Writer of A Savage Factory: An Eyewitness Account of the Auto Industry's Self-Destruction Robert Dewar said here on Monday that the most important reason for GM's bankruptcy should be the high labor costs.

And almost all the interviewees in Detroit shared the same opinion that labor costs should be blamed for the 100-year-old GM's collapse.

According to Dewar, it wasn't poor fuel efficiency, bad design, or foreign cars that rocked the nation's auto industry. It was poor management which resulted in higher and higher labor costs in the auto plants that spawned the beginning of the end of the American car.

How high on earth the labor cost is in GM plants? Well, you may find answers among the numbers mentioned below.

On its website GM released the total of both cash compensation and benefits provided to GM hourly workers in 2006 amounted to approximately US$73.26 per active hour worked, including US$39.68 in cash compensation and US$33.58 in benefit or government required programs, such as pensions, group life insurance, disability benefits, and supplemental unemployment benefits and so on. However, the costs used to make a Toyota car in the US plants were only US$48 per hour.

According to a report released by Harbor-Felax, a famous auto consulting company based in Detroit, health care is the biggest chunk of labor cost. For instance, to make a vehicle needs US$1,635 on health care for active and retired workers in the United States, while Toyota pays only US$215 for active ones.

So huge a cost for labor in GM not only eroded the earnings, but also made the vehicle produced by GM much less competitive than Japanese car.

"It is all because of the union. UAW (United Auto Workers) is so strong in the auto industry that they have the ability to ask for higher and higher salaries for its members, or there will be a strike," said Wenyu Lian, a Chinese staff project engineer who has worked in GM for many years.

"The hostility between union and carmakers made the situation worse," Dewar told Xinhua.

In 1998 and 2007, the UAW organized two strikes, which made about 6 billion dollars lost because of nationwide phase-out production.

Fortunately, both GM and the union have realized the severity of huge labor costs.

In 2007, GM negotiated the 4-year labor deal with UAW, which is supposed to expire in September 2011, shifts the obligation for about US$46.7 billion in retired UAW worker health care from the company to the union, with the company pouring about US$26.5 billion into a trust fund with the name of Voluntary Employees Beneficiary Association run by the union.

With the agreement executed, GM former CEO Wagoner said the total hourly labor costs dropped 6 percent in 2007, from 73.26 dollars in 2006 to around 69 dollars per hour.

After last November, GM's suffering bankruptcy threats forced UAW to make further concession. On May 21, GM and UAW reached a tentative agreement to lower more labor costs, which was ratified by the members of UAW on Friday, just three days ahead of GM's deadline of Monday for bankruptcy.

The latest agreement entitles GM to lay off workers and eliminates a couple of medicare and subsidies. It is estimated that will reduce the labor costs for about US$1.2 billion per year.

Diana Tremblay, GM vice president of GM's Labor Relations pointed out that the innovative agreement "will enable GM to be fully competitive and has eliminated the gap with our competitors."

(Xinhua News Agency June 2, 2009)