US: study sees labor costs lower for Detroit Three today image

UAW rank and file members are heading into the second round of voting this week on the United Auto Workers’ renegotiated tentative agreement with Fiat Chrysler Automobiles NV and a recent and influential labor research shows personnel costs are far lower now for the Detroit carmakers.

The tentative deal still offers signing and lump-sum bonuses in addition to base-salary hikes to both veteran and second-tier workers, order among other benefits. But according to the Center for Automotive Research, in 2014 the combined union labor cost for GM, Ford and FCA was just 5.7 percent of their combined North American revenue. The study authored by Sean McAlinden, chief economist at the Ann Arbor-based CAR says both Detroit automakers that went bankrupt did it because of “legacy costs, too many workers and too many plants, not because of wages,” so the salaries should be increased. The study, when set next to the near-record North American profits at GM and Ford could have deep effects for the traditional assumption that union wages and benefits make the bulk of costs models at Detroit’s carmakers – because they actually don’t.

For example, back in 1999, at GM – the biggest automaker in the United States – UAW’s labor costs totaled $18.14 billion – compared to last year’s $7.07 billion, which is a massive, 61 percent drop. Ford paid 15 years ago $9.4 billion and last year only had to deliver $6.88 billion. At FCA, the weakest of the three, the costs back in 1999 were at $7.07 billion and in 2014 they closed the books at $3.04 billion. Meanwhile the non-union costs at the global automakers operating factories in the US are set at an average of $5.51 billion by the CAR, higher than FCA and below the GM and Ford thresholds.