Retiree Costs
Here's how it breaks down: An hour of labor at a U.S. auto plant costs around $74, while the same hour of work at a Toyota or Honda plant is closer to $50. That $24 difference is cited as one reason Detroit has had trouble competing in the car market. Take-home pay is comparable, averaging around $29 per hour for GM, Chrysler and Ford, and around $27 an hour for the Japanese manufacturers.
But, as part of their contract agreements with the United Auto Workers, the Detroit Three also pay the cost of health care for life for their retirees, along with a generous pension package.
Those retiree "legacy costs" mean an extra $16-$18 per hour in costs compared to the $3 per hour that the Japanese automakers spend in retiree benefits
That differential reflects two distinctions between U.S. and foreign automakers, First, the foreign manufacturing plants tend to be newer than the Detroit Three's U.S. plants, meaning there are fewer retirees who need benefits.
The Union Difference
Second, the workers at the foreign auto companies are not unionized, which means they have not bargained for the generous retiree benefits of a UAW worker. That means no defined pension plan and no health care for life. So even as the number of foreign autoworker retirees increases, the legacy costs should not reach those of the U.S. automakers.
In 2007, the extra legacy costs amounted to an additional $1,800 for each car the Detroit Three produced. But now, with the auto market suffering and production down significantly, the retiree costs are spread out over fewer cars. A drop in production has also meant fewer workers are needed. The companies are encouraging early retirement, increasing the number of retirees even further.
$3,000 More Per Car
Legacy costs now tack on an additional $3,000 to each American car that rolls off the assembly line,
Another weakness, he says, are the work rules that make it "significantly harder to put workers on actual production jobs."
the jobs bank program, which guarantees laid-off workers benefits and most of their wages while they wait for work. it has "historically required the Detroit Three to pay for more hours of work in order to get an hour of work on the assembly line accomplished," and has therefore made it difficult for the U.S. automakers to compete with foreign manufacturers.