Chrysler’s Labor Costs Will Soon Be Lower than Toyota’s

The Detroit Three automakers are shrinking their labor cost disadvantage to Japanese competitors in the U.S., says Sean McAlinden, senior economist for the Center for Automotive Research.

By 2015, Chrysler's hourly rate for wages and benefits will be $55 $3 less than at Toyota, McAlinden tells the AutoBeat Insider Conference. Hourly labor costs at General Motors ($60) and Ford ($62), will be closer than ever to the Japanese giant.

Worker expense at other major foreign carmakers in America will be lower still, including Honda ($53 per hour), Nissan ($50), Hyundai ($47) and Volkswagen ($40), CAR estimates.

Much of the credit for Detroit's more competitive labor costs goes to restructuring and new labor agreements, according to McAlinden. He notes that spending less on labor widens profit margins and allows automakers to invest some of their savings in product development and vehicle features.

The result is higher transaction prices and smaller incentives and ultimately, bigger profits per vehicle. The three U.S. companies went from a North American operating loss of more than $3,000 per vehicle in 2009 to roughly a $2,500 profit now.