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The problem with the US auto industry is quite easy to diagnose; but unfortunately not so easy to cure.

Let's compare the American operations of the world's two leading manufacturers, GM and Toyota. In 2005, GM, on average, lost $2331 per vehicle manufactured, whereas Toyota made a profit of $1488 per vehicle. So, the more cars GM sold, the more money they lost.

It takes GM 34.3 hours to produce a vehicle, start to finish. It takes Toyota 27.9 hours. (2005 numbers)

The average line worker at GM makes $31.35/hour; at Toyota they make $27.00/hour. (2005 numbers)

So, Toyota is paying less in payroll but getting greater production from what is ostensibly the same American workforce.

But the real difference, the important difference is in regards to employee health care costs. GM pays health care benefits to the tune of $1525 for each vehicle it produces. Toyota only pays $201. (2004 numbers) Think about it, whenever you purchase a GM vehicle, you're subsidizing their corporate health care system to the amount of $1525. Buy a Toyota, you only pay $201.

I am loathe to call the United Auto Workers union the problem, but they undeniably are a large part of the problem. (For the record, all of GM's facilities are unionized, while only three of Toyota's twelve North American plants are.) The wages and benefits the union demands from American auto makers are coming to border on extortion. They are completely out of line with the economic reality of the 21st century. The new wave of auto manufacturing taking place in Europe is increasingly replacing career workers on the line with out-sourced temporary workers and more importantly robots. Though the initial investment has been great, in the not too distant future, Europeans will be able to flood the international market with quality cars at low prices.

Learn more about this author, Thos Robert.
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