$10 Per Hour Pay Gap Costs GM Billions Of Dollars

According to today’s Detroit News, “Including benefits and other compensation, UAW workers cost $55 an hour on average [MP: Not counting legacy costs], compared with an hourly cost of around $45 at the transplants.”

1. As far I can tell, General Motors (NYSE:GM) currently employs about 70,000 hourly workers (after buyouts) and Ford about 50,000. Assuming a 40-hour week and 50-week year, the $10 per hour pay gap would put GM at an annual cost disadvantage of $1.4 billion annually, and Ford’s annual cost disadvantage would be $1 billion.

2. According to the 2008 Harbour Report (see post), the Big/Little 3 produce vehicles at a $606 labor cost disadvantage per vehicle vs. the foreign transplants. Assuming GM will produce 3 million vehicles this year, the $606 labor cost disadvantage per vehicle would cost it an additional $1.8 billion vs. its foreign competitors. For Ford’s estimated 2 million vehicles produced in 2008, it will cost them $1.2 billion more than if Toyota or Honda produced those vehicles.

Comment: Both estimates suggest that the current pay gap between UAW workers and non-union workers at the foreign transplants impose additional labor costs on GM and Ford in the billions of dollars per year. And that’s without legacy costs.

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