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.

Starting Point

I submit that any legitimate argument made by proponents of an auto industry bailout (especially those in Congress) must begin with this graph. Anything else is the work of a scoundrel.

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