US: Ford’s high labor costs, an opportunity for other carmakers image

The new contract signed between Ford and US union workers keeps the labor costs at a high level for the American giant and this allows foreign automakers to offer better prices for their cars.

Under the new ratified WAU deal, Ford said a labor cost gap of 8 to 10 dollars per hour will remain with nonunion automakers such as Toyota Motor and Hyundai Motor. From this situation could benefit foreign car manufacturers, which have plants in the US, as they might offer more attractive options while keeping vehicle prices down. Ford’s hourly labor costs will rise to $60 from $57, GM’s to $60 from $55, and Fiat Chrysler’s to $56 from $47 by 2019, when the agreements between the Detroit Three and the UAW run out, according to the Center for Automotive Research, an industry consultancy. Last year, Ford’s US labor costs were $9 higher than Toyota’s and $16 higher than Hyundai’s, the consultancy said.

Ford Chief Executive Officer Mark Fields said the new agreement brings the company’s labor costs on par with crosstown rival General Motors Co and closer to that of Fiat Chrysler Automobiles, while it will bring the expenses up by 600 million dollars. He also said Ford can leverage its global manufacturing footprint to be more competitive in North America. “In this contract, we’re not restricted from sourcing products anywhere in the Ford world for sale in the US as long as we’re meeting our US sourcing commitment,” said Fields. This would mean the automaker could import some models like the EcoSport, which is built by other production lines, including Brazil.

Via Reuters