Wall Street Journal story about wages in union shops compared to VWs offering If you are a union person or anti union/ republican YOU NEED TO READ up and see the lies that your party leaders spew By Mike Ramsey Updated May 23, 2011 12:01 a.m. ET Volkswagen AG VOW.XE -0.20% on Tuesday will celebrate the opening of a new Tennessee auto plant that gives the German auto maker much lower U.S. labor costs than not only its Detroit rivals but its Japanese competitors on American soil. The new plant will present a stiff challenge for Detroit auto makers, which restructured with the goal of achieving cost parity with Japanese companies building cars in the U.S. Located near Chattanooga, Tenn., the plant will pay starting workers about $27 an hour in wages and benefits, according to estimates by industry analysts. Thats roughly half the $52 an hour cost of labor at the Detroit Three auto makers and some non-union U.S. plants owned by Toyota Motor Corp. TM -0.84% and Honda Motor Co. HMC -0.73% It comes as Koreas Hyundai Motor Co. and Kia Motors Corp., whose Alabama and Georgia plant labor costs are similar to VWs, are gaining share against Detroit and Tokyo rivals. Wage and Benefit Gap Auto makers now setting up new assembly in the South have labor cost advantage. Volkswagen, Chattanooga, Tenn. Product: VW Passat sedan Labor cost: $27 an hour including wages and benefits Hyundai Motor Co., Montgomery, Ala. Product: Sonata sedan Labor cost: $27 an hour including wages and benefits Honda Motor Co., Marysville, Ohio Product: Accord sedan Labor cost: $50 an hour including wages and benefits Ford Motor Co. Product: Ford Fusion Labor cost: $58 an hour including wages and benefits* Sources: Center for Automotive Research, Barclays Capital, WSJ reporting * Average of U.S. plants During the auto bailout restructuring led by the U.S. government, General Motors Co. GM +2.13% and Chrysler Group LLC were told they had to rework union contracts to be in line with Toyota. While unions agreed to sharply lower the pay for new hires, there havent been that many workers coming in at the lower levels. As a result, their labor costs remain far higher than those of new plants in the South. Any current wage or benefit gap between the Detroit Three and transplants could grow as transplants add capacity in the lower-wage U.S. South, said Brian Johnson, the lead auto analyst for Barclays Capital. VW plans to build its Passat, a sedan that will be priced at $20,000, about the same as the Honda Accord and Chevrolet Malibu, making it competitive with the other volume sedans in the segment. The current model starts at nearly $28,000 but the price is coming down. Over the next three years, VW is expected to boost the average workers wage from $14.50 to $19.50, pushing up the total cost for a worker to roughly $38 an hour, according to the Center for Automotive Research in Ann Arbor, Mich. Ford Motor Co. F +1.06% , GM and Chrysler have battled for years to lower the gap between themselves and Japanese auto makers that assemble vehicles in the U.S. Years ago, Detroit had labor costs of around $70 an hour, but in the last few years the three companies have won concessions from the United Auto Workers union. Fords labor cost is now about $58 an hour, according to the company. One key UAW concession allows GM, Ford and Chrysler to hire new workers at a wage of $14 an hour, about half the pay of veteran workers. New workers also get less costly benefits, such as 401k retirement accounts instead of a life-long pension program. The number of workers who get this second-tier pay package is limited, however. The Detroit Three and the UAW are scheduled to begin negotiating a new labor contract this year. Barclays Mr. Johnson expects GM, Ford and Chrysler to seek to increase the percentage of workers making the lower, entry-level wage up from the 20% cap today. The string of non-union auto plants that have gone up in the South is a reflection of the U.S.s increased competitiveness in auto manufacturing. Both BMW AG BMW.XE -1.24% and Daimler AG DAI.XE -0.39% produce vehicles in the U.S. and export them to markets around the world. VW, the worlds most profitable auto maker last year, is hoping its new plant makes the company more competitive in the U.S. market. It has had roughly a 2% market share in U.S. sales for a decade. In contrast, VW has a global 11.4% market share, including 21% of the German market and 13% share in Chinas fast-growing market. It hasnt made money in the U.S. for the past decade because unfavorable exchange rates between the dollar and the euro increases the cost of German-built cars exported to the U.S. In Chattanooga, VW plans to make a new version of its Passat sedan that is larger and tailored for the U.S. market. It intends to sell the vehicle for about $8,000 less than the current model, which has a starting list price of about $27,600. The new Passat goes on sale later this year. VW in 1988 closed its last U.S. plant, in New Stanton, Pa., after a decade-long run trying to compete against Japanese auto makers that were then beginning to open U.S. factories. It bought an unfinished Pennsylvania plant from Chrysler in 1976 and inherited a unionized work force. Today, VW makes some of its best-selling models, including the Jetta and Beetle, at a plant in Mexico. The new plant is part of a VWs plan to nearly triple the number of vehicles it sells in the U.S. The company sold 360,179 vehicles in the U.S. in 2010 under the VW, Audi and other brand names. It aims to sell more than one million by 2018. Write to Mike Ramsey at michael.ramsey@wsj
Posted on: Tue, 18 Feb 2014 00:50:02 +0000
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