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1999 Machine Shop Labor Costing Study
There are probably few topics of more interest to machine shops and custom engine rebuilders than charges for specific shop labor operations. In January, Automotive Rebuilder surveyed 2,400 machine shop members of the Engine Rebuilders Association (AERA) throughout the U.S., asking for labor charges for 22 basic labor operations performed on two popular engines currently being rebuilt – the Ford 5.0L V8 and the Mitsubishi 2.0L DOHC.
Overall response to our survey was significantly high enough (18%) to allow us to provide not only a national average for each labor operation, but also the average labor charge in each of nine different U.S. geographic regions. The map shown on this page defines the states comprising each of the nine geographic regions for which labor charges are provided.
Specific labor charges for rebuilding the Ford 5.0L V8 and Mitsubishi DOHC engines begins on page 38. Regional labor charges indicate the variance in labor charges that machine shops across the country exhibit depending on their locations. In general, shops located in the Pacific and New England regions report higher labor charges than those located in the West South Central and East South Central regions, where labor charges are usually lowest.
In addition to the specific labor charges shown for the Ford 5.0L V8 and 2.0L Mitsubishi engines, our survey also provides national information on several key characteristics of those shops responding to our labor costing survey.
This information includes: proportion of hours billed to total hours worked by machine shop employees; the average total number of machine shop employees per shop; the average wages paid to a master machinist on a weekly basis; the average hourly shop rate currently being charged by machine shops; and the average weekly dollars spent to handle warranty claims.
This national information also includes the average, median and mode labor charges for all 22 labor jobs performed on the Ford 5.0L V8 and the Mitsubishi 2.0L DOHC engines. See page 36. Understanding the statistical definitions of "average," "median" and "mode" can help make the results of our national survey results charting more understandable.
The "average" for a particular labor charge, for example, is the result of summing all of the numbers from each respondent and then dividing that number by the total number of respondents. The "median" is the result of ranking all of the responses high to low, and then choosing the number that resides exactly in the middle. The "mode" is simply the most common number given by all of the respondents.
For the Ford and Mitsubishi charts which provide the national average, median and mode labor charge numbers, you’ll also find a "95% CI range column." The "95% CI" column numbers are a confidence interval range with a plus or minus 3% error level. This measure creates a labor charge range in which with 95% certainty the "true" average would lie if all the machine shops in the country were to have answered the question.
National shop numbers
One of the more interesting shop charts profiles the proportion of machine shop employee hours worked to total hours billed. The largest percentage of respondents (about 32%) reported that of total hours worked 71-80% were actually billed to the customer. Overall, about 78% of shops reported that they billed 71% or more of total hours worked in the shop.
The highest percentage of shop owners (about 38%) reported that their current hourly shop rate ranged from $41-$50. About 74% of shop owners reported that their current hourly shop rate ranged from $31-$50. On the two extremes, 1.2% of shop owners said their hourly shop rate was $20 or less, while 1.8% of shop owners reported that their hourly shop rate was $71 or more. The national hourly shop rate average for all reporting shops was $44.74.
Average weekly wages for a master machinist ranged as low as $468 for shops located in the West North Central region to a high of $625 paid by shops located in the Pacific region. The overall national average master machinist is paid an average of $538 per week.
While the national average was 3.3 machine shop employees per shop, nearly 70% of our survey respondents reported having only one or two machine shop employees. The next highest number of machine shop owners (about 20%) reported having three to four machine shop employees.
The average dollar amount paid to handle warranty claims on a weekly basis varied significantly. For example, while 24% of machine shop owners reported that they spent an average of $1-$20 per week to handle warranty claims, nearly 18% of shop owners reported spending more than $200 per week to handle warranty expenses.
Variances in hourly shop rates, employee wages and warranty claim expenditures could be a function of shop size and engine production as well as geographic location. However, about 67% of our survey respondents reported annual sales of less than $500,000, while nearly one-third of shop owners said annual sales were $500,000 or higher. In fact, nearly 12% of shop owners reported that annual sales were more than $1 million.
On this page you’ll find the national averages for hours worked to hours billed; employees per shop; average wage paid to master machinists; current hourly shop rate; and weekly average dollars spent on warranty claims for those shops responding to our labor pricing survey. Click here to find 22 specific national and regional labor charges reported by machine shop owners for rebuilding of the Ford 5.0L V8 and 2.0L DOHC Mitsubishi engines.
Thanks to AERA which helped to compile the questions used in this labor costing study. We would also like to thank King Engine Bearings, AERA, Dynagear, Rottler, Nusource, Dura-Bond and Dana/Clevite/Victor Reinz/Perfect Circle for sponsoring this machine shop labor pricing study. Their financial support helped to fund the mailing of questionnaires and the marketing research and analysis presented in this report and the following charts.
National Shop Profile Averages