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Toyota Leapfrogs GM

Mark Thoma finds a piece by Lee Hawkins and Norihiko Shirouzu about the disabilities of GM:

Economist's View: Leapfrogging: A look at the advantages a newly constructed Toyota auto assembly plant will have over an existing GM plant:

"A Tale of Two Auto Plants," by By Lee Hawkins Jr. and Norihiko Shirouzu, WSJ: For more than 50 years, General Motors Corp. has built cars and trucks here at Texas' only auto assembly plant... The sprawling factory, one of GM's best, employs 3,000 people and buys myriad parts and services from local suppliers to build the big sport utility vehicles that have been among the company's most profitable -- including "the national car of Texas," the Chevrolet Suburban.

Now, though, a rival has come deep into the heart of Texas to battle GM. At a 2,000-acre site in San Antonio, Toyota Motor Corp. is getting ready to start production later this year of the newest generation of Tundra pickup trucks in a plant that will use the Japanese car maker's most advanced machinery and methods.

Separated by 280 miles, these two factories bring into stark relief the competitive problems plaguing GM... In no small part, the world's largest auto maker's difficulties stem from the fact that its challengers can start fresh, unencumbered by old plants and old obligations that limit innovation and add ... to the cost of each vehicle...

Toyota appears to be working aggressively to make the most of its advantages. The company has been able to deploy the latest know-how to fit various manufacturing processes ... into a relatively compact space and make the plant more efficient.

On the other hand, ... GM can't maximize its success by adopting its newest, best methods... "Arlington is doing a great job for GM, but they can't have an optimal layout, and their footprint is landlocked because a world with subdivisions and expressways has grown up around it...," Mr. Robinet says...

Even so, Arlington ranked No. 1 among North American large-SUV factories last year, at 22.39 assembly labor hours per vehicle... Two decades ago, GM factories suffered from a sizable gap compared with similar Toyota factories... Recent ... surveys show that this gap has narrowed substantially. But GM's productivity gains are offset by higher hourly labor costs and the burden it carries for benefits owed to retirees.

In Arlington, GM pays union-scale wages of ... about $1,800 ... per vehicle. ... Harbour Consulting President Ron Harbour estimates Toyota's total hourly U.S. labor costs, with benefits, at about $35 an hour -- less than half of GM's rates. The brand-new plant won't have any direct retiree costs for many years. So if the San Antonio factory does no better than match the Arlington plant in productivity, it could still enjoy a labor cost advantage of about $1,000 per vehicle, a substantial sum in industry terms...