DETROIT -- There are plenty of puts and takes in the tentative deal the UAW struck with General Motors Co. this week, but this much looks clear: Detroit carmakers dealing with already-higher labor costs than their international foes risk becoming even less competitive.
GM’s labor costs will rise $100 million a year just due to the increases in worker pay, which “could be an even bigger headwind” for Ford Motor Co. and Fiat Chrysler Automobiles, according to RBC Capital Markets analyst Joe Spak. And that doesn’t even account for the cost of continuing the union’s generous health care coverage -- a tab Ford expects to rise above $1 billion next year.
“The economics of the deal look really attractive for the GM workers,” said Colin Lightbody, a former labor negotiator for Fiat Chrysler who’s now a consultant in Windsor, Canada. “This agreement will increase the competitive labor cost gap.”
GM’s average hourly labor costs -- including wages, benefits and other expenses -- were already about $13 above what international automakers such as Toyota Motor Corp. and Honda Motor Co. pay workers at their U.S. plants, according to the Center for Automotive Research. Ford’s costs are $11 an hour higher, while Fiat Chrysler pays a $5 premium.