Automakers Must Address Five Crucial Issues for Bailout

Auto Industry's Top Issues

1: Overpaid workers

General Motors CEO Rick Wagoner, from right, Chrysler CEO Robert Nardelli, Ford CEO Alan Mulally,...

General Motors CEO Rick Wagoner, from right, Chrysler CEO Robert Nardelli, Ford CEO Alan Mulally, testify at a Senate Banking, Housing and Urban Affairs Committee hearing on the automotive industry bailout on Capitol Hill in Washington, Tuesday, Nov. 18, 2008.

(Manuel Balce Ceneta/AP Photo)

The United Auto Workers union is taking much of the public blame for the automakers' woes. People see UAW members as overpaid and underworked compared with other U.S. workers.

The average hourly wage the Detroit 3 pay union workers is not a lot more than the $26 average for the non-union workers at Toyota's U.S. plants and $24 at Honda's, CAR says. But including benefits for the workers and retirees, the Detroit 3's total hourly labor costs still average more than $70 vs. less than $45 at the foreign-owned plants. The new UAW contract signed in 2007 will bring those costs more in line -- but not fully until 2011 and after payments by the companies to a benefit fund for which the union has agreed to be responsible.

In a recent presentation on the new labor contracts, Sean McAlinden, vice president of research for CAR, wondered, "Will this improvement be too late?"

Despite such UAW concessions -- including buyouts for tens of thousands and lower wages for new workers -- critics say the union still is strangling automakers by forcing them to pay workers not to work with the "jobs bank," a supplemental unemployment benefits program.

The jobs bank was created in the early 1980s to ease the transition into assembly plants with more work done by robots. Workers replaced by robots would be offered a job elsewhere or, if no job was available, would get almost a full paycheck until a job was found.

It's become a symbol of excess. The Detroit 3 have about 3,000 workers in the jobs bank, though the number could rise with more plants scheduled to close within weeks or months.

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"There is not a huge number of people in it, but it's one of the most negative things that people across the country hold against the auto industry. They look at it and say, 'This just doesn't make sense,' " Cole says. "I would expect we're going to see the jobs bank be a key factor" in the plans submitted to Congress.

A spokesman for the UAW did not return a call for comment, but UAW President Ron Gettelfinger noted recently that the jobs bank has been scaled back: Workers can stay only two years, rather than indefinitely.

On CNN's Late Edition on Sunday, Gettelfinger said the UAW is "prepared to go back to the table, the bargaining table," but said all affected parties, including dealers and parts suppliers, should be willing to do so, as well.

He also called for the Detroit 3 to "establish that executive compensation is something that they're willing to curtail."

2: Overpaid executives

Like Gettelfinger, members of Congress also have argued that the CEOs haven't made enough personal sacrifice to justify the bailout they seek.

Ford Chairman Bill Ford told National Public Radio that the company is negotiating with CEO Alan Mulally on a cut in pay and perks. In two years, Ford has paid CEO Alan Mulally nearly $50 million and allowed $752,000 worth of personal and family use of company planes. "We're talking to Alan about it," said Ford, who's taken no salary for four years. "We are very sensitive to public opinion."

GM CEO Rick Wagoner has not publicly agreed to a pay cut, although he took cuts in 2006 and 2007. His base pay returned to $2.2 million this year. His total take for 2007 was $14.4 million.

Chrysler CEO Bob Nardelli reportedly agreed to a $1-a-year salary when he arrived at the company, but because it is privately held by Cerberus Capital Management and Daimler, it does not have to make Securities and Exchange Commission filings that would show what other kinds of compensation he may receive.

The industry got a huge black eye at the hearings when politicians chastised the CEOs for flying to Washington on corporate jets to ask for handouts.

Bill Ford said the company is looking at its air fleet. "We're taking a real look at our whole plane operation," he says. "We've sold a number of planes already, and we're taking a good hard look at the rest of them, as well."

GM was the first to respond to the airplane saga, announcing the elimination of two planes days after Wagoner testified. Chrysler says it got rid of company-operated planes earlier this year.