by tax revenue. Do we even know whether Honda/Toyota have private or government workers comp?
What's your solution?
How does this explain away Ford tanking and Honda expanding, here on August 22, 2006?
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Re: Ford shutting down 10 plants
^^^ because it lowers that total average wage and benefit cost per employee per year component that Honda corporation itself must pay out of its own pocket and amortize in the sale price of their cars relative to the total average wage and benefit cost per employee per year at Ford. This of course is just one cost component where Honda is receiving US gov't subsidies while Ford is not. The kicker is of course while some US gov't subsidies are known up front and quantified i.e. property tax abatements, 'incentives' packages etc. this gov't subsidy takes place in 'stealth mode' without the state and local gov'ts who are footing the bill for it even being aware of its existance, let alone the financial magnitude, until the plant has been established in operation for 12+ years.
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Re: Ford shutting down 10 plants
OK. If Honda is turning over employees faster - which we've seen no evidence of - or if it is having more than their share go on disability - which we've seen no evidence of....
What's the solution?
You say it costs less in labor per car for Honda. (And I would submit that having higher-efficiency plants factors into that, too.) Doesn't every company, auto or otherwise, try to keep its costs lower to improve its profitability?
The statement is that the reason for Ford tanking and Honda succeeding is labor costs. It looks to me like Hondas cost more than comparable Fords, yet they're selling.
I presume, but don't know, that Honda is spending gobs of money in the mortgage on their present factories and taking out mortgages on new ones, while Ford has mature real estate and is abandoning other places. That's just talking through my hat, but my point is that there are hundreds of factors besides labor - including R&D, executive/management costs, attitudes toward equipment, advertising, legal you name it - and Honda seems to be getting it right and Ford is not.
What's the solution?
I say Ford needs to make cars that people buy. They make cheap cars with a low profit margin, and that doesn't buy much bacon, so rather than compete on that level, they hinge their profits on higher-profit big vehicles - and when that market evaporates, they got nuthin'. But I'm not auto expert, just a consumer.
What's the solution?
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Re: Ford shutting down 10 plants
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What's the solution?
I think that Ford has already found the only truly viable solution given their current position re US production facilities and US union contracts ... close down US production until the 'American' content of their cars drops to 51%, and build/expand/partner facilities in Thailand, Phillipines, Taiwan, China etc. where the other 49% can be produced using $5 a day employee labor costs and virtually non-existant employee benefit costs, environmental compliance costs, worker safety costs etc. This will allow Ford to build future cars that 'people want to buy' at prices 'people want to pay', and still turn a profit - and is likely to eventually put price pressure on Honda and Toyota.
This approach also avoids burdening US state and local taxpayers with the cost of 'incentives packages', tax abatements, etc. which have been given to Toyota, Honda etc, I'm not sure how costs to US states and localities for Ford unemployment vs Honda disability, for ex-Ford vs ex-Honda employee medicaid benefits, food stamps etc will go down. On the bright side, I suppose that 15 year service laid off ex-Ford workers will be more 'capable' of getting 'full requirement' replacement jobs, as opposed to ex-Honda employees fired after 15 years of service because they developed a chronic 'partial disability' while working for Honda which now prevents them from achieving 100% job performance.
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Re: Ford shutting down 10 plants
Outsourcing is the solution? Gee, I sure hope not.
I agree with Jay. They need to build more cars people will purchase.
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Re: Ford shutting down 10 plants
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Originally Posted by Melonie
This approach also avoids burdening US state and local taxpayers with the cost of 'incentives packages', tax abatements, etc. which have been given to Toyota, Honda etc, I'm not sure how costs to US states and localities for Ford unemployment vs Honda disability, for ex-Ford vs ex-Honda employee medicaid benefits, food stamps etc will go down. On the bright side, I suppose that 15 year service laid off ex-Ford workers will be more 'capable' of getting 'full requirement' replacement jobs, as opposed to ex-Honda employees fired after 15 years of service because they developed a chronic 'partial disability' while working for Honda which now prevents them from achieving 100% job performance.
I suppose - if there's any evidence that that's actually happening on a systematic basis.
Hell, I haven't even seen any evidence that Honda has received any incentives to build in Ohio, although I have no doubt it did - just as I have no doubt that GMC did in Tennessee. Just as Mitsubishi did in Illinois. Just as Ford did in Kentcuky. I did see that Honda elected to go to Indiana rather than Ohio for a new plant because it was wary of draining the supplier talent pool in the Marysville area, even thought it has (incentivized? who knows?) real estate to build on. So there might be things other than incentives involved - like prior planning on best practices and long-term consequences.
So. No solution in this country other than let the market decide, wherever that market may come from. Sounds good to me. Makes me wonder what we were debating about.
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Re: Ford shutting down 10 plants
My understanding was that we were discussing the topic of this thread ... and the underlying reasons why Ford chose to close down 10 North American plants ... which led to additional info regarding Ford's alternate plans for offshore auto component production once those 10 north american plants and their 30,000 UAW and salaried employees are eventually removed from Ford's payroll - which should then allow Ford to design and market a 'car that people want to buy' for a 'price that people want to pay' and actually turn a profit in the process.
as to the 'cost' of direct incentives, the Federal Reserve had this to say ...
(snip)"Indiana offered Honda generous incentives of EDGE tax credits, training assistance, and real and personal property tax abatements totaling up to $41.5 million. In addition, the state will provide infrastructure support for water, wastewater, and road improvements of approximately $44 million."(snip)
Large offers of this nature have become commonplace. Speaking at the Chicago Fed’s recent symposium on the automotive parts industry, Sean McAlinden of the Center for Automotive Research reported that the state of Georgia offered Korean carmaker KIA a package estimated to be worth $409 million."(snip)
from
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Re: Ford shutting down 10 plants
Fair enough. It seemed like a long way to go to say, "Go offshore. It's the only way," but we got there. Although I don't necessarily agree. But it is one option.
So let me hit you with a hypothetical, Mel, since we're working without evidence.
Hypothetically, labor statistics show that Honda employees have comparable benefits, comparable pay, and comparable longevity to the union types. Hypothetically, further labor statistics show that Honda doesn't discard injured employees substantially more than any other car employer.
Hypothetically, let's say research unearths that Honda didn't have any more incentives to build in at Marysville than GMC or Ford or any other company did at any of its other plants.
Hypothetically. We don't have evidence to the contrary, but I really do mean hypothetically. I promise not to quote you on it as anything other than a hypothesis.
Hypothetically, if that were true, what would then be the next line of apology-making for Ford not performing profitably against its competition?
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Re: Ford shutting down 10 plants
problem is that we needn't rely on purely hypothetical situations. The numerous state and federal court cases against Honda brought by former employees claiming 'wrongful dismissals' are rather well documented. The $91 million dollars in Honda incentives ponied up by Ohio taxpayers is also well documented. The fact that Honda's firing policies have resulted in the existance of only about 1000 retirees from all of its US facilities after 25 years of US operations is also well documented. Honda's hourly pay rate of $20-25 per hour is also well documented versus somewhere around $27-32 an hour for a UAW plant worker depending on specific job and specific region. Honda's hourly benefits cost is also significantly lower than hourly benefits costs at a UAW plant, primarily because Honda's workforce is young and healthy keeping health insurance costs low, because Honda offers a 401k retirement plan instead of UAW defined retirement benefits, and because Honda firing policies seem to insure that very few employees actually leave Honda as retirees eligible for company funded benefits.
the flipside argument ...
probably the most credible evidence comes from the Supreme Court of Canada, which awarded 'record' damages to a Honda employee for 'wrongful dismissal'.
Coincidentally, Honda has no additional expansion plans in Canada !
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Re: Ford shutting down 10 plants
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Originally Posted by Melonie
problem is that we needn't rely on purely hypothetical situations.
So there is no other cause? Even hypothetically, it's unanswerable? OK. I'm glad to stick with my line. Make the right cars, Ford.
Thank you for providing some data. I had time to look at the first link you listed: , and it got me to writing this.
Really, that's a bit of a "stand up and cheer" article for Honda building U.S. plants. It talks about "Honda Ohio" spending $7 billion in just one year just on parts from suppliers in Ohio. That's not including its payroll that its workers go out and spend, or the further money generated by the suppliers and its payroll and purchases, or the community support funds that Honda spends - all of which is an excellent return on investment for one year, let alone the life of the factory, for $91 million dollars of incentives (assuming that's correct).
That's why communities offer incentives for prized employers. Honda sweetened the pot by developing and using local suppliers, too.
The numerous state and federal court cases against Honda brought by former employees claiming 'wrongful dismissals' are rather well documented.
As they would be with any major employer, and we all know that. In another thread, I rather imagine it could be attributed to runaway litigation.
Honda has a panel of factory workers that review firings, and this panel can reinstate the dismissee, and it does so as it sees fit.
The fact that Honda's firing policies have resulted in the existance of only about 1000 retirees from all of its US facilities after 25 years of US operations is also well documented.
25 years ago, it started with a couple dozen employees. We'll see how it goes. The 2004 article you linked talked about that number inevitably growing over the years.
I think I read a while back that there are 16,000 employees at Honda presently - just a faded memory, and I could be wrong. Going from zero to 16,000 in 25 years and having 1,000 retirees out of it doesn't sound all that bad to me, especially when we think of retirement as occurring in 20+ years. But I'm no labor analyst.
You've made me read a little more. The report I read related a Honda labor turnover rate of 2(two)%. Assuming that's correct (and I don't, because it's a little too favorable of a report) that's pretty good.
Honda's hourly pay rate of $20-25 per hour is also well documented versus somewhere around $27-32 an hour for a UAW plant worker depending on specific job and specific region.
Depending on, yes. The 2004 article you linked cited $23.20 plus bonuses that can take it to $26.67, not including overtime and benefits, and they are certainly working overtime. That's in Marysville, where $26 will go farther than $26 in Detroit.
Honda's hourly benefits cost is also significantly lower than hourly benefits costs at a UAW plant, primarily because Honda's workforce is young and healthy keeping health insurance costs low,
I imagine any employero would like that. I do. It's also perhaps why it's early in the plan for numbers of retirees.
because Honda offers a 401k retirement plan instead of UAW defined retirement benefits,
Ah, at first Honda was bad because it kept people from retiring. Now it's bad because it offers a 401k program.
I know lots of people who would like to be in a 401k.
and because Honda firing policies seem to insure that very few employees actually leave Honda as retirees eligible for company funded benefits.
Hm. The article that you linked quoted two happy employees. One had worked there for 21 years; the other for 20. In a factory that's been around for 25.
probably the most credible evidence comes from the Supreme Court of Canada, which awarded 'record' damages to a Honda employee for 'wrongful dismissal'.
Yeah, I saw that a few days ago. One case for $500K. Mel, one case does not credible evidence make. You also said that there was union harassment on the part of Honda, yet the only thing I saw on that was a complaint with the NLRB, I think, that had been dismissed. But as a single factor, I don't consider that credible evidence, either.
Besides, credible evidence of what? Systematic abuse of employees? If one case counts as "credible evidence," then the two quoted employees of 21 years and 20 years would constitute credible evidence for a different proposition.
You said that Honda's low wages woud keep workers eating fast food instead of steak. At $23-26/hour, plus overtime, plus benefits, I think they can keep eating a little steak.
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Maybe here's another reason why Honda's competitors don't want to act like Honda: No private offices for executives. Management wears the same factory uniforms as labor. No private parking spaces for management. Shared cafeteria. No special titles on doors, no signs of rank or prestige. Why would a car company executive want to take on those intolerable working conditions?
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You have an anti-Honda bias. I have a pro-Honda bias. The difference as I see it is that you're cherry-picking anti-Honda stuff that feeds your bias. I developed my pro-Honda bias in admiration after reading about the environmental attitudes, engineering attitudes, quality attitudes, and pro-labor attitudes that they developed and spread around.
I'm willing to accept Honda's warts - all companies have them - while admiring their accomplishments and philosophies and thinking that others can learn well from it. You're looking at the warts and trying to describe them as a case of advanced leprosy. I think you're quite wrong.
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Re: Ford shutting down 10 plants
Fair enough ! I also don't want to dwell on the politico-economic merits of cities/states granting incentives, only the fact that Honda's Ohio plant got them and Ford's Michigan plants did not thus creating a lower cost of taxes etc for Honda. I also don't want to dwell on the socio-economic merits of a $23 per hour paycheck in Ohio versus a $28 per hour paycheck in Michigan, only the fact that this represents a 20% lower direct labor cost for Honda. Likewise I don't want to dwell on (at this point in time at least) unquantifiable particulars regarding continued employment until eligibilty for retirement, only that Honda's 1:16 ratio of retirees to workers versus Ford's 1:3 ratio of retirees to workers represents a vastly lower indirect labor cost for Honda. These inarguable differences in costs means that Ford cannot possibly build a car that is competive with Honda in features or performance or quality and also sell that car at a price anywhere near the price of a Honda and still turn a profit.
Again the underlying point is that, given UAW contract restrictions and existing American production facilities, Ford's only serious future option to remain competitive with Honda, Toyota et al in the small car market is to incorporate as many cost reductions as possible as a result of offshore production of 49% of future content - to compensate for the higher costs they are forced to pay on the remaining 51% American content.
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Re: Ford shutting down 10 plants
Gosh, Mel, are you sure you're not dwelling on that stuff?
I think there are plenty of other things that Ford could have done, or could do, and I think there's numbers here that aren't being factored in. For one thing, in support of what you're saying, I'll add that Honda's plant is probably more labor-efficient than Ford's plant, i.e., is more automated and uses fewer workers to crank out their cars.
But as to Ford:
Ford could have started with serious competitive small-car building in the 60's and 70's when the small import cars were making headway, and particularly in the mid-70's (?) when the oil embargo triggered a rash of those sales.
Ford could have built new and less expensive plants in other areas, too, and negotiated local tax breaks on those plants. Oh, wait, it did, but it's closing those and keeping Dearborn MI open, if I understand right.
It could have bargained harder on wages and benefits. Failing that, it could have started operating in cheaper places that offered tax incentives.
Ford could have revised management, labor, engineering, design, production, and marketing practices rather than sticking mostly to what they've always done and watching these other young upstarts close in on them.
If union agreements prevent Ford from doing that kind of stuff, then Ford is a self-made victim of its own bad negotiatons.
Honda had to build and buy everything new. Ford already had equipment in place, so its annual capital costs should have been lower.
And I don't dispute a single thing that you're now saying about Honda having cheaper labor costs than Ford (although those costs will rise as the labor force matures). But again, so what? Honda wanted to build cars in America. Like any good business, it looked for a strategy that would make it profitable. Surely it wouldn't come in and look for ways to get the most expensive labor and land possible.
And it's a refreshing to some extent that Honda delivered "insourcing" (the article's term) rather than keeping shipping everything from Japan or China or Indonesia. You can say that a new Honda job at $23+/hour reflects a loss of a Detroit job at $27+/hour, but I think that's bad math. That Detroit job could have well gone to a $20/month job in China (looks like it still might), or a factory worker in Japan, because these cars are going to sell anyway - but instead 16,000 automotive jobs were added within American borders.
I just see criticism going on and cries of unfairness because a car company was smart about its operation. Profitable companies try to operate in smart ways. Honda was told by Japanese authorities that it couldn't get a quality car built in America, to keep the factories offshore. I'm glad Honda proved them wrong.
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Re: Ford shutting down 10 plants
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I'll add that Honda's plant is probably more labor-efficient than Ford's plant, i.e., is more automated and uses fewer workers to crank out their cars.
obviously this is true when comparing a 40 odd year old Ford plant to a 20 odd year old Honda plant, and comparing strict UAW work rules to a non-union, use employees any way management wants to work environment.
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If union agreements prevent Ford from doing that kind of stuff, then Ford is a self-made victim of its own bad negotiatons.
Absolutely agreed, as I have already posted more than once
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Honda had to build and buy everything new. Ford already had equipment in place, so its annual capital costs should have been lower.
Well, this point is debatable re the Bank of Japan making 1% money available, whereas Ford would have had to bond at 5%+ (god knows what it would be today with a junk bond rating). And newer more flexible equipment offers immediate efficiency improvements which likely more than offset the capital costs (especially at a 1% yen interest rate)
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And it's a refreshing to some extent that Honda delivered "insourcing" (the article's term) rather than keeping shipping everything from Japan or China or Indonesia. You can say that a new Honda job at $23+/hour reflects a loss of a Detroit job at $27+/hour, but I think that's bad math. That Detroit job could have well gone to a $20/month job in China (looks like it still might), or a factory worker in Japan, because these cars are going to sell anyway - but instead 16,000 automotive jobs were added within American borders.
this area seems to be the location of the widest 'gap'. With benefits included, much more has been lost than just $5 per hour in direct labor cost difference in assuming that Ford Detroit jobs lost are replaced 1:1 with Honda Ohio jobs. Also lost are US gov't tariff revenues on say imported Japanese pickup trucks which are now produced by Toyota in US facilities which would have amounted to 25% of the sticker price, and even higher percentage tariffs on Japanese 'luxury' vehicle imports vs the same vehicles assembled in US facilities. The whole tariff issue involves huge money and huge political forces, and obviously directly affects Japanese auto companies decision to import vs 'insource' much more than American auto companies decision to produce domestically or assemble domestically based on a supply of 49% foreign made parts.
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That Detroit job could have well gone to a $20/month job in China (looks like it still might), or a factory worker in Japan, because these cars are going to sell anyway - but instead 16,000 automotive jobs were added within American borders.
Which brings us to the scariest part of this whole speculation ... that once Honda's and Toyota's US operations 'mature' to the point where they start to experience rising health care costs due to aging of US workers hired some 25 years ago, rising retirement benefit costs etc. as a larger and larger percentage of retirees vs active workers increases indirect labor costs etc. , why would such 'smart' Japanese companies continue to operate their US facilities under conditions of rising costs and falling productivity/profitability the way that Ford has done ?
So far, the Japanese automakers have all been in growth mode for decades as they glean an ever increasing share of the US auto market. But at some point (i.e. the point at which the declining US 'middle class' can no longer afford luxury car payments and mortgage payments at the same time, and the point at which the US 'poor' can't even get financed by the auto manufacturer, and at the point where the Big 3 have no more percentage of sales to hand over) the continuous growth mode will come to an end. At that point, Toyota and Honda will find themselves with underutilized 40 year old US manufacturing capacity i.e. the same position that Ford is currently in. It will be extremely curious to see what happens then. The 'tin foil hat' crowd is pointing to 2016 on the outside, and is speculating that the older US Toyota and Honda plants will simply close their doors.
At any rate, there is a bit of new news which IMHO really says a lot about Ford's future intentions ...
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a picture is worth 1000 words !
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Re: Ford shutting down 10 plants
^^LOL - that's pretty funny.
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Re: Ford shutting down 10 plants
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Re: Ford shutting down 10 plants
I have tunnel vision. The midwest Japanese plants dont buy my products or other US brand components sold by my competitors...they only buy products made and/or owned by Japanese companies. Their call since its their money. OTOH, my call is to spend my money on domestic brands when the time comes to purchase new vehicles for my employees and/or my family.
FBR