U.S. Automakers Narrow Productivity Gap With Japanese

Quality advances and more flexible labor agreements are reasons cited for improvement.

U.S. automakers have significantly narrowed the productivity gap with their Japanese competitors at factories in North America, according to a report released last week. General Motors Corp. is now less than three hours behind Toyota in terms of the amount of labor needed to build a single vehicle.

Just five years ago GM's North American workers spent more than eight hours longer than their Toyota counterparts to build a car, according to the Harbour Report. GM was also named an industry leader in plant efficiency for three of four manufacturing categories.

DaimlerChrysler and Ford Motor Co. have also improved dramatically, cutting the productivity gap to three and five hours per vehicle from more than 10 hours in 2002.

Toyota remains the most efficient manufacturer in North America using a total of just 29.93 labor hours per vehicle and operating its plants at between 95% and 108% capacity, the report said. Honda showed the biggest improvement in productivity with a decrease of 2.7% to 31.63 hours per vehicle.

"The manufacturing productivity gap among North American automotive manufacturers continued to narrow as quality advances and more flexible labor agreements drove major improvements," said Ron Harbour, president of Harbour Consulting.

But the heavy costs associated with the unionized workforce at GM, Ford and DaimlerChrysler continues to impose a heavy burden on automakers of about $200 to $300 per vehicle, Harbour said.

Toyota and Honda each earned a pre-tax margin of more than $1,200 on every vehicle they sold in North America. In contrast, Chrysler Group lost $1,072, while General Motors lost $1,436 and Ford lost $5,234 on each vehicle sold in 2006, Harbour noted. The large differences in health care and pension costs, as well as higher costs of rebates and low-interest rate financing and lower revenue per vehicle sold account for most of the gap, Harbour said.

Harbour said he expected productivity issues to be a major part of the upcoming negotiations with the United Auto Workers. GM, Ford and Chrysler will all push to take more indirect labor, such as janitors, off the company payroll in the negotiations which officially open in July, he predicted. The automakers have already negotiated more flexible local labor agreements prior to this summer's pivotal national talks with the UAW. However, they must go further to overcome their persistent health care and pension cost disadvantage..

Copyright Agence France-Presse, 2007

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