Submitted by: Submitted by kenneth1234
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Date Submitted: 08/27/2012 02:31 PM
As strikes go, Chrysler’s wasn’t all that impressive. When
Chrysler’s unionized workers nationwide left their assembly
line positions in early October 2007 to protest the
holdup in securing a new four-year labor contract, the media
reported “the second major UAW walkout in a
month”—but it seemed more like a long lunch with picketing
during dessert. By nightfall the parties had come to
an agreement, and the next morning the newspapers chorused
such headlines as “It’s a New Day in Detroit” and
“Detroit’s 3 Finally on Track.”
Many observers seem to believe that the Big Three’s
woes are all tied to union wages and the benefits its bluecollar
workforce receives. But those are not their biggest
problems. While the new agreements with the UAW could
help, cutting labor costs won’t cure what ails Detroit. In
fact, just the opposite could happen.
General Motors has cried loudest about the “unfair”
wage advantage the Japanese automakers enjoy. It has bemoaned
what it sees as a $1,500 to $1,900 price disadvantage
(owing to active and retiree health care costs) on
every product it sells. Detroit spends approximately $78
an hour in blue-collar wages and benefits, while Toyota
Motor spends less than $50. But a plant’s productivity
may be more important than actual wages paid there.
Auto executives know real labor costs aren’t framed just
by the per-hour pay but are measured by how many vehicles
the fewest workers can build in one shift. And consider
Ford’s last minivan attempt. No matter what Ford
spent to develop or build a new minivan, it was DOA at
Ford and Lincoln-Mercury dealerships. When a new vehicle
comes to market and fails, the manufacturer loses
hundreds of millions—if not billions—no matter what its
labor costs are.
Much has been made of the fact that Detroit already
spent much more than Japanese automakers in the United
States for health insurance. Yet GM admitted something
important after the union contracts were signed: Fully...