Keeping profits high on the backs of workers

Toyota’s Five-Year Plan is reverberating throughout the auto industry.

Honda is opening a new plant in Indiana at lower wages than they pay at other Honda plants. The template for Honda’s lower wage move is what the auto industry uses to determine wages and benefits: Toyota’s Five-Year Plan. It’s the new industry standard when setting wages and benefits.

According to an internal Toyota document obtained by the Detroit Free Press, the company’s Five-Year Plan is designed to save $300 million in labor costs by 2011 to keep profits at record levels. They plan to do this by offering wage “increases” that are wiped out and then some, by higher insurance co-pays and deductibles as well as other costs imposed on workers.

When General Motors was the auto industry leader, union members used their strength together to negotiate as equals with GM to raise the standard of living for all autoworkers with fair wages, benefits and job security. That’s because the auto industry’s leading company, together with workers having a voice as equals, set worker standards, and other companies follow suit.

Today, the auto industry leader still sets wage and benefit standards. But now, the leader is Toyota. And for the first time in modern history, Toyota is using its leadership to create fierce downward pressure on wages and benefits for all autoworkers. That’s not serving our workforce, our communities or our country very well.

The net result is a drop in wages and benefits for American workers, and an employer emphasis on temporary jobs rather than job security.

You don’t need to look any further than Honda’s plans for a new plant in Greensburg, Ind. Honda is following the new industry “pattern” set by Toyota: less for workers, more for the bottom line.

“Honda plans to hire 2,000 production workers in Greensburg, where basic wages will start at just under $15 hourly and rise to $18 over the next three years,” reports Neal E. Boudette in The Wall Street Journal.

“In Big Three assembly plants, UAW workers get about $26 an hour. Until recently, nonunionized plants owned by foreign automakers have paid close to that – about $24 an hour - which helped damp worker interest in unions.

As eroding membership and contract concessions hurt the UAW’s ability to keep up a wage standard, foreign makers have begun lowering what they offer. In Greensburg and elsewhere, wages are pegged to the average of all manufacturing jobs in the areas, not just auto plants.”

Employers can now compete based on lower wages, not higher quality products and better treatment of workers. Because workers have decided time and again not to join together at these new auto plants, management alone has made these decisions. That’s why wages are going down, and workers can expect more of the same until they decide to get together and build an organization (union) of their own.

“We have no input into what our hourly wages are or whether we even get a raise each year, and now we’re seeing the result of that – falling wages and benefits while we have to work harder just to stay afloat,” says Tom McIntosh, a 20-year veteran worker at the Toyota plant in Georgetown, Ky.

Toyota details its plan to shift from setting wages based on nationwide, auto industry standards to prevailing wages in states where each plant is located, typically, in states that pay the lowest wages in the country. The
difference in wages between Alabama and New York is a windfall for management. They’re the only ones who benefit when they sell their cars for the same price in every state, regardless of how much workers are paid in each state to make the same car. It’s unfair.

The devil is always in the details. For example, under the “Wages” section of Toyota’s Five-Year Plan, Toyota describes the fair wages and benefits paid by companies such as GM, Ford and Chrysler as a “Premium” and a so-called problem: “PROBLEM: U.S. auto industry ‘Premium’ reduces profit potential. STRATEGY: Manage Base Wage by ourselves based upon State Manufacturing Wages. Our strategy moving forward is to base our Hourly Wages more closely with the State Manufacturing Wages where each plant is located, and not tie ourselves so closely to the U.S. Auto Industry, or other competitors,” reads the document. Note that the document doesn’t discuss executive pay, which is typically in the millions.

What does Toyota get while the workers lose? About $3,640,000 in annual savings, which helps boost record profits that exceeded $14 BILLION in 2006 alone. And more cuts are on the way. Toyota’s Five-Year Plan has a goal of saving $3 per hour per worker. These additional health care costs, after meager raises are taken into account, will only achieve 31 cents per hour of that goal. There’s 10 times as much pain to come for Toyota workers – and the rest of the auto industry workforce is facing a similar future.

Honda is trying to get ahead of this curve and drive the industry down even further. Honda admits that their wages in Greensburg will be tied to Indiana’s average manufacturing wage. That’s proof that Toyota’s Five-Year Plan is now setting the standard in the auto industry.