How much are Auto CEO's offering to give up? Not Much!

In order to get their billions from the US taxpayer, The Big Three CEOs and in some cases the Directors, are offering to reduce their 2009 salaries to $1. To find out how much this would actually cost them, I did a little research.

What is the compensation for auto industry executives?
In 2006, the CEOs of Chrysler Group, Ford and GM earned a combined total of $24.5 million in salaries, bonuses and other compensation in 2006. The next four highest paid executives received average salary and other compensation of $1.3 million at Ford and $1.4 million at GM.

Looks like they will lose a few million each. But, are they planning to forego all compensation except $1, or only salary? Or salary and bonuses? What about stocks and stock options that were also part of executive compensation, which were not included in the figures above.

We can see more clearly what else they might give up in these figures for Ford’s top 5 employees, from Ford’s Annual Report for 2007.

• Alan Mulally, Ford president and chief executive officer, earned $2,000,000 in salary and received incentive bonus awards of $7 million. His total 2007 compensation was $21,670,674, which includes salary, bonuses, the Company-recognized expense for stock options and other stock-based awards, as well as all other compensation. His salary, in other words, was a mere 9.23% of his total compensation.
• Don Leclair, Ford executive vice president and chief financial officer, earned $1,005,633 in salary and received incentive bonus awards of $3 million. His 2007 compensation totaled $11,703,127. (Salary was 8.6%)
• Mark Fields, Ford executive vice president and president, The Americas, earned $1,255,634 in salary and received incentive bonus awards of $2,850,000. His 2007 compensation totaled $8,389,898. (15%)
• Lewis Booth, Ford executive vice president, Ford of Europe and Premier Automotive Group, earned $868,133 in salary and received incentive bonus awards of $2,250,000. His 2007 compensation totaled $10,264,463. (8.46%)
• Mike Bannister, Ford executive vice president and CEO, Ford Motor Credit Company earned $708,700 in salary and received incentive bonus awards of $2,150,000. His 2007 compensation totaled $8,677,747. (8.17%)

In other words in 2007, while salary and bonuses were approximately $6 million dollars, this represented only 8-15% of the total compensation they received for their year’s efforts. These top 5 Ford employees actually received approximately $60.72 million in total compensation. For the same period GM’s top 2 earned $15.7 million for 2007, up 64 percent from the previous year, (while GM lost a record $38.7 billion). Because Chrysler is privately owned it does not have to publish this information - but I imagine the figures are much the same.

How much of this total compensation are the CEO’s offering to give up? That is not clear!

Just for comparison, what else could these dollars cover?
If you divided the $60.72 million compensation paid to Ford’s top 5 between the approximately 245,000 employees worldwide they would each receive an additional $24,836.74 each. A nice additional annual wage for many of them. In fact, paying every single one of Ford's employees as much as the best paid UAW-represented skilled-trades workers ($67,225 /yr) would cost the company a mere $16.4 million. That's less than three-quarters of Mulally's take home pay!

What were the “Labor costs” which the Republicans are so anxious to reduce?
Wage rates for 2006, according to the UAW, which covers about 721,025 employees at the big 3, were as follows;
• A typical UAW-represented assembler at GM earned $27.81 per hour of straight-time labor. ($58,240/yr)
• A typical UAW-represented skilled-trades worker at GM earned $32.32 per hour of straight-time labor. ($67,225 /yr)

In addition to regular hourly pay, labor cost figures include overtime, shift premiums and the costs of negotiated benefits such as holidays, vacations, health care, pensions and education and training. It also includes statutory costs, which employers are required to pay by law, such as federal contributions for Social Security and Medicare, and state payments to workers’ compensation and unemployment insurance funds. The highest figures sometimes cited also include the benefit costs of retirees who are no longer on the payroll.

How much value do UAW members contribute to their employers?
According to the U.S. Census Bureau, the typical autoworker produces value added worth $206 per worker per hour. This is far more than he or she earns in wages, even when benefits, statutory contributions and other costs are included.

How much are labor costs in relation to the total price of a new vehicle?
The total labor cost of a new vehicle produced in the United States is about $2,400 which includes direct, indirect and salaried labor for engines, stamping and assembly at the automakers’ plants. This represents 8.4 percent of the typical $28,4513 price of a new vehicle in 2006. The vast majority of the costs of producing a vehicle and transporting it to a dealership and preparing it for sale – including design, engineering, marketing, raw materials, executive compensation and other costs – are not related to direct or indirect manufacturing labor.

So this is what the Republicans are so keen to destroy - a union-negotiated wage which provides a decent income to automobile workers, while preserving the obscene compensation packages of the grossly overpaid executives. What a bill of goods!