Traverse City Record-Eagle

Michigan

November 19, 2008

GM: Labor costs competitive

DETROIT (AP) -- The leaders of General Motors Corp. and the United Auto Workers union told Congress this week that a new union contract will virtually erase the labor cost gap between GM and foreign competitors with U.S. factories. That's not quite true, according to GM's own figures.

Although the contract signed last year eliminates about two-thirds of the cost gap when its provisions take full effect in 2010, GM's labor costs will remain about $9 per hour, or 17 percent, higher than Toyota's, according to GM estimates.

The labor costs, scrutinized by two congressional committees weighing U.S. automakers' request for $25 billion in government loans, were singled out by opponents as a reason why the Detroit Three can't be competitive with their Japanese rivals, mainly Toyota Motor Corp. and Honda Motor Co.

GM CEO Rick Wagoner and UAW President Ron Gettelfinger told the Senate Banking Committee on Tuesday that the contract goes a long way toward eliminating the gap.

"The gap in labor costs that had previously existed between the Detroit-based auto companies and the foreign transplant operations will be largely or completely eliminated by the end of the contracts," he said.

Wagoner and Gettelfinger, along with Ford Motor Co. CEO Alan Mulally and Chrysler LLC's Bob Nardelli, reiterated their plea for aid before the House Financial Services Committee on Wednesday.

Figuring out labor costs is tremendously complicated because the contract has many provisions that change based on U.S. auto sales and production rates. Also, GM is estimating costs for the Japanese automakers.

But GM, which negotiated the four-year deal that serves as a template for UAW deals with Chrysler and Ford, says its total hourly labor costs dropped 6 percent this year from pre-contract levels, from $73.26 in 2006 to around $69 per hour. The new cost includes laborers' wages of $29.78 per hour, plus benefits, pensions and the cost of providing health care to more than 432,000 GM retirees, GM spokesman Tony Sapienza said.

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