Every business, no matter its size, will incur operating expenses. Building leases, utility bills and maintenance costs are all paid in order to keep the business running smoothly, and car factories are no exception to the rule. Car companies are much more than a factory; each is a network that takes an active role in the sale and manufacture of its vehicles. This creates a range of operational expenses, most of which are unique to the auto industry. Here, we will go over some of the reasons why car assembly factories are so expensive in the USA, and we will categorize those expenses.
In the US car factories of today, very few parts are made in-house. Most are bought from other companies, and most parts manufacturing is done overseas in order to keep costs lower. At the factory, the foreign-made parts are put on in assembly line fashion. Globally-sourced parts are an ongoing expense, and the machinery used to install these parts must be maintained. Machinery maintenance and replacement is another ongoing cost, but it saves in the form of reduced labor cost and physical stress on auto workers.
American car companies’ labor costs run almost three times those of the country’s other manufacturing sectors. In 2008, the average American auto worker earned about thirty dollars per hour, while the average manufacturing wage was a little over twelve dollars per hour. That year, GM’s labor cost per hour was about $69, and Toyota’s was about two-thirds of that.
The costs of running an American car factory also include other expenses for things like warranties and sales. The dealerships are owned by the parent company, but work under contract with local owners. Some of the biggest out-of-factory expenses are in account auditing, sales and repair, and shipping the cars from factory to dealership. The cost of R&D (research and development) is high, but paying it means that the car factories can create products that meet the public’s demands.