GM contract may yield flat per-vehicle labor costs even with hourly raises, study says

DETROIT (Bloomberg) -- General Motors' labor costs per vehicle may decline slightly under the proposed four-year contract with its U.S. union that calls for across-the-board raises, according to the Center for Automotive Research.

The deal, which still must be ratified, gives raises to veteran workers that boost pay above $29 an hour and gets the entry-level, or so-called Tier 2 workers, to the same rate over eight years. Even with those increases, GM’s labor costs should be little changed, Ford Motor Co. will see a small increase and Fiat Chrysler Automobiles will have the biggest jump, according to a study by the Ann Arbor, Mich.-based research center.

The key to controlling the costs lies in using cheaper temporary workers, some Mexican production and retiring older, higher-paid factory hands over the next four years. Those factors will offset some of the things the Detroit carmakers agreed to with the UAW, said Kristin Dziczek, director of the center’s Industry and Labor Group.

“The contract is not as expensive as people think because they can use temporary workers and some people will retire,” Dziczek said today in a phone interview. “You will have a different workforce in four years.”

Labor costs per vehicle at GM will drop to $2,350 in 2019 from $2,374 in 2014, while Ford’s will rise almost $200 a vehicle to $2,401 and FCA’s jump to $2,500 from $1,771, she said. Hourly labor costs rise from $57 to $60 at Ford, from $55 to $60 at GM and from $47 to $56 at FCA, Dziczek said.

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