US automakers have significantly narrowed the productivity gap with their Japanese competitors at factories in North America, according to a report released Thursday.
General Motors Corp., which is in the midst of a massive restructuring plan, 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 widely-read 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.
“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 US automakers of about 200 to 300 dollars per vehicle, Harbour said.
Toyota and Honda each earned a pre-tax margin of more than 1,200 dollars on every vehicle they sold in North America.
In contrast, Chrysler Group lost 1,072 dollars, while General Motors lost 1,436 dollars and Ford lost 5,234 dollars 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.
The productivity difference is nonetheless critical because if manufacturers spend less on labor, they can spend more on other features which boost the appeal of their products.
Harbour said he expected productivity issues to be a major part of the upcoming negotiations with the United Auto Workers.
“Improving productivity in the face of lower production is a huge accomplishment, but none of the domestic manufacturers can afford to let up,” Harbour said.
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, he said.
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 percent capacity, the report said.
Honda showed the biggest improvement in productivity with a decrease of 2.7 percent to 31.63 hours per vehicle.
