Ralph Reiland looks at Mismanagement at the Big Three Detroit automakers:
It was a dead heat. General Motors sold 9.37 million vehicles worldwide in 2007 and lost $38.7 billion. Toyota sold 9.37 million vehicles in 2007 and made $17.1 billion.That was the second best sales total in GM’s 100-year history and the biggest loss ever for any automaker in the world.
For Toyota, that was roughly $1,800 in profit for every vehicle sold. For GM, it was an average loss of $4,100 for every vehicle sold.
Collectively, Detroit’s Big Three automakers are currently losing about $5 billion per month, with Ford, General Motors and Chrysler, respectively, burning through $2 billion, $2 billion and $1 billion in cash every 30 days.
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Currently, UAW workers at Ford, GM and Chrysler earn an average of $28 per hour, plus benefits. At the Toyota and Honda non-union plants in the United States, the hourly rate, excluding benefits, is $26 and $24, respectively.Add the cost of benefits for the current workforce and the cost of pensions and health care for retirees (benefit-collecting retirees outnumber current workers by three-to-one at GM, Ford and Chrysler) and the difference in labor cost between a Toyota plant in the US. and the plants of Detroit’s automakers jumps to $29 per hour.
More specifically, the hourly compensation cost for labor, including benefits and retirees’ costs, at the Big Three is $73 per hour, compared with $44 per hour at a Toyota factory with American workers in the U.S.
Further, it takes fewer hours of labor to produce a car in Toyota’s U.S. plants than at the plants of Detroit’s automakers.
With more flexible work rules, GM says it could save hundreds of dollars per vehicle. The company maintains, for instance, that a company-wide use on non-union janitors, earning $12 per hour, would cut costs and increase competitiveness by up to $500 million a year.
Similarly, health care costs at GM for active workers and retirees account for more than a quarter of total labor compensation, adding approximately $1,000 in cost to every GM vehicle, compared to $215 in health care costs in each Toyota produced in U.S. plants.
Under UAW contracts, additionally, laid off workers are transferred to a jobs bank and receive 95 percent of their full pay and benefits to not work. This year, the cost to the Big Three will be an estimated $478 million, about $70 million less than Honda spent to build a brand new factory in Indiana.
Somewhere along the line, both management and labor in Detroit forgot the good economic advice of UAW head Walter Reuter: “Getting more and more pay for less and less work is a dead end street.”