The Homa Files

Excerpted from WSJ, “America’s Other Auto Industry”, Dec. 1, 2008

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There are the 12 “foreign,” or so-called transplant, producers making cars across America’s South and Midwest.  Ths “other” American car industry is a model for how to do it.

Toyota, BMW, Kia and others now make 54% of the cars Americans buy … and employ some 113,000 Americans, compared with 239,000 at U.S.-owned carmakers.

Detroit has already adopted some of its efficiency and employment strategies, though not yet enough. To put it concisely, the transplants operate under conditions imposed by the free market. Detroit lives on Fantasy Island.

Consider labor costs. Take-home wages at the U.S. car makers average $28.42 an hour,that’s on par with $26 at Toyota, $24 at Honda and $21 at Hyundai.

But include benefits, and the picture changes. Hourly labor costs are $44.20 on average for the non-Detroit producers, but are $73.21 for Detroit.

In 1995, a GM car took 46 hours to make, Chrysler 43 and Toyota 29.4. By 2006,  GM had moved it to 32.4 hours per vehicle and Chrysler 32.9. Toyota stayed at 29.9. 

[Ken’s Note: [That’s about $2,400 of labor in each Detroit car; about $1,300 in each transplant car; over $1,000 difference per car in “applied labor”.  And that doesn’t include the costs of the UAW “job bank” Laid-off workers get nearly full-pay to play cards or do crossword puzzles in a congregating hall.  That program costs the Detroit 3 over $1.5 billion annually — about over $600 per car sold. So, their total labor cost disadvantage (vs. ‘transplant’ carmakers in the South) is more than $1,500 per car.  UGH !]

Over the decades the United Auto Workers won pension and health-care benefits far more generous than in almost any other American industry. As a result, for every UAW member working at a U.S. car maker today, three retirees collect benefits; at GM, the ratio is 4.6 to one.

The international producers’ relatively recent arrival has spared them these legacy burdens. They also located in investment-friendly states. The South proved especially attractive, offering tax breaks and a low-cost, nonunion labor pool.

The absence of the UAW also gives car producers the flexibility to deploy employees as needed.  At Detroit’s plants, electricians or mechanics tend to perform certain narrow tasks and often sit idle. That rarely happens outside Michigan.

Attempts to unionize foreign-owned factories have generally been unsuccessful; their workers know too well what that has meant for their UAW peers.

Another transplant advantage: Their factories are newer and production process simpler. As a result, they can switch their assembly lines to different models in minutes. Such a change would take weeks at UAW plants.

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Full article:
http://online.wsj.com/article_email/SB122809320261867867-lMyQjAxMDI4MjA4MTAwOTEzWj.html

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This entry was posted on December 2, 2008 at 7:59 am and is filed under Autos - Travel. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.