Japanese Cars Earn $2,400 More Profit Each

A latest auto industry report says that Japanese cars make $2,400 more profit per car than US ones. Most interesting was that beyond cost efficiencies and less onerous healthcare obligations, Japanese cars also just plainly sell for higher prices.

Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. persuaded buyers to pay an average $24,289 per vehicle, 12 percent more than U.S. automakers, the Harbour-Felax Group study said. The Japanese paid $1,400 less per vehicle on health care, and their workers spent more time on the job.

We summarize the article's cost breakdown below:

• Japanese spent $1,400 less per car on health care benefits. The majority of the US disadvantage comes from paying healthcare benefits to retireees, of which GM has 338,000 to support.
• Toyota spends $348 per car on warranty costs vs. $500 for GM and Chrysler
• US automakers spend $138 more per car on longer holidays
• They also spen $70 more per car on worker absenteeism
• Japanse spends $133 per car on 30 minutes of break time/day vs. $203 per car on 46 minuts of break time for US counterparts.

Another major cost advantage for Toyota has been the use of standardized parts.

Toyota saved $1,000 per vehicle over the last five years by designing components such as hinges and air bags so they can be used on a wide variety of cars and trucks, Harbour-Felax said. In an August speech, she said one U.S. automaker, which she didn't name, offers 81 varieties of side-view mirrors, compared to two for its more efficient Japanese rival.

Currency has also been an advantage.

Today's yen-dollar exchange rate widens Toyota's advantage over domestic automakers by $1,054 per vehicle

Healthcare we can blame on Unions and Japan's public healthcare system. But cost inefficiencies from using non-standardized parts and lower average selling prices seem much less excusable for US automakers. Fixing just these two things alone could close the gap.

Related stocks: Toyota (NYSE:TM), Nissan (NSDQ:NSANY), Honda (NYSE:HMC), General Motors (NYSE:GM), Ford (NYSE:F), and Chrysler (NYSE:DCX).

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