Mazda Motor Corp. will have a $7.50 hourly labor-cost advantage over traditional American auto makers when it starts building cars in the United States in 1987, a Detroit-based auto trade journal said yesterday.
Automotive News said the advantage will come from savings in wages and benefits and through production efficiencies. The journal based its assessment on a letter of intent signed last year by Mazda and United Auto Workers union officials.
Portions of the agreement, particularly those dealing with work-rule changes, have been common knowledge for some time. But the Automotive News account marked the first time since Mazda's announcement of its U.S. production plans last December that an actual dollar value has been assigned to the production-cost segment of the pact.
Mazda, which plans to roll out 240,000 small cars annually at a plant in Flat Rock, Mich., would become the fourth Japanese auto maker to build cars in the United States. Honda Motor Co. Ltd., Nissan Motor Co. Ltd. and Toyota Motor Corp. (through a joint venture with General Motors Corp.) now produce cars in this country.
The Japanese auto makers here are experimenting with compensation schemes and manufacturing practices that have helped them produce cars at home at a unit price that is at least $1,500 less than that of comparable American cars. They are trying to hold on to as much of that advantage as possible in the United States.
Mazda officials said that it is "still too early" to discuss their U.S. compensation plans publicly, and UAW officials declined comment. But some industry sources familiar with the letter of intent confirmed the accuracy of the Automotive News story.
According to industry sources, the smallest part of Mazda's U.S. cost advantage would be a break of about 70 to 80 cents an hour in wages. Under a three-year agreement beginning in July 1988, Mazda production workers would earn 85 percent of the going rate at Ford Motor Co. in the first year of the contract. (Ford's expected base rate at that time would be $16.82 an hour.)
Mazda workers would earn 90 percent of the Ford rate in the second year of the contract, and would reach 100 percent of Ford base pay -- including cost of living allowances -- at the end of the third year. That means that Mazda's base wages would rise from $14.30 to $18.99 an hour at the end of the agreement.
The rest of the Mazda cost advantage would come from production efficiencies generating savings of about $1.50 an hour and from breaks on pension, health insurance and other benefits that could yield savings of an additional $5.20 an hour, sources said.
"Considering Mazda's investment" of $450 million in the proposed Flat Rock facility, "and keeping in mind that the quotas may be coming off of Japanese cars, which means that Mazda does not have to build here, Mazda deserved some kind of a break," said a source who requested anonymity.