Monday, January 29, 2007

Behind Ford's scary $12.7 billion loss

Unions realized early on they needed to organize entire industries as opposed to individual companies. Worked OK for them untill the inevitable foreign competition cropped up. Now if you notice the industries that have or are about to fail in this country are almost exclusively Union dominated.

NEW YORK (Fortune) -- An enormous gap still separates the performance of Detroit automakers from their foreign competitors - and it isn't all their fault.

The stupefying $12.7 billion loss that Ford Motor Co. reported Thursday for 2006 comes one year after General Motors' equally horrendous $10.6 billion loss for 2005.

The dominant reason? The cost of labor. As analyzed by Harbour-Felax, labor costs for Detroits "Big Three"is significantly more per vehicle than their Japanese counterparts.

Health care is the biggest chunk. GM for instance spends $1,635 per vehicle on health care for active and retired workers in the U.S. Toyota pays virtually nothing for retired workers - it has very few and a mere $215 for active ones.

Other labor costs add to the disparity. Contract issues like work rules, line relief and holiday pay amount to $630 per vehicle, costs that the Japanese don't have. And paying UAW members for not working when plants are shut costs an additional $350 per vehicle.

Hat tip/AntiBubba182 at FR.

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