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Author: MrMoros One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 18125  
Subject: Re: Unions in the 21st Centery Date: 2/13/2002 4:13 PM
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OK – Here's my rough estimate of how much of a vehicle's cost is due to labor vs. materials.

The average time it takes Ford to produce a car is 25.7 hours (data from 15 June 2001 - http://www.usatoday.com/money/autos/2001-06-14-harbour.htm)

Assuming that the average UAW assembler makes $40/hour (including benefits), that's $1028/vehicle (25.7 hours times $40/hour) – Note that this is direct labor only and does not include overhead or indirect labor (i.e. foreman, management, engineering, HR).

If the average vehicle costs $30,000, then direct labor is only 1/30 of the vehicle cost. Even after adding any reasonable assumptions for overhead & indirect labor expenses, labor still remains a very small percentage of the total cost of a vehicle (sureley below 10%). That's why you hear so much about auto makers pressuring suppliers on component pricing – at the end of the day, that's where the money is.

Feel free to punch holes in my argument – I may have missed something.

MM
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