You happy now... is the next goal parity with Mexican auto workers?
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U.S. Automakers on Path Toward Labor-Cost Parity With Toyota
March 18 (Bloomberg) -- The U.S. auto industry may be close to reaching wage parity with Japanese carmakers’ U.S. operations, a stipulation required for General Motors Corp. and Chrysler LLC to receive further aid and a milestone of cost-reduction.
Ford Motor Co.’s latest contract with the United Auto Workers union puts it on a path to $50 an hour, including benefits, by 2011, nearly matching Toyota Motor Corp.’s $48 figure, said Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Michigan. GM may not be far behind.
It and Chrysler LLC must demonstrate parity with the labor costs of at least one Japanese automaker’s U.S. operations to keep $17.4 billion in U.S. aid and convince the Treasury to release as much as $21.6 billion more. Failure to meet loan terms may prompt the government to recall the money, forcing a bankruptcy.
“For all practical purposes, we’re at parity now,” said Harley Shaiken, a labor professor at the University of California at Berkeley. “When the market recovers, Toyota will return to profit first and profit sharing payments make Toyota’s hourly costs more expensive than Ford’s.”
Ford, which said it doesn’t need government loans, gave details on the new UAW contract after it was ratified by Ford UAW members March 9. The specific terms of the GM and Chrysler loans require a comparison with either Toyota, Nissan Motor Co. or Honda Motor Co. and exclude Korean automakers Hyundai Motor Co. and Kia Motor Co.
Contract Amended
Ford estimates its hourly labor costs under the new contract at $55 an hour, down from $60 before the concessions. UAW workers are paid $28 hourly at all three automakers and new workers get about $14 as current workers leave or retire. Benefits and retirement costs comprise the rest of the hourly labor costs.
Ford still pays more than the $40 an hour labor costs for Nissan and $30 for Hyundai in the U.S., McAlinden said.
“Even after the Ford concessions, they still have the highest benefits and wages” compared with any non-U.S. automaker, McAlinden said.
GM estimates its own agreement with the UAW, not yet ratified, will have a similar hourly rate, a person familiar with the plan said last week.
Even achieving a $50 labor rate will be a stretch for GM and Ford because it requires a high rate of attrition, said Brian Johnson, a Barclays Capital analyst, in an interview.
GM and Chrysler said they won’t disclose details on savings until after their contracts are ratified. All three automakers are offering new buyout packages for union workers this year.
Labor Concessions
The UAW announced tentative agreements on labor contract changes for Ford, GM and Chrysler on Feb. 17 without giving details. Ford was the first to vote after reaching an agreement on a plan to replace as much as half of future payments to a union-run retiree health-care fund with stock instead of cash. GM and Chrysler are still negotiating retiree-fund changes.
“It was a hard pill to swallow to give up all this stuff, but it was something that needed to be done,” said Anderson Robinson Jr., president of UAW Local 900, which represents about 3,500 workers at two Ford factories in Michigan. “I told my members if we don’t pass this, we could all be out of a job.”
The UAW-GM agreement makes similar economic concessions to the one ratified by union members at Ford, UAW Vice President Cal Rapson wrote in a March 9 letter to local presidents and chairmen.
Toyota, Nissan
Toyota’s hourly labor rate, with benefits, is about $48, spokesman Mike Goss said. Nissan pays technicians $25 an hour plus “a comprehensive and competitive package of benefits,” spokesman Steve Parrett said, declining to specify the value of benefits.
Toyota has wholly owned assembly plants in Kentucky, Indiana and Texas. Nissan builds vehicles in Tennessee and Mississippi. Hyundai has a factory in Alabama. Honda has assembly plants in Ohio, Alabama and Indiana.
Honda pays workers at Marysville, Ohio, more than $28 an hour, including profit sharing and bonuses, said spokesman Ed Miller. He had no comment on CAR’s estimate that benefits bring that to $45 to $48 an hour.
Hyundai isn’t commenting on labor costs at its Alabama factory, said spokesman Robert Burns. When the plant opened in 2003, the company said it planned to pay workers wages of $14 to $24 hourly, without giving benefit costs. The average hourly pay and benefit rate for private-sector workers is $25.36 an hour, according to the U.S. Labor Department.
The U.S. labor rates of all the automakers, including the foreign companies, still exceed low-cost countries such as Mexico, where the comparable figure is about $7.50 an hour, and China’s $1.25, McAlinden estimates.
Canadian Auto Workers President Ken Lewenza said the focus on labor rates is misplaced since the UAW represents 10 percent of the cost of a U.S.-built vehicle and the CAW represents 7 percent of a Canadian-built car.
“Until people realize that labor rates are not the problem in terms of the crisis we’re in, then this insane race to the bottom will continue,” Lewenza said in an interview.
To contact the reporter on this story: Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net Keith Naughton in Southfield, Michigan at Knaughton3@bloomberg.net .
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