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Foreigners Debunk Myth of Unproductive U.S. Workers

December 01, 1987|HARRY BERNSTEIN

For years, the alleged inefficiency and relatively high wages and benefits of American workers were repeatedly cited by auto makers and financial analysts as key factors in the decline of the auto industry in this country.

But the experience of foreign manufacturers operating plants here clearly shows that the denigration of Americans as rather sloppy, costly workers was unfair.

The reasoning behind the recent far-reaching corporate decisions of Toyota and Volkswagen make the point nicely.

Look first at Toyota. Even as it is building a new assembly plant in Georgetown, Ky., Toyota has decided to add an $800-million engine plant. That is a compliment to American workers and, happily, it means more jobs for them.

The sharp decline in the value of the dollar, strong sales here and the Japanese determination to increase its share of the huge U.S. market were critical factors in Toyota's decision to add the engine plant.

The extra capacity will help Toyota reach its stated goal to have 75% of the components in its U.S.-built cars also made in America.

Toyota says productivity of its workers in the United States and Japan is now comparable, and labor cost differentials are no longer significant because of the drastic change in the dollar-yen ratio and also because Japanese wages are rising faster than those in this country.

In 1985, wages and fringe benefits in the U.S. auto industry averaged $19.63 an hour, compared to $8.14 in Japan, or just 41% of the cost here.

As of last week, U.S. auto industry workers averaged $19.88 an hour and Japanese workers earned $14.95, or 75% of the U.S. rate. And much of that labor cost advantage is erased by the cost of shipping cars across the ocean.

Pay raises for the Japanese and changes in the exchange rate are the prime factors in narrowing the gap between American and Japanese workers. Since the efficiency of workers in the two countries is now comparable, those old bugaboos of high American labor cost and lack of productivity were not even a consideration in Toyota's decision to expand its U.S. operations.

Even the trouble Toyota does have at one of its plants in the United States was not caused by inefficiency of American workers or their wages.

There has been a slump in sales of the Chevrolet Nova, the GM car produced by American workers under Japanese management at the Toyota-GM joint venture plant in Fremont, Calif. There has been no drop, however, in sales of the Toyota models made there by the same workers.

Because of GM's sales decline, production at Fremont is being cut to 650 cars a day from 750. But none of the 2,500 workers will be laid off because the company's contract with the United Auto Workers includes a firm no-layoff policy that can be modified only in dire emergencies.

The confidence in American workers expressed by Toyota executives was similar to the praise given them by Volkswagen. Unfortunately, the outcome differs sharply--VW is shutting down its only plant is this country, putting 2,500 workers out of jobs even as Toyota expands.

VW sales have dropped so precipitously in this country that it is closing its plant near Pittsburgh, even though VW pays its workers in Germany at least 15% more than it pays Americans--and, don't forget, it has to pay hefty shipping costs to get cars here from Germany.

The United Auto Workers protested, charging that the VW decision to close its U.S. plant indicates that VW expects to bring cars here from their low-wage facilities in Brazil and Mexico.

Leaders of IG Metall, the union that represents VW workers in Germany, also protested the company decision.

"The decision to close the Pennsylvania plant was not clever because it increases the protectionist mood in the United States, and that could ultimately hurt us," said a spokesman for IG Metall, adding:

"It means we lose our foothold there, one that will be essential if (U.S.) import laws make it more and more difficult to ship our cars to that important market."

But the German union officials who are also members of the VW board of directors didn't fight the plant closure decision.

They finally, if reluctantly, accepted it because they know the Pennsylvania plant has been operating well below 50% capacity for the past five years and was losing money steadily.

The union spokesman stressed that "all of our members are working and we did not want nor need the U.S. jobs to be brought back to Germany, but we understand that VW could not indefinitely sustain such heavy losses in America."

VW officials deny that they plan to shift production to low-wage countries to become more competitive.

But it must be a real temptation. After all, while labor costs in the United States are significantly lower than in Germany, wages and fringe benefits for auto workers in Mexico are astonishingly lower. They average less than $1.35 an hour.

And in Brazil, wages and benefits total only $2.28 an hour.

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