Shaun Kenney | Politics and Religion in Virginia's Public Square


Sunday, January 28, 2007 Why U.S. automakers like GM and Ford are losing money The answer? Big labor: A big reason is the cost of labor. As analyzed by Harbour-Felax, labor costs the Detroit Three substantially more per vehicle than it does the Japanese. Health care is the biggest chunk. GM (Charts), for instance spends $1,635 per vehicle on health care for active and retired workers in the U.S. Toyota (Charts) pays nothing for retired workers - it has very few - and only $215 for active ones. Other labor costs add to the bill. Contract issues like work rules, line relief and holiday pay amount to $630 per vehicle - costs that the Japanese don't have. And paying UAW members for not working when plants are shut costs another $350 per vehicle. Here's one example of how knotty Detroit's labor problem can be: If an assembly plant with 3,000 workers has no dealer orders, it has two options. One is to close the plant for a week and not build any cars. Then the company still has to give the idled workers 95 percent of their take-home pay plus all benefits for not working. So a one-week shutdown costs $7.7 million or $1,545 for each vehicle it didn't make. For all of the recent talk about increasing the minimum wage (a hike that benefits not working families, but labor contracts indexed to the minimum wage), is it any small wonder why U.S. industry is in such deep trouble? posted by Shaun Kenney \| 1/28/2007 07:59:00 PM \| 6 comments 6 Comments: At 8:19 PM, Shaun Kenney said... Second that. Sad thing is that most labor employees (the decent ones anyhow) would probably make more w/o the unions than they do now. At 9:13 AM, Doogman said... And it has nothing to do with the incredibly-poor quality of the product. At 9:34 AM, Shaun Kenney said... Some of that has to do with innovation being choked off by a 19th century understanding of labor, though. Ford trucks used to be the best on the road! Not so anymore... but that's why I have the older models. the engine in the '86 F-150 is still the best engine Ford ever built. At 2:50 PM, GOPHokie said... The other major thing is right-to-work laws. That way unions can still exist for the collective bargining purpose, but they cant hold employers hostage. At 9:20 AM, Joe Friday said... Can someone explain to me why investments weren't made and funds setup to fund the insurance and retirement needs? Seems it is irresponsible business practices, than labor. And aren't all of the big three in bed with the Japanese? Where are those profits going? Is this just more smoke and mirrors accounting, to get government aide and or a marketing ploy, for the big three? At 9:12 AM, Doogman said... Tom - excellent questions... which will likely never be answered. See... when you're royalty, you don't have answerability to those pesky 'little people' - until they come for you with a pike. Post a Comment Home
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