Car Wars 2011

Ford and General Motors are expected to distribute sizable profit sharing checks to workers, a sure sign of the rebound of these two domestic automobile companies. Also of note, is the labor cost reductions which have contributed to the recovery. Money quote:

The gap in labor costs between Detroit and the foreign-owned factories in the United States has narrowed considerably. Ford’s total labor cost for a worker — a combination of wages, benefits and pensions — has been reduced more than 20 percent and is now about $59 an hour, compared to $56 at Toyota, according to the Center for Automotive Research in Ann Arbor, Mich.

This, of course, goes a long way towards explaining the UAW's promised effort to organize the domestic plants of foreign automakers.

The Devil is in the Math

Pro-labor site In These Times has posted a piece claiming an employer's lockout is costing the company more than giving into the union's contract demands. The first question is "why is that news?" One would assume the disrupted continuation of work would be more expensive. Upon closer analysis, however, the math is skewed. The poster includes the total cost of replacement labor in the computation. Since the locked out employees are not paid for being locked out, the labor cost figure does not belong in the calculation. The proper analysis would subtract the normal labor costs from the actual labor costs to ascertain the increase caused by the lockout.

Labor costs and automakers

We have previously posted about American automakers being a proxy for organized labor. Now we find the bashing of American automakers also falling into the "facts matter" realm. Part of General Motor's turnaround is based on a real reduction of labor costs for hourly workers, according to the Center for Automotive research. In fact, in 2008, the average wage for hourly workers at GM was almost a thousand dollars a year lower than Toyota's average wage. Salaried workers at GM, however, averaged over $40,000 a year more than salaried workers at foreign automakers. This information strongly suggests it is not labor costs subject to collective bargaining which cause GM to be at a competitive disadvantage.