Study: Union Work Rules Cost Big ThreeBy Michelle Krebs June 20, 2007
Union work rules and job classifications at Detroit automakers have resulted in 8,200 assembly jobs that wouldn't be needed if the automakers had the flexibility of Toyotaâs U.S. factories, according to study by Detroit turnaround expert, AlixPartners.
"Our analysis of the cost differential between the domestic automakers and Toyota just due to work rules and job classifications further points up just how important this year's labor negotiations are to the Detroit Three," John Hoffecker, managing director of AlixPartners, said in a statement, published in today's Detroit Free Press.
The study also confirms why private equity firms are so interested in auto companies and parts-making companies: they are getting bargains.
Using transaction multiples, which divide the total value of an acquisition by a measure of cash flow from operations, the average multiple in the auto industry has dropped from 6.2 a year ago to 5 this year. The average rate across all industries is 8.4.
"It just stands to reason that the auto industry's below-average multiples, coupled with its significant cash flows, will make it a magnet for private equity for as long as money for deals remains as free-flowing as it is today," Hoffecker said.
AlixPartners' annual Global Vehicle Industry Analysis examines 51 automakers, 25 heavy vehicle producers and 297 auto suppliers.