The healine at MSNBC said "Detroit Coming Closer To Japanese Rivals In Efficiency".
In other words, it took Toyota (TM) 29.93 labor hours to build components and assemble each vehicle. Nissan and Honda (HMC) were close. GM (GM) was at 32.36 hours. Chrysler finished last at 35.1 hours.
But, the headline and the summary of the study buried one critical point that ended up as a mere footnote in most media coverage of Harbour Consulting’s study of assembly efficiency. Toyota and Honda make an average of $1,200 on each car they sell in North America. Chrysler loses over $1,000, GM over $1,400 and Ford (F) over $5,000.
The gains in efficiency can never offset the disadvantages of legacy wage, pension, and healthcare costs. With all of these costs included, the three US car companies pay the average worker over $73 an hour. For the Japanese, that number is about $43.
At this point, nothing short of very significant concessions from the UAW at this Fall’s labor negotiations will allow US car companies to make a profit on each car they sell in their home market. It may be an ugly fight, but it is not one Detroit can afford to lose.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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