Toyota Expands While Big Three Pay More


Ever since I've started this blog, I've heard from a number of readers who think I'm biased in favor of Toyota. Well, if you are one of those people, you are not going to like today's post.

Later today, Toyota will announce plans to build it's 8th North American final assembly plant. It will be located just outside Tupelo, Mississippi and should open in early 2010. The announcement is not a surprise, since Toyota has said for some time that it plans to add more assembly lines in North America to keep up with it's rising sales. After all, with over 16% market share, Toyota is now #2 in the U.S. The Japanese automaker needs more capacity if it's going to cut down on the number of cars it imports from Japan.

When it's up and running, the Tupelo plants will have roughly 2,000 employees. This continues a trend where Toyota is slowly and steadily hiring while the big three continue to cut jobs. In fact, since 2003, Toyota has added 3,328 jobs in the U.S. During that same period, the Detroit 3 have announced, collectively, that they have announced cutting more than 100,000 jobs.

Meanwhile, the latest research on labor costs for the big 3 show GM and Ford will be paying more for employee healthcare, despite givebacks on healthcare benefits by the UAW. Fitch research finds the that GM's healthcare costs will go up 14.1% next year, or $244 per vehicle built in the U.S. Meaning, GM will spend, roughly $1,783 on healthcare for every vehicle it builds in the U.S. Fitch estimates Ford's healthcare bill will jump 9.1%, or $81, to $1,064 per vehicle.

Why are these expenses going up so much just a year after GM and Ford extracted billions in healthcare concessions from the UAW in late 2005?

Blame it on inflation:
This re-enforces the cost disadvantage the big 3 face when trying to compete with the Toyota, Honda,Nissan, Hyundai, etc. It also shows why healthcare will be THE issue that defines the UAW negotiations this September.

Questions? Comments?