Huge labor costs blamed for GM's filing for bankruptcy

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DETROIT, June 1 (Xinhua) -- Writer of A Savage Factory: An Eyewitness Account of the Auto Industry's Self-Destruction Robert Dewar said here on Monday that the most important reason for GM's bankruptcy should be the high labor costs.

And almost all the interviewees in Detroit shared the same opinion that labor costs should be blamed for the 100-year-old GM's collapse.

According to Dewar, it wasn't poor fuel efficiency, bad design, or foreign cars that rocked the nation's auto industry. It was poor management which resulted in higher and higher labor costs in the auto plants that spawned the beginning of the end of the American car.

How high on earth the labor cost is in GM plants? Well, you may find answers among the numbers mentioned below.

On its website GM released the total of both cash compensation and benefits provided to GM hourly workers in 2006 amounted to approximately 73.26 U.S. dollars per active hour worked, including39.68 dollars in cash compensation and 33.58 dollars in benefit or government required programs, such as pensions, group life insurance, disability benefits, and supplemental unemployment benefits and so on. However, the costs used to make a Toyota car in the U.S. plants were only 48 dollars per hour.

According to a report released by Harbor-Felax, a famous auto consulting company based in Detroit, health care is the biggest chunk of labor cost. For instance, to make a vehicle needs 1,635 dollars on health care for active and retired workers in the United States, while Toyota pays only 215 dollars for active ones.

So huge a cost for labor in GM not only eroded the earnings, but also made the vehicle produced by GM much less competitive than Japanese car.