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Reasons for GM Slide Go Beyond Work Force
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Reasons for GM Slide Go Beyond Work Force


Reasons for GM Slide Go Beyond Work Force

Reasons for GM Slide Go Beyond Work Force
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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

For the first time since the 1930s there's a new world leader in auto sales, and it's not an American company.

Japan's Toyota has overtaken United States rival General Motors in sales volume for the latest quarter, and is on pace to knock off GM as the world's biggest automaker.

There are lots of reasons for GM's decline, but industry analysts say assembly workers aren't to blame.

GM was once no match for Toyota when it came to building cars fast. In 1998, it took GM workers an extra 10 hours to push a vehicle off the line. By 2005, GM had narrowed that gap to about an hour.

"They have done everything they've been asked to do," said Jeff Liker, author of The Toyota Way, a book on the company's legendary system of teamwork.

Liker says GM workers became more efficient in part because the company copied some of Toyota's techniques. Instead of the old system where a worker had a single job, GM began using teams where everyone pitched in, doing different tasks to keep the line moving.

"There would be evidence of what they learned from Toyota in every factory in the world," Liker said. "One of the more advanced ones is the Cadillac plant in Lansing (Mich.) where the quality and productivity is pretty close to Toyotas."

But it was too little, too late, he added.

Indeed, the company has designed many vehicles that consumers just didn't want to buy. That damaged GM's image and cost thousands of workers their jobs.

"Some of the plants that have the reputation for being the best in terms of quality of the work force, teamwork, all the things that management asks, are the ones that were selected to be closed," Liker said.

Although GM workers are good, they are also very expensive; and that has put the company at a disadvantage.

Under their union contract, GM assembly workers make about $2 more per hour than Toyota's workers do.

And health care — especially for retirees — is staggering. For instance, GM spends more than $1,600 in health care per vehicle in North America while Toyota, with few retirees in the U.S., spends under $300 per vehicle.

GM can't pass health care costs onto customers, so it sells some cars at a big loss.

Sean McAlinden , an analyst with the Center for Automotive Research in Ann Arbor, Mich., said: "They haven't made money on the passenger car since the mid 1980s."

Take the Chevy Cobalt, a compact vehicle. While it's priced at $20,000 to $21,000 with a full compliment of options, it has been mostly selling at $13,000 to $14,000.

"They're losing $2,000 to $3,000 a vehicle," McAlinden said.

GM has cut health care costs. But when contract negotiations begin this summer with the United Auto Workers, McAlinden expects GM to ask for more concessions from its hourly workers.

"Right now the Big Three [GM, Ford, Chrysler] owe $118 billion in future retiree health liabilities for which they've set aside practically very little money. That's far more than the companies are worth," he said. "So on paper the companies are completely and utterly bankrupt."

McAlinden said if Toyota does become No. 1 this year, it will set a new standard for wages and benefits in the U.S. auto industry that will be considerably lower.



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