(Relevant costs) An analysis of GM’s labor costs at its parts plant in Dayton, Ohio, provides evidence of one source of the firm’s competitive problems. Its UAW employees are provided fringe benefits that cost, on average, about $16 per labor hour. Fringe benefits provided include full health-care coverage (no deductibles or co-payments), vision care, dental care, full pension after 30 years, life insur¬ ance, disability benefits, legal services, and supplemental unemployment benefits. Add to the $16 cost per hour of fringe benefits about $18 per hour in base pay, plus an additional increment for profit sharing, and the total cost of the average laborer is about $43 an hour.

[SOURCE: Adapted from Nichole M. Christian, “Rich Benefits Plan Gives GM Competitors Cost Edge,” Wall Street Journal (March 21, 1996), pp. Bl, B4. Reprinted by permission of The Wall Street Journal, © 1996 Dow Jones & Company, Inc. All Rights Reserved Worldwide.]

Assume you have been hired as a cost analyst by GM management. Write a report offering specific suggestions as to actions GM can take to control its parts and components costs.

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