Tuesday, November 18, 2008

A Word About Detroit Labor Costs

Note that the widely-reported difference between hourly compensation costs at the "Big" Three and the nonunion U.S. auto plants understates the cost disadvantage of the former, as the work rules and other factors force GM, Ford, and Chrysler to use more manhours per vehicle than is the case for the others. Hence, the per-vehicle cost disadvantage is greater than the mere difference in hourly compensation. And this is quite apart from the adverse effect of the jobs bank and other legacy costs, which are not relevant on the margin per vehicle produced, but which must be paid and thus are relevant in terms of the ability of the Three to attract private capital. As they sang in the original "M.A.S.H.," suicide (i.e., bankruptcy) is painless, brings on many changes, etc. All for the better.

2 comments:

Tom Van Dyke said...

Well done, Dr. Zycher. If Japanese companies can build cars profitably in America and American companies can't, something is rotten in Denmark.

Matt Huisman said...

What do you make of "assisted" suicide, then, Dr. Zycher? Mr. Romney is now recommending a "Managed Bankruptcy" - a new phrase for me, only half of which would seem to be within the skill set of the typical congressman.