Jobs: What do they cost?
What’s it cost to create a job…or to save a job? What is the ROI for that job?
Members of the US Senate voted against a $14 billion loan for the Big Three automakers.
There are roughly 830,000 jobs tied directly to the Big Three car makers. 230,000 workers are directly employed by the Big Three. Another 600,000 are employed directly by the auto parts supplier industry. – NY Times.
The message with this vote was that…these 830,000 jobs are not worth $16,000 +/- each to keep. ($14 billion/830,000 jobs = $16,000 +change.)
The 230,000 jobs directly with each Big Three car maker are not worth $61,000 each. Too expensive, they say. Where would we see a return on that investment?
However, in Tennessee, brand new jobs in auto manufacturers are worth $250,000 each. Volkswagen received upwards of $500 million in assistance from the state of Tennessee and local governments to build a plant which would create 2000 jobs at the plant.
Volkswagen says the plant will cost them $1 billion to build. For them, the cost for each of these 2000 jobs at this plant is…$500,000 each.
That’s a total of $750,000 combined to create one job. What’s the ROI for these jobs? The bigger question may be: How do they generate it?
Chattanooga Chamber of Commerce
Chattanooga Times Free-Press
You could do it cheaper, couldn’t you? Couldn’t you create or save a job for less than this?
What would it cost to add or save one job?
How much additional cash-flow would you need?
Where do you find that extra cash?….revenues added, costs reduced, equity investments, assets sold, liabilities retired, additional bank loans, corporate bonds …
How much will it cost to create the plan, connect it with their goals and your company goals? ( Those two are simpatico, right? )
How much will it cost your existing employees? Will pay raises be frozen, incentives be lowered? Will more career opportunities be generated?
How much new equipment will be needed?
How much of your time will be required? Do you have the time? Or, will you sacrifice time from your current tasks? If the latter, add that to the cost.
What’s your ROI? Not as a percentage, but…what will be returned on your investment? A career for one person, an opportunity for several, growth for all in your company, bonuses, health insurance as a paid benefit?
What is the ROI for your community from this job you created or saved? Safety, security, better schools, better restaurants, better roads, a future for your community?
How would your company measure the loss of but one job? What about your community?
And, at what point does it matter? Consider the ratio one layoff : one company….That’s odd, we say. 10 : 10…That’s not good, we say. 100 from 100….? As a nation, we’re way past the ratio of 100 : 100. 100 jobs lost at 100 companies. We’re sailing past 1000’s : 1000’s.
If you’ve read this far, you are either aggravated at the time wasted or hopeful I have some answers. I don’t. At least, quantitatively. I could, though. But it doesn’t seem necessary does it? The numbers seem self-evident. You can find new numbers with every morning’s news.
I’ll say this, though, small business can create jobs more effectively, more cost-effectively, and generate the higher ROI as compared to the plans of big business, domestic or international, working with government, local or national.
We all have to be clear, now, in our answers to this question: What’s the ROI to create or save one ? For the employee, our company, our community…yes, our country.
What do you say? What’s a job worth? What rate of return is required?
Our answers create the solution and the plan to move out of this recession.
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About the author: Zane Safrit’s passion is small business and the operations excellence required to deliver a product that creates word-of-mouth, customer referrals and instills pride in those whose passion created it. He previously served as CEO of Conference Calls Unlimited. Zanes blog can be found at Zane Safrit.
Anita Campbell
The auto industry is so central to our economy that we have to step in. Business is an ecosystem, and a lot of small businesses depend on the auto industry.
However, I am glad Congress is asking hard questions before we do it — because a message needs to be driven home.
To riff off of what Jonathan Fields said in yesterday’s post, it’s not so much “differentiate or die,” it’s “change or die.” That’s what the Big 3 need to be working on. And that goes for the union, too.
The American taxpayer can’t carry everyone on its back — that includes overpaid executives making bad business decisions, and non-working union members taking advantage of the job bank for lifetime unemployment benefits. Maybe they have to sacrifice more — such as pay a greater percentage toward their health care, and settle for Chevy health care coverage instead of Cadillac care. What’s wrong with those kinds of costs savings, and a little sacrifice on everyone’s part, to save jobs?
In tough times we all have to make tough choices. That’s what I want to see — some evidence of sacrifice that says “we know times are tough and we are going to do our fair share to change so we work our way toward future profitability, and meanwhile we’ll sacrifice, too.”
Exactly. I don’t mind doing my part as a taxpayer if it benefits our economy and country in the long run. I do, however, mind if they don’t make much needed changes within the companies.
Years ago I read a statement that approximately 7 support jobs are maintained for each single manufacturing job.
That would include everything from hairstylists, accountants, to the kid at the 7-11
So try redoing your math by multiplying 830,000 X 7 🙂
TJ McCue
I have to agree with Anita here. There’s a lot at stake by not helping the Big Three, but there’s equally as much at stake long term if we jump in willy-nilly and don’t THINK about how we jumpstart them.
There’s lots of argument for letting them die on the vine and letting 100s of new startups come in, nimble and focused, to pick up the pieces. That would be a mistake, too. Small companies, right out of the gate today, could not support the employee base or anything close.
But i love your approach Zane. What’s the cost to doing these things and what’s the return. I sense that you’re asking not because the return matters more than a person, but that because without asking how these funds will be spent and returned, we do a disservice to many individuals — meaning the taxpayers and small biz owners.
When will the American auto industry start to become competitive? Maybe it is time to take a trip to Japan and learn a hard lesson from for example Toyota. GM will sell out SAAB and Ford will sell out Volvo in order to cut their losses. This will have a huge negative impact on the Swedish economy.
I don’t believe in bailouts, special hand-outs and governmental subsidies. Somebody has to pay the bill in the long run.
If you want to read an inspiring story from the manufacturing industry, check out American Steel by Richard Preston. For more on the steel industry and Nucor, read my post. Click on “Martin Lindeskog” Says:
Thanks, Elliott. I know the numbers of jobs tied very closely to the auto industry is very high. One series of articles I read said 10% of our economy was tied to the Big Three. That seemed a bit high. But I used these figures to stay conservative, not lose the discussion with complaints of hyperbole. So, thank you for expanding that in a realistic manner.
Martin, you’re so right. I thought domestic car makers had learned one or two lessons in the 70’s, then the 80’s, then the 90’s…sigh. I grow so …angry when I hear them say they were blindsided by the spike in gas prices. For goodness sakes, I’m an art major and I knew they were going up. And I could see the shift in buying from SUVs and v-8s to hybrids.
Thanks, Anita, TJ and Amanda. We’re all in this together. It is a good step to see people step up and insist on better solutions. And together, we can find the one with the best ROI.
Zane: Yes, you are right regarding the lessons that should be learned by now. The price of gas could be lower if you are not dependent to instable oil sources. I think that the auto industry should spend some more time and energy on hybrid cars and new smaller electrical car models. I recommend you to read Alex Epstein’s piece, Save the Big Three, Kill the U.S. Auto Market. http://goushie.notlong.com
Neal O'Sullivan
I am surprised to read all these comments concerning the “cost/ROI of jobs”, and yet no mention of these companys’ balance sheets? Payroll is an Income Statement hit. Legacy costs, and long term debt are balance sheet stocks and these are the two big “cement goulashes'” weighing down the big three. In my opinion, taking the company’s into bankruptcy will directly address restructuring the balance sheet of these distressed firms. No way will the UAW cooperate outside of court ordered restructure. And why should debt holders take anything less than 100 cents on the dollar voluntarily? All parties have no rational reason to cooperate without a gun held to their collective heads. Sure a lot of people are going to get hurt, and yes it is going to be expensive. However, if anyone thinks Detroit can be salvaged with a $15B dollar bridge loan, well then you’re just kidding yourself.
Really interesting article and great comments too. I’m personally opposed to a bailout of the big three. It’s time for the automakers to grow a pair and address the problems (Unions, crappy product, bad management) head on.
Susan Oakes
It is interesting reading the comments. When the news hit that the auto industry was in trouble within days our car companies said the same thing and of course wanted money.
If the US auto industry goes down then the effects will also impact on jobs around the world directly or indirectly. I don’t usually agree with bailouts but consider the consequences.
Maybe I am wrong but I haven’t heard of any real plans to change the way the car companies operate and actions that can be taken today to increase productivity. Without this what will happen in 6 or 12 months when the money is gone.
Neal O'Sullivan
Susan pleasesix to 12 months; try six to 12 weeks! Until the principles of the big 3 (including the BOD’s) and the UAW personally feel the financial smack in the face of illiquidity there will be no resolution. I’ve got an idealets first drain their respective net-worth’s, and then go to the Fed’ hat in hand.
The American taxpayer can’t carry everyone on its back — that includes overpaid executives making bad business decisions, and non-working union members taking advantage of the job bank for lifetime unemployment benefits. ->> This is so true Anita. I’m quite surprised that America does have this problem too.
Chaitanya Sagar
Zane, jobs are not ends. They are means to achieving something. Anyway, it’s great to see such a passionate post.
I think we need to bail out the auto industry; but we need to do it in a way that forces change. Tie the money to conditions; and manage those conditions. Executives should be let go – they led their companies to insolvency. The Unions need to compromise – a job that pays less is still better than no job, for a long time.
One of my clients laid off 20% of his workforce last week. They are a manufacturer and have been hard hit by the slowing economy. The laid-off staff probably don’t have a good opportunity for new jobs in the next 3 to 6 months. Could they have kept those employees working by job sharing? Perhaps but then all of the employees would have been hurting. Instead, the client is focusing on new sales opportunities in non-traditional fields to try to get sales high enough to bring back laid off employees.
Hi Chaitanya,
What do you mean by “Jobs are not ends?”
Ok, pull your heads out of the sand!
@Anita Campbell (Change or Die):
@Zane Safrit (Angry at Blindsided Automakers)
The Big 3 have been making the kinds of vehicles consumers wanted to buy. How many of us, back in December 2007, predicted $4.00/gallon gasoline? Since it takes an average of 3-5 years or so to bring a new vehicle to market, considering GM and Ford each have 30+ mpg vehicles available, the domestic car makers have products available for consumers. In the true American, capitalist economic model, they’ll sell you what you want to buy. And, yes, I realize they’re not perfect and agree they’ve made mistakes.
@Elliot Ross (7 support jobs):
I wish people truly realized the significance of the auto industry on our economy. How many “support” jobs are there for the financial industry? Auto workers outnumber financial workers by 1-1/2 times. Why does Wall Street get at least 50 times the bailout?
@Neal O’Sullivan:
And we’re seeing real benefits from the $700 billion Wall Street bailout? I don’t think so!
@Stew (Crappy products):
So, Wall Street has better management? Not! Yet, they’re still getting bonuses using taxpayer dollars! Oh, and take a look at JD Powers’ quality surveys, Big 3 cars have 4 of the Top 20 spots.
I’m not pro-union by nature, but we all enjoy benefits from union activism, such as holiday pay, vacation pay, and overtime. OSHA and other worker protection schemes have their basis in union efforts. I don’t think any of us wants to give those up. People like to also forget unions have given substantial concessions during the last decade or so. Certainly Gettelfinger should have been more agreeable and partnerish during the Congressional hearings, but members and retirees don’t have it as good as the good ole days.
The UAW has agreed to shut down the “Jobs Bank”, which lots of people cast stones. Never mind that some Jobs Bank folks have been working with school districts and other community organizations. What’s the impact of this loss? And, to dispel a common myth, the Jobs Bank has a 2-year limit, so it’s not “indefinite unemployment”. It also came about as a safeguard for members as automakers began installing robots and other automated processes.
@Susan Oakes:
I agree–the cost of not giving the automakers a bridge loan is much higher than most realize. Although I agree they should have a plausible plan rational people agree with, why is this a stipulation for the automakers but banks and Wall Street get $700 billion without any plan? Even Secretary Paulson, who has total control over that pot of money, seems totally lost.
Walt
Cynical Synapse, the reason the public is not buying the crap GM and Chrylser are shoveling has nothing to do with $4 gallon gas or selling SUV’s. It has to do with making attractive vehicles people want to buy because they are attractive AND an affordable cost structure. GM’s cost structure is bloated and the UAW is a big part of puffing it up. How come Toyota can make money but GM can’t? Ill tell you why, costs and management.
“Cynical Synapse”: You have an interesting quote on your blog.
“That which does not destroy us makes us stronger.” — Friedrich Nietzsche.
It is time for the auto industry to learn the hard lesson. Same as the steel industry when Nucor entered the stage. I recommend you to read American Steel by Richard Preston. For more information, click on “Martin Lindeskog” Says: and read my post on this topic.
Walt: I agree with your statement 100%. Have you read Harry Binswanger’s article,’Buy American’ is UN-American?
Best Premises,
Martin Lindeskog – American in Spirit.
Gothenburg, Sweden.
Thanks all for the comments and passion and questions and challenges. This is the conversation we should be having nationally. It’s the conversation our elected reps should have as well, on our behalf.
The more we have this passionate, opinionated, the more likely we are to find solutions and find ’em faster for what’s needed to drive us out of this mess.
My own PS: I need to remember to subscribe to comments….