[Pen-l] labor and the auto companies

[Rudy Fichtenbaum <rudy.fichtenbaum@xxxxxxxxxx>]

We keep hearing from conservatives and even a number of liberal 
commentators that the reason the big three auto companies are not 
competitive is because of high labor costs due to the fact that their 
workers are unionized. I just looked at Compensation (Payroll plus 
Benefits) as a percent of the Value of Shipments for Automobile and 
Light Duty Motor Vehicle Manufacturing  in the Annual Survey of 
Manufacturers. Compensation for all workers, not just production workers 
is about 7.2% of the Value of Shipments. Of course this includes both 
transplant as well as the "big three." Assume for a moment that GM, Ford 
and Chrysler accounted for 50% of auto sales and their labor cost was 
50% higher than the transplants. That would imply that Compensation for 
the big three was about 9% of sales compared to 6% for the transplants. 
That would make labor costs about 7.5% for the industry average. If that 
were the case and we cut labor costs at the big three in half that would 
reduce the cost of producing an automobile by 4.5%. Does anyone 
seriously believe that this would make the big three competitive?

Doesn't this expose the myth that the problems of the big three are due 
to high labor costs? Am I missing something?

Rudy

--
Rudy Fichtenbaum
Professor of Economics & Chief Negotiator AAUP-WSU
Department of Economics
Wright State University
Dayton, OH 45435
Phone: 937-775-3085
Fax: 937-775-2441

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