Several posters have stated that unions have outlived their usefulness. I tend to agree that the big three are hurt by the unions, and the unions themselves cost American jobs. Because the United States has one of the most talented, skilled and intellegent work forces, companies are willing to pay a permimum for American workers. Look at any ECON 101 text book and see what the real wages of Americans are across the board, and they are amoung the highest in the world. This is across all industries and is not limited to Union jobs, and since the majority of all jobs in the US are non-Union, the Unions are not the reason for the high salaries. Again, more ECON 101, when you form a union, you artifically increase the cost of labor, causing a higher price for the raw materials to produce the end product, meaning you reduce the number of buyers in the market. This means the company will maximize profits buy reducing the number of items produced. This means fewer jobs in the industry. By allowing an industry to hire non-union workers, companies have a reduced labor cost per product produced, thus they can maximize profits buy highering more workers. The total amount of salary is higher in this case, there are just fewer people earning top salaries. (This is not even including the lost salary each and every union employee loses in paying Union dues.)That being said, I work in the computer industry. I work for a contracting outfit that is hired by pharmacutical companies to prepare statistical reports for the FDA on new drugs. I record every hour that I work so that my company can bill someone for my time. I am also consider an (overtime) except employee. I work in an industry were a 45 hour work week is expected, and 50+ hour weeks are the norm. (No, I am not really complaining, I am well paided and I truly enjoy what I do ...) My point though is if I worked in a union shop, I would not be an except employee, and I either would get paid overtime or I would only work 40 hours a week. (It doesn't take a rocket scientist to realize that any time I work over 40 hours a week is free money for my company. Especially since the dot.com implosion, no one complains to management about the hours spent, as the loudest complainers from before are already gone. Unions can serve a very useful and necessary purpose, but in the case of the UAW, it seems their primary goals anymore are to maximize their own profits, by preventing people from opting out of the union, using union dues to elect representatives that will keep the current work rules in place to maximize their power, and to place the interest of the union over the interest of members in individual plants. The unions are also very short sighted, in that when they hurt the companies providing the jobs, and force plant closing they are lossing jobs, and thus revenue for themselves. They are also making it more likely that one of the big three could go under. Look at any of their balance sheets, an earlier poster stated that their biggest expense without any kind of return is retirement benefits. Imagine what these companies (and I am not advocating it as it would be morally wrong) would do, if they declared bankrupcy, and reorganized minus the retirement liability? At some point, unless the UAW realizes their mistakes, this will happen.Sorry for the long rant, hope it made a little sense.Jim E.
As a UAW Ford worker, I'd like to make a few points regarding mgmt. and the Union.1. On a previous post someone said their are fewer union members. One of the main reasons of this is automation. The plant I work at had 6700 UAW hourly workers in 1979, today we have 2600. Most of the jobs are automated. The non-skilled workers have more to do with computers and such than ever before(they are basically semi-skilled). Alot of the workers (like myself are skilled), and we work on alot of robots that did the job of 1,2, or 3 people in times past.2. In my department 8 years ago we had 4 foreman and 1 superintendant. Today we have 1 super, and 7 foreman. We still do the same amount of work so why do we have 3 more foreman knocking down around $150k per year + health care.3. Union workers make too much money people say. We do make good money, but the money we make is usually spent on other goods and services and that in turn keeps the economy running. I believe the average worker makes 57,000 beans per year.(Hardly a windfall but a good living). If you would look up how much it costs to produce a car, labor is a small part of the costs.4. At my plant we have a bad problem with quality. Once again it's not the hourly person's fault. It is usually management wanting to get their quota. This happens alot were a foreman will say that doesn't matter it's not critical and then the job bounces after 15,000 parts were made wrong that now have to be recalled.5. The union didn't waste 4 billion dollars on junk yards in Europe. 6. The union members dont get $10 million when they get fired (ala Jaq Nassar).7. The union didn't authorize a Stock Enhancement plan that obviously hasn't enhanced a thing about their stock.8. The company is still saving millions of dollars per year by not hiring enough people. They use overtime to get the required hours out of people. (Paying overtime is cheaper than paying another salary and benefits).9. The Union didn't hire some bonehead to ravage the Ford Motor Credit department.10. During the mid-late 90's when Ford was a wall street darling you didn't hear a thing bad about the UAW. Now as pretty much 1 guy (Nassar), has screwed up the company people right away start blaming the UAW.That's just my opionion on a bad Vicodin Buzz!!
Stormpimski,Good post to point out the other side of the Union argument.While i agree that none of the things you mentioned are the fault of the union, I think the point some others were making is that now is the time to overcome those past mistakes and the union is keeping the company from making the changes it needs to make to correct them.What are your thoughts about the benefits of the union to both the company and the workers. If there was no union today would you be better or worse off or the same.tjt
Storpimpski said.10. During the mid-late 90's when Ford was a wall street darling you didn't hear a thing bad about the UAW. Now as pretty much 1 guy (Nassar), has screwed up the company people right away start blaming the UAW.I respond. I don't recall blaming Ford's poor performance on the UAW! I do recall discussing the problems that I had personaly had while a union member. I was discussing the cost of labor and the need for constraints and for job performance for pay received. I have never worked in the auto industry. regards
Tjt,I'm not saying here that the UAW is perfect, it's far from it. Saying that, IMHO the biggest thing that the union bring to the company and the workers is Employee Involvement. Each week at my plant every department has a meeting with the employees,sometimes management attends but not all the time. In these meetings discussions are held on how to make the job easier, more time consuming and believe it or not more profitable. The thing that are mentioned then get taken to the management side and quite a few things are initiated.In past times (to my knowledge as I've only worked for 10 years at this particular plant) this would never have happened. It was always the Boss' way or no way.As for your question about having no union how would I be. I would be worse off. Having a non-working wife and 3 kids just the medical coverage alone is a boon, let alone the wages and work atmosphere.
Good post... but I want to ask you to clarify something... Are you certain (without a doubt...) that you have 7 foremen bringing in $150k per year (plus health care)? That sounds a bit fishy to me... way too much money IMO for that position... Because if there are foremen making $150k per year, there is something VERY WRONG with the situation and the company IMHO is pissing away money...Hell, I know CIO's and VP's that don't make 2/3 of that!
$150k is on the conservative side. My foreman alone made $165,000 last year. I did his taxes so I know.
Jvancil,Also I'm a skilled tradesmen and the foreman are all grade 10's. Just remembered that fact.
Wow... is it overtime that allows them that sort of income? I mean, seriously I know people who are running companies that have 30 million in revenues that make less than that... It seems out of proportion...John
John,It's OT, we did have one boss off on medical leave for about 6 months. But they still overlap 2 of these guys every day. For what reason I have no idea.
Jim, I share some of your observations and conclusions on the circular arguments of union effects. But I found your personal work situation to be less than a stellar example of an ideal work situation. I'm not sure why you used it to contrast the union discussion as it showed to me an example of a broken and unjust system. Allow me to play a bit of the aggressive devils advocate. If it comes off too aggressive or offensive my apologies as it's only to make a point and offer a fair rant in exchange for your union one:"(It doesn't take a rocket scientist to realize that any time I work over 40 hours a week is free money for my company. Especially since the dot.com implosion, no one complains to management about the hours spent, as the loudest complainers from before are already gone."Jim I have colleagues who would argue you do us all a disservice to our "professional" tech industry by diluting your salary by working for free after your 40 hours salaried. I happen to agree with those protective colleagues. You already said your company bills for those hours - how nice for them. You also mentioned:". I work in an industry were a 45 hour work week is expected, and 50+ hour weeks are the norm. "The reason it's "expected" is because geeks comply. So, why do we (the royal we) do that? Because we like our jobs too much? Perhaps this convenient lack of logic is why many engineers make poor business men. Obviously our companies take advantage of such compliance and will expect it when scheduling! Who can blame them? So much for bang for buck valuation. This is yet another labor circular argument where "the man" makes out.<tongue in cheek> Course we're probably too smart to need a union & besides we don't mind working for the man at an effective %20 to %33 reduction in pay per effort. Well some of us mind and don't do that. The argument that a company will be able to hire more people because of the charity of it's work force is just as flawed a circular argument. Alternately I'd argue if 2 or 4 of your co-workers are willing to work 50 to 60 hour weeks for 40 hours of pay they won't have to hire you and yet company x still gets the mark up on an extra man week's labor. How nice for them.Perhaps you are a partner or other equity owner and you feel this justified but I have to ask would a doctor or lawyer work for a client without billing the hours and expecting a cut? Perhaps on rare occasion but not as a practice (no pun intended). So, here's a thought - situations like the ones you describe is one reason why engineering is considered a white collar social work class (along with doc's & lawyers) YET the contradiction is that we are not valued as such when compared to peers in that category. Hard to listen to isn't it. ;-)I too work for a tech consulting firm. Fortunately my employers (I am not a partner) appreciate such issues and don't take advantage of our love of what we do. It's in their best interest to optimize resources, not expect hourly billable efforts to go unrewarded, and to reserve squeezing an extra labor day out of an employee only when absolutely needed (and with fair exchange of comp time later). This keeps the staff and their labor quality up and keeps the hours billable at a premium rate. An alternate answer to old labor problems is for management to put them selves in they employee's shoes and vice versa (aka fair is fair). When you know there to be billable hours made by your company do you receive comp time at the least? Or a bonus that's actually reflective of your, I assume, heavily marked up time? We do as it is only fair and reasonable. The point I'm hopefully making is that though it's easy to look at labor situations and critique them it's not an issue that evades even our modern and highly educated technology market. Every one has their agenda and if the answers were as simple as simply changing wouldn't you also be getting paid fairly for your otherwise free labor that your employers get paid for?<takes off devils advocate costume>Nothings as simple, or fair, as it seems. ;-)In the mean time ranting can be fun and therapeutic.Regards all,B
"If you would look up how much it costs to produce a car, labor is a small part of the costs"Hmmm that's an interesting assertion that I wouldn't have assumed.This implies you've looked this up and are convinced.Can anyone substantiate or refute this claim with real numbers and provide a source? It may be hard to distill the issue if assemblies are bought from divisions or OEM'd (and that labor is buried in costs of "materials"). From engineering labor through to assembly labor I would have thought all to be the most significant expense to "produce a car" (understanding that we're talking about the manufacturing run of a model where eng. expenses etc are amortized properly).B
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
Feel free to punch holes in my argument – I may have missed something.Like the fact that I can't spell surely (ok, sureley is close enough right?)MM
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).So there's only one guy working on a car at a time? Are you certain that foremen, management, engineering, security guards, janitors, etc., really come that cheap, too? Or are you counting most of those as overhead?During the first half of the 25.7 hours, wouldn't multiple people be working on different parts of the car? One guy working on the dash, another working on the frame, etc?(I really don't know what percent of a car is labor, but I'm trying to get a grip on it)
When the auto industry talks about hours to produce a vehicle, that is the total labor minutes of everyone directly involved in the ASSEMBLY of that vehicle. sure there are lots of people working on various aspects of putting it together but when you consider that a modern assembly plant produce a vehicle every 40 seconds, somewhere in the vicinity of of 2300 people can work their 40 seconds worth for a total assembly labor of 25 hours. What is nor included is the labor buried in the parts flowing into the assembly plant, whether from a supplier or an internal company manufacturing activity.For example, none of the labor required to make the 200 to 300 stampings in the vehicle body is included. A recent study broke down the cost of those stampings for a typical family sedan. In that study, labor costs were about 20% of the total while material cost was 50% and tooling amoritization was 10%. The same thing aplies to supplier parts. As to engineering, a new-form-the-ground up vehicle may require 500 people working four years to bring it to fruition. Even at an average cost of $100K per head, that is $200 million. Amoritize that over 5 years of production at 200,000 vehicles per year and the engineering labor cost is $200 / vehicle. On a $20,000 vehicle that's a rousing 1%! Go figure.
It's not just the UAW. Look at, for example, United's mechanics. Okay, so they're pissed because they didn't get a raise until now. So they want to strike when their airline's facing some real problems?The UAW is the same way. They'd rather ask for the moon and go on strike if they don't get it. Never mind the fact that the Big Three are having some real problems.
That, my friend, is absurd. I don't want to pry into your finances, but my God, you do the work, and he gets how many times as much money as you get?That's ridiculous.
If the average vehicle costs $30,000, then direct labor is only 1/30 of the vehicle costNot quite. That's the retail price. The cost of making that car better be a hell of a lot less or Ford is in real trouble.
Thanks, Gruck, for the informative post. I learned quite a bit in the two minutes it took to read it. (The implied irony, of course, is that the Fool's new policy will kick both of us off tommorrow. Hope everyone else enjoys the "enlightened" conversation that the Fool will have next week.)
Not quite. That's the retail price. The cost of making that car better be a hell of a lot less or Ford is in real trouble.Good point. Actually if you look at Ford's latest 10Q for the June to August quarter (dated 11/14/2001) they are in real trouble (net profit is negative). If you look at the 2000 numbers for auto sales (excluding Ford Credit and Hertz), you can see that on sales of $33 billion they netted $371 million - a little better than 1% profit. Granted, 2000 was a bad year and the 3rd quarter is always tough because of new model launches, but I doubt if Ford's net margins ever get much above 5% (I may be wrong, but I don't currently have the time to look up past year info). So even with Ford's profit (if any) and after giving the dealer a couple hundred in profit, labor is still a rather small part of the equation. (As I stated earlier, it's surely no more than 10%).Good discussion!MM
I can remember reading in the Detroit Free Press about one or two years ago that for every Expedition produced, Ford Motor Co. made $15,000 profit. I'm not sure what the number is now but that is a hell of a lot of cash.
Feel free to punch holes in my argument – I may have missed something.Sort of a big error... I think... is that you are implying one worker and 25.7 hours to assemble the car... there will be MANY workers each hour and you are not recognizing the labor outised of the actual assembly process.
"Sort of a big error... I think... is that you are implying one worker and 25.7 hours to assemble the car... there will be MANY workers each hour and you are not recognizing the labor outised of the actual assembly process. "Right. "man hours" are what's needed not elapsed time.Any of us in project management know that the two are rarely related when throughput is considered most important. That article from USA Today was addressing "Average assembly hours per vehicle" not really labor...in fact it's actually a pretty poor article since they were trying to tie the figures to productivity which could be taken several ways (throughput time or labor).B
Storpinski wrote:Also I'm a skilled tradesmen and the foreman are all grade 10's. Just remembered that fact. I am a Ford salary employee who just observed his 25th anniversary with Ford.There is absolutely no truth that plant supervisors are grade 10 employees. Line supervisors are grades 6 and 7. A superintendent is a grade 8. You have to reach a managerial level in the plant to be a grade 9. And there aren't that many in the plant.The $150K figure for a salary employee is in the ballpark. This figure includes base salary and benefits such as paid vacation time, health care, paid holidays, the 7.5% match on Social Security, 401k, training fund and life insurance among other things. If an hourly employee makes $50K then it probably costs Ford $100K for that worker after you throw in benefits' costs.Line supervisors do get paid OT. If someone works 12 hours/7 days or even 10 hours/6 days then that worker (be they hourly or salary) can possibly double their base salary. However Ford does not pay additional benefits to the worker for their OT. Therefore it is much cheaper for Ford to work OT then to hire additional workers.
jvancil-you wrote: "is that you are implying one worker and 25.7 hours to assemble the car... there will be MANY workers each hour"My understanding of the 25.7 hours calculation is that one would take the total number of hours worked (for all production employees) and divide it by the total number of vehicles built. This calculation would take into account many people working on the line at the same time. Right??you also wrote: "...you are not recognizing the labor outised of the actual assembly process."Actually, I noted this fact in my original post: "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)."MM
Philipo-"...USA Today was addressing "Average assembly hours per vehicle" not really labor..."You are correct. I guess I made an assumption that assembly hours should be close to man hours since everytime the assembly line is running it is also manned. That may or may not be a poor assumption.MM
Actually, I noted this fact in my original post: "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).">/i>I probably didn't make myself clear, my point was that if you are trying to determine labor content you have to include the outside forces... otherwise the measurement doesn't really make sense.If the 25.7 figure came from the calculation you have provided, then I guess I am okay with it, although I still believe that it indicates one person working 25.7 hours to assemble one car, and I am not sure that is reasonable... but it may be. It has been a few years since I was in a plant!
jvancil-Thanks for your reply. I have one question for you. When you say, "you have to include the outside forces", do you mean indirect labor (material handlers, warehouse, etc...) or something else?In my inital post, I simply had to estimate those numbers since they're hard to come by. But my guess (remember it's only a guess) was that labor was probably less than 10% of the average retail price of the vehicle. Does this sound reasonable to you? If not, why?MM
MM-"I guess I made an assumption that assembly hours should be close to man hours since everytime the assembly line is running it is also manned. That may or may not be a poor assumption."Maybe not. I think more data is needed (i.e. "The Harbour Report North America" seems to be frequently quoted). I guess I've always pictured an assembly line to be an inverted tree like where the line is the trunk and the parts flow from tributaries of sub assembly lines (sometimes those being off site). Perhaps the part that is a wrong assumtion is how much labor is in house. I have little sense of how labor is accounted for on the siginificant sub assemblies that are increasingly OEM'd outside of the company (and that changes the balance on paper froma labor cost to a cost of goods). So labor could be buried in such assy contracts and purchases, no? <shrug> A point someone else made about the cost of the vehicle vs. the retail or sale price is important in such guessing as was the Expedition example cited of a $15K/unit profit (assuming this true - it sounds high). Anyway your initial $30K average seemed sy high especially since we're talking about the cost to make vehicles (not the retail markups involved).Did some digging and to be fair your numbers aren't as far off as I would have thought - again not knowing how assembly contact manufacturing is factored in.(google.com is great):http://subscribe.wsj.com/microexamples/articlefiles/ProductivityImprovesAmongUSAutomakers.doc" Productivity Improves Among U.S. Auto Makers By Jeffrey Ball 06/18/1999 The Wall Street Journal"Read the article - it's old but close to the one you cited in numbers.Here's a snippit of info from it:"GM's problem isn't simply that it has so many workers. It is also that the company, like DaimlerChrysler, isn't managing those workers efficiently, Ronald Harbour, president of the consulting firm, suggested. The increased time it takes GM and DaimlerChrysler to build an average vehicle is a sign the two companies are paying "a lot of unscheduled overtime," Mr. Harbour said. Ford, by contrast, has shown the "discipline" to avoid expensive unscheduled overtime hours, which is "really giving Ford a significant advantage over the other two" companies, he said. It's also significant that Ford is posting the highest labor productivity among U.S. auto makers without a big shift to newfangled manufacturing processes. According to the Harbour study, the two most productive midsize-car plants in North America are Ford plants in Atlanta and Chicago, and they do nearly all of their assembly the old-fashioned way: in-house."JUmping back in - one wonders if this view has changed since 1999.Continuing...." The Cost of Car-Making U.S. auto makers are closing the gap, but remain behind Japanesecompetitors in labor productivity. Labor hours Total labor cost Annual per vehicle per vehicle volumeGM 45.60 $2,052 4,946,000DaimlerChrysler 44.25 1,991 2,906,000Ford 34.79 1,566 4,299,000Honda 30.84 1,079 695,000Nissan 30.76 1,077 309,000Toyota 30.38 1,063 647,000 Source: Harbour Report"I also found all sorts of other cost information (some interesting) such as:http://msl1.mit.edu/msl/meeting_05082000/prz_pdf/BIW_2000.pdfand a for general labor cost info (broken down somewhat):http://www.manufacturingcenter.com/tooling/archives/0901/0901imports.aspHere's a snippit from an article summary of the 2001 Harbour report (see link just above for the source):"How Big Three fared Among the former Big Three automakers, Harbour and Associates reports, Ford Motor Co. continued to have the best results in vehicle assembly. Ford had three of the top 10 car and five of the top 10 truck plants, and Ford plants ranked No. 1 in five of 12 individual categories. But General Motors got the best marks for improvement. The car maker showed the most progress of any company in the 2001 report, which notes: “GM was the most improved multiple plant company in assembly (9.4 percent), stamping equipment productivity (10 percent) and engine labor productivity (5.2 percent). What's more, GM took the overall lead in hours per transmission for the first time.” “For the past several years, GM has been working very hard on implementing lean manufacturing systems and processes throughout its operations,” explains Ron Harbour, president of Harbour and Associates. “As shown in The Harbour Report 2001 results, it is evident that GM has made significant improvement in its manufacturing operations.” Who did what well Here are some of the highlights from this year's report: Assembly: “Nissan's car assembly operation finished second and its truck operation was third in the 2000 report's hours per vehicle (HPV) rankings. Aided by a 16.5-percent boost in production, both Smyrna operations finished No. 1 in the 2001 report as the plant showed an overall 7.1-percent HPV improvement. The car line's HPV of 16.33 moved Smyrna ahead of last year's overall leader, Ford Atlanta, which finished No. 2 with a HPV of 16.93. And the Smyrna truck line's HPV of 18.06 was well ahead of Ford Twin Cities (19.49), last year's truck leader.” “Nissan's assembly operation in Smyrna has posted solid performances in productivity measures in recent years, despite operating at lower than full capacity levels,” Harbour says. “Smyrna used the time when the plant was underutilized to find ways to improve overall operations - and the continuous improvements efforts paid off.” Stamping: “Foreign-owned manufacturers Toyota and Honda showed the strength of their stamping operations across The Harbour Report's basket of stamping measures. “Toyota was No. 1 in two labor productivity measures, hits per worker and pieces per worker, and two equipment productivity measures, hits per hour and pieces per hour. In addition to leading the hours per vehicle category, Honda also was No. 1 in vehicles per line. Mitsubishi led all companies in average die changeover time.” “As in years past, Honda and Toyota both had outstanding performances throughout their stamping operations,” Harbour says. “But GM's improvement in stamping equipment productivity also must be noted. Over the last 10 years, the company has invested heavily in its stamping operation. The results have been much improved performances in labor and equipment productivity, and cost, safety and quality measures also have gotten better.” Powertrain: “Honda was the overall leader in hours per engine (HPE) at 3.05, and in the 6-cylinder segment with a HPE of 3.39. Toyota placed second overall at 3.17, and second in the 6-cylinder segment at 3.88. But the order was reversed in the 4-cylinder segment, as Toyota was No. 1 at 2.61 and Honda was second at 2.79. GM, with a HPE of 4.87, moved well ahead of Ford (6.23) and DaimlerChrysler (6.31) in the 8-cylinder segment. “With an overall HPE of 4.50, GM widened its gap with Ford and DaimlerChrysler, which both were at 5.68 HPE. GM also had five of the 10 most improved engine operations, including Toluca, Mexico, which made the most progress of any engine plant in the report with a 41.2-percent improvement. “GM became the leader in transmission productivity for the first time with a hours per transmission (HPT) of 4.50, which was only slightly better than the performances of Ford (4.67) and DaimlerChrysler (4.76). But DaimlerChrysler made the biggest advancement of any company with a 6.2-percent improvement in HPT.” Overall: Harbour says the performances of many of the manufacturers were impacted by the industry slowdown that took place at the end of 2000. “The results in 2000 proved that the factors making companies more competitive in good times are even more critical when times get tougher,” he says. “Most of the automotive manufacturers have been working on lean manufacturing, quality and safety, and improving product and process engineering. But the reality was some companies were working harder at it—and better at it—than others. “With the end-of-the-year slowdown, the companies and plants that were most aggressive in the areas of lean manufacturing, continuous improvement and other strategic initiatives generally were impacted less in their productivity performances.” Copies of The Harbour Report North America 2001 can be ordered by calling 248/641-0707 or toll-free at 800/208-1353. The report is $495 and payment by credit card is accepted. "Anyway it seems you're more right than not - that gross assembly labor isn't that significant. I'll observe that 1/10 cost attributed to labor seems closer than the 1/30th=labor you suggested based on a $30K/vehicle (cost to manufacture being key).B
In my inital post, I simply had to estimate those numbers since they're hard to come by. But my guess (remember it's only a guess) was that labor was probably less than 10% of the average retail price of the vehicle. Does this sound reasonable to you? If not, why?Yes, that sounds reasonable for direct labor, and given that it is a much higher percentage of the cost... rather than the retail price.
jvancil-Yes, that sounds reasonable for direct labor, and given that it is a much higher percentage of the cost... rather than the retail price. Are you sure?? How much higher??If you look at another post (http://boards.fool.com/Message.asp?mid=16715295), Ford's margins aren't that good, so the average profit on a $30,000 car is probably $1,500 (5%). I know that someone mentioned the $15,000 margins on the Expedition, but that is only one vehicle and probably represents the extreme best. One can use the other extreme to show how Ford looses money or brakes even on small cars and sedans.Again, I'm trying to use averages and generalizations to proove my point. I'm beginning to wonder if that's a good idea. There are simply too many variables that affect the numbers (i.e. tire recalls, profitable trucks vs. unprofitable cars).Maybe (if I have the time) I can find a more in-depth analysis of this issue and share it with you.Very good discussion!MM
Philipo-Excellent post - you got one of my five rec's for the day!"Maybe not. I think more data is needed (i.e. "The Harbour Report North America" seems to be frequently quoted). I guess I've always pictured an assembly line to be an inverted tree like where the line is the trunk and the parts flow from tributaries of sub assembly lines (sometimes those being off site). Perhaps the part that is a wrong assumtion is how much labor is in house. I have little sense of how labor is accounted for on the siginificant sub assemblies that are increasingly OEM'd outside of the company (and that changes the balance on paper froma labor cost to a cost of goods). So labor could be buried in such assy contracts and purchases, no? <shrug>"(1) I agree that more data is needed & you did a great job providing some.(2) I have always have the same idea of an assembly line. I have been in quite a few (I'm a quality engineer at a medium-sized tier 1 company).(3) I agree that much of the labor occurs outside of the assembly plant at suppliers. However, based on my experience (not hard data), if you look at what goes into a car (both purchased parts and those built at the plant), I think it is safe to say that materials are a much larger portion of the cost than labor. I know for sure that is true where I work. I'll see if I can find some data to back this up somewhere.MM
Labor costs should be roughly close to materials cost. Materials are getting cheaper along with the fuel it takes to get them there. So the price of labor should be coming down, too, shouldn't it?
"Materials are getting cheaper along with the fuel it takes to get them there."How are materials getting cheaper? Fuel vs. inflation is at a low but I'd guess (just a guess) that to be a small part of the cost of manufacturing (energy in general may however be more costly). So what do we mean by materials when we we're talking auto manufacturing? And how raw are these materials in reality? The increasing percentage of cost in a vehicle is electromechanical components and electronic assemblies. It's time to rethink a vehicle's makeup as it's no longer just raw steel being stamped into a hulk for resale. I remember figures aproaching 25% on upscale vehicles being attributed to electronics. That's a gigher percentage that is likely outsourced as assmblies and their true costs buried."So the price of labor should be coming down, too, shouldn't it?"Only if you assume materials & labor are related. I don't see how they would be. I suppose less materials in terms of discreet part counts (vs. macro assemblies) might mean less end assy labor but thats a pretty loose use of the term materials when relating materials to labor.B
Very good discussion!Problem here (as I see it) is that we are working on supposition and guess! We would really need access to a lot of information from Ford in order to come up with the answer. Let me speak to something I do understand, though. I am with a manufacturing concern, and our direct labor as a percent of SALES (shipments) was ~ 14% last year. Indirect labor was ~ 4%. At $30,000 per car, applied to Ford that would be $4200 for direct and $1200 for indirect. And keep in mind that this is before any of the SG&A... Our net profit goal is about 7%... I do not know what Ford's is... or what their actual net was... but I can tell you that they are probably a good deal more efficient than we ar with regards to labor... but they have huge technology and machinery costs to replace that labor efficiency. I would not be suprised to find out that Ford was working on about a 5 - 8 % net on each car (on average) which would put it closer to the $1500 to $2000 per car. Of course the other thing we do not take into account is this... is it $30,000 to the Dealer or to the end user Customer? (Me...) Whcih makes a difference as well. I have heard some opine that a dealer makes about $100 per car, and that is (IMHO) ridiculous. Not nearly enough to make it worth their time...So I think I will continue to make guesses and say that Ford is probably running Direct Labor at somewhere around 11%. Indirect... probably higher than 4% because they seem to be top loaded on supervisors, etc.
(3) I agree that much of the labor occurs outside of the assembly plant at suppliers. However, based on my experience (not hard data), if you look at what goes into a car (both purchased parts and those built at the plant), I think it is safe to say that materials are a much larger portion of the cost than labor. I know for sure that is true where I work. I'll see if I can find some data to back this up somewhere.My guess would be about 2.5 to 3 times Direct Labor...
I don't know exactly what part of the equation labor is, but still, you've got to try to maximize your return on that. I'm not talking about wage cuts or anything like that. I'm talking about a more flexible workplace, where you can try stuff without having ten guys approve or disapprove of it. See if it works, if it doesn't, try something new.
"Let me speak to something I do understand" <snip>Good post jv. and thanks for the interesting discussion guys.TGIF!B
Sorry it took me so long to respond. I haven't read all the rsponses yet, but thought I would try to clarify my post some, as I didn't make my point clear. (I am a geek, not a writter ...)1. Unions, in and of themselves are bad for workers. (Please read the entire post before you flame me ...)- The add a layer of non-productive workers that hurt the profitablitly of the business and the union members, one of which and ussualy both who have to pay there salaries.2. Unions often the lesser of two evils, and ussually help protect workers more than they hurt workers.- by negotiating better wages, benefits, encouraging the developement of craft standards, creating a standarized way for employees dealing with management, all these things are benefits that are often worth the union dues paid by the employees, and the cost to the bussiness of the union (not the benefits, just the cost of maintaining the union, salaries, facilities, time for meetings, etc.).3. When the cost of running the union exceeds the benefits derived from the union, the union needs to go.Again, to clarify my post, I think that the UAW is hurting auto workers. This is my opinion by looking on the outside in on the situation, and I am willing to be shown the errors in my thinking. But, I think when GM builds an entire new lines of cars to aviod the UAW, you have to look at why. I also think unions would benefit other industries, white colar working class is exactly what I am thinking of, you just said it better.On final point, just to be prefectly clear. I work long hours in part because I love what I do. I get an interesting problem to solve, get involved and finish it, only to realize I should have left four hours ago. (I am single, no kids so no I am not abdoning anyone.) I know emperically that you are correct, working 50+ weeks devalues my salary. I do not get comp-time, but then again if I ask for an afternoon often, no one keeps track. I also don't punch a time clock. My hours are I come in between 7:30-9:00 AM. Lunch is sometime between 11 and 2 for anywhere from skip it to two hours, and I leave between 5PM and ussually 7:30, although at times I stay later. Roughly have of my extra time is me getting things done unasked, the other to meet deadlines.As far as compensation goes, my hours is one. Second, I am one of the hirer paid people in my department. Third, I get excellent training, ussually off-site and fully paid for.Hope this clears up some of the questions ...Jim E.
>(3) I agree that much of the labor occurs outside of the assembly >plant at suppliers. However, based on my experience (not hard data), >if you look at what goes into a car (both purchased parts and those >built at the plant), I think it is safe to say that materials are a >much larger portion of the cost than labor. I know for sure that is >true where I work. I'll see if I can find some data to back this up >somewhere.One other way to look at the outside labor cost is that it is factored into the price paid for the part, so if you count the hours, multiple the pay rate and add the cost of the part you are paying the labor twice.Jim E.
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