Labour concessions won't save Big Three: Hargrove

Argues that falling market share a much bigger problem than a reduction in production costs

The Big Three automakers are barking up the wrong tree by focusing on labour concessions, according to Buzz Hargrove, president of the Canadian Auto Workers union.

Speaking at the JP Morgan Automotive Investment Conference in Detroit, Hargrove told investors that the current focus by Ford, General Motors and Chrysler on labour concessions is futile and won’t help the overall picture of the North American automakers.

“Labour concessions cannot possibly have any meaningful effect on the Big Three’s market share in their home market,” said Hargrove. “Even if the Big Three get everything they are asking for from the United Auto Workers, that would reduce the average production costs of a vehicle they sell in North America by only $500.”

Hargrove went on to point out that $500 is:

•equal to less than two per cent of the average selling price of a new vehicle in the United States;

•one-sixth the current sales incentive which the Big Three are currently using to sell new vehicles;

•one-twentieth of what Toyota saves on the import of a Lexus due to the artificial suppression of the Japanese foreign exchange rate; and

•less than one-quarter of Toyota’s current per-vehicle profit margin on North American sales.

Hargrove said all the focus on trying to extract labour concessions diverts attention from the North American industry's real problems, which derive from falling market share of domestic producers. This is the end result of a huge and growing automotive trade imbalance with the rest of the world, according to Hargrove.

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