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WAGES, INCENTIVES EAT U.S. AUTOMAKER PROFITS

Japan's Big 3 average $3,814 more per car.

Japan's three biggest automakers increased their profit-per-vehicle advantage over U.S. automakers by 32 percent last year as the North American makers boosted incentives to sell cars, according to a report Tuesday.

Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. made $3,814 more per vehicle, on average, in 2006 than General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler unit, analyst Laurie Harbour-Felax said at an industry conference. The comparable figure in 2005 was $2,900, she said.

The report underscores a central issue in contract talks under way between the three U.S. automakers and the United Auto Workers union. The manufacturers, which had combined losses of $15-billion last year, say they pay $25 to $30 more per hour in wages and benefits than their Asian competitors, much of it for the health-care expenses of retirees.

"I think it is possible for them to make money in North America," said Harbour-Felax of Chicago-based Stout Risius Ross Inc.

The U.S. labor-cost disadvantage amounts to $1,200 to $1,500 a car compared with the Japanese automakers, Harbour-Felax said. In addition, the U.S. companies used cash or financing incentives to boost sales, resulting in a loss on every vehicle they sold in 2006, Harbour-Felax said.

Chrysler lost $1,111 per vehicle in 2006, down from a profit of $144 each in 2005, after offering incentives of $5,000 or more on some vehicles, Harbour-Felax said.

Ford lost $1,962 per vehicle, an increase from $451 the previous year, while GM's loss narrowed to $146 per vehicle, from $1,271 a year earlier, the report said.

Harbour-Felax said GM fared better because it has reduced the complexity of its manufacturing processes.

"You want to make it easier to build a vehicle, reduce the complexity, which in turn reduces the cost," GM spokesman Tom Wickham said in an interview. "Much of this has been accomplished by working with our suppliers, employees and unions to create a competitive environment."

Chrysler declined to comment on specifics of the report.

"We will not confirm our per-vehicle profit, but do agree that the numbers from the Harbour-Felax report are directionally correct," spokeswoman Lori Pinter said.

Ford spokeswoman Jennifer Flake said she hadn't seen the report and declined to comment.

GM, Ford and Chrysler may seek to shift as much as $114-billion in retiree health-care obligations from the companies to an independent fund administered by the union, people familiar with preliminary negotiations said in June.

All three U.S. automakers are in contract negotiations with the UAW. Separate four-year agreements between the union and each company expire Sept. 14.

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