High Wage Car Assembly

The difference in wages paid to car assembly workers varies greatly around the world. It is true that the wage cost per car isn't that high, perhaps 5-10% in a high wage country, but there are many variables. Premium cars would be less compared to mainstream cars. 

The car industry is experiencing cost pressures. Competition is heating up with more brands vying for your patronage. China was a big earner for companies until intense competition there started eroding profits. The Chinese government has recently encouraged car companies to pull back on aggressive discounting. In addition, shipping costs have also been rising.

Where does this leave car manufacturers? It must be tempting to move production to lower wage countries. That isn't a straightforward thing with investment in plants being hugely expensive. You can't just walk away from them. But over time, the shift can be carried out.

Car makers don't want a customer backlash if they moved all their production, so they manage the balance carefully. How would VW fare if it moved all its production out of Germany? With freight costs and the logistics of sending cars long distances, there is merit in having production close to the market where the bulk of the sales will be achieved. 

Workers on high wages understandably want to protect their earnings but at what cost? Would it be worth having a wage increase freeze or even a modest cut in wages to save a plant they work at? Unlikely to impossible. 

Belgium used to be a major car manufacturer but now has only one plant in Ghent. The fact is it didn't have a local brand which made it easier for car companies to leave. Wage costs were also a factor. 

Recently, Audi closed its plant there to move production to Mexico. Why? The factory wasn't fully utilised but lower wages would also have been an incentive. 

One Audi worker who was interviewed said he would struggle to find another job that paid as well. Car assembly does seem to be a well paid job for the level of skill required. I'm not surprised finding another job at that pay rate was highly unlikely. 

Would such a worker in hindsight been prepared to take a modest pay cut to keep a job that would still be reasonably well paid? The answer would be no. Many workers in high wage countries view their remuneration as an inalienable right. Maybe it's a case of not seeing the bigger picture.

There is no easy answer to this. Margins are being squeezed and costs have to be looked at. More cooperation and cost sharing between car companies is needed. The Japanese are good at doing that.

Car assembly in high wage countries may eventually be just for premium or maybe only luxury marques. The assembly workers may need to find lower wage jobs elsewhere if they can.