October 21, 2011
NOTHING COSTS MORE THAN IT USED TO:Why the UAW made peace with Detroit (Doron Levin, 10/21/11, Fortune)
The Detroit-based auto industry could face significant threats over the next four years: tighter regulation, soft demand and tougher competition. High costs from union labor won't be one of them.
A successful ratification vote by Ford Motor Co. (F) hourly workers, following ratification at General Motors Co. (GM), seals the four-year wage and benefit deal between the two biggest of the Detroit Three automakers and the United Auto Workers union. (Chrysler Corp. has a tentative agreement with the UAW.) "Detroit automakers haven't solved everything. Competition with the [foreign] transplants is still very difficult," said Sean McAlinden, a labor economist with the Center for Automotive Research in Ann Arbor, Michigan. "But the UAW contract is no longer the strategic threat it's been."
By employing more new hires, who work at a wage rate far below that paid to more senior workers, the automakers now are able to bring their total labor costs closer to those paid by Toyota (TM), Honda (HMC), Nissan (NSANY), Hyundai, BMW, Volkswagen and Mercedes.
When wages are going down, inflation is not going up.
Posted by Orrin Judd at October 21, 2011 7:32 PM