How Toyota and GM define “cost”

March 9, 2006 at 9:24 pm | Posted in Technology | Leave a comment

There’s more to costs than employees. Here’s a Bloomberg article that shows how badly General Motors and Ford are doing with respect to Toyota. They claim that all it takes for them to be competitive is to reduce their employee liabilities, wages, and benefits. However, the article shows that they are at a tremendous technological disadvantage. For example, Toyota can assemble a car faster and with fewer employees. In addition, Toyota works with small American companies to gain manufacturing advantages — they can produce a V-6 engine block for $1000 less than an equivalent GM engine.

Even if GM were to somehow get Toyota’s lower (e.g. non-union) labor rates and health plans, their costs may still be higher.

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