Tiny weeny little people,electic cars and countries

Not sure about the tiny weeny little people comment but I do believe the US indigenous auto industry is near death. I see several reasons for it, the biggest being unions.

Compare what Toyota and Honda product lines look like vs the US industry. They spend a lot of time developing a model and come out with a new model every 4 or 5 years. The US industry is stuck with a new model or major changes every year. This adds extra cost to each new model year and has not proven to sell more cars.

The US generally missed the fuel efficient switch. They are coming in late and have not established a reputation in that area. They simply blew it here.

Reliability is my reason for making the switch away from US cars about 15 years ago. This one, in my opinion, is also tied to the union problem. Reliability has improved but not enough to draw me back even if the companies were financially sound.

Unions are great when there is a need. But there is a line under which the employee is treated improperly by the company and above which the company is being treated improperly. Once unions help the employee push up to that line where there is a balance the union should dissolve or go into sleep mode. But they stay in action and must justify themselves by ever putting pressure on the company to increase salaries, health care, and retirement benefits. As the company profits are squeezed the only way to compete is to cut corners in research, materials, and production methods which impacts reliability. Union workers pay union dues and expect more and more from the union. Strikes are forced on the workers and union cover during strikes bleeds the employees. The employee/company balance was upset many years ago and has destroyed the industry.

I'm sure greed, corruption, and poor decisions are all part of the mix too but to me the overwhelming fault lies with the unions.

 

Workforce related costs are just little part of the story. Of course those issues accelerated Detroit's demise, but in my opinion, Detroit can not blame unions on its demise. They should blame it on the decades of bad decisions they have made.
Instead of changing and reinventing themselves for a better future, Detroit was trying to change everybody else and even whole world, usually through influence in politics.
Of course they failed. They just postponed the inevitable. Change is inevitable fact of life. You either change and adopt to new times or you die. They selected to die through bad decisions they have been making.

 

I'm a union member and I feel it's like insurance. I'd rather not use it but I'm glad it's there.
Every 3 years my union negotiates my wages and conditions for me and other workers who work for the government department I work for. I'm guessing the management would rather deal with 3 union representatives during these negotiations than see each of us individually.

Apart from these negotiations my union provides training in ocupational safety, managing retirement, reclasification aplication writing, first aid and all that useful stuff. I think unions do a great job and would vanish when all employers become fair. That is a long way off.

 

I think its unfair to Ford to lump them in with Chrysler and GM. Chrysler's dire position is related to the utter failure of the Daimler merger. And their quality is an issue. GM's dire position is related to not have a clear vision and understanding of what their customers actually want and instead trying to give them whats best for GM. They are not top tier in quality but not bad either. Certainly not as bad as Damlier or Land Rover. Don't blame the issues at GM on unions. There is a whole culture of greed and entitlement at GM well beyond only the unions. Ford is actually in a pretty good position. They have a better labor deal if I remember correctly, they seem to get the whole product line mix idea, have gotten their quality levels up. I think Ford will emerge as the top American car maker over the next 10 or 20 years.

 

Quote by Kevin Hassett, director of economic policy studies at the American Enterprise Institute (leadingauthorities.com)

"GM is in deep trouble mostly because the United Auto Workers have festooned the company with rigid work rules and extravagant costs. The 2007 collective-bargaining agreement, for example, required the automaker to pay up to $140,000 in severance to a worker whose position was eliminated. And that is nothing compared to the enormous health-care costs these companies are laden with. The average cost of employing a worker at the Big Three, including benefits, was nearly twice that of Japanese automakers. No wonder the automakers are hemorrhaging cash."

 

GM, Chrysler, and Ford haven't been in trouble because of unions. They've been in trouble because they are shrinking. Any mature company that goes into decline will get into similar trouble. It's a tipping point kind of issue that has played out many times. Doesn't help that U.S. healthcare is the most expensive in the world and inflates at about twice the rest of the economy's inflation rate every year (and has done so for decades.)

Why were foreign competitors gaining on them over the past several decades: quality/reliability was a big factor. Folks have been willing to pay more for the equivalent vehicle made by many foreign manufacturers. That's not an issue with unions, it is one of design, execution and focus. It took them at least 25 years for domestic automakers to adapt...but the rep won't go away soon.

GM, Ford, and Chrysler hung their hats on the bigger, more powerful, types. When that became unsustainable they were in much worse shape than other companies. At the same time foreign manufacturers had successfully penetrated the final domestic bastions (full size trucks, etc.)

American Enterprise Institute is bunch of discredited conservative political operatives. "Kevin Hassett served as an economic adviser to the George W. Bush 2004 presidential campaign and as Senator McCain’s chief economic adviser during the 2000 presidential primaries. He also served as a senior economic adviser to the McCain 2008 presidential campaign." Do you really believe anything coming from someone with those supply-siding credentials?

If the unions were gone tomorrow the Big Three would still be in a world of hurt.

 

GM is *very* good at making trucks, busses, and SUV's, at a *profit*.
There will always be demand for these vehicles.

IOW, each American auto company should focus *only* on car makes that are profitable, and sell-off the rest.

Let Honda, Toyota and Mazda fight it out for the consumer sedan that is efficient and priced for the masses.

What's to point to GM/Chrysler fighting for market share against the Ford Fiesta, Honda Fit or Toyota Yaris?

IOW forcing GM to have a fleet MPG average of 30 or higher, when they are excellent at making lower MPG quality trucks, is counter-productive.

Even as a hybrid, a large V6 hybrid truck doesn't get anywhere near 30 MPG n'or can it ever attain it with current technology.

 

Its an interesting point to have GM focus soley on what they are good at. Just focus on building what you're good at and be the best at it. The problem with that is that it is impossible to really know where the market will go. Just look at what happened to the SUV market when gas prices rose to $4 / gallon. If that's your niche, you're screwed. You need a balanced product portfolio to help insulate your company from market forces you don't have control over. It's why Honda and GM build cars with Fuel Cells. IMHO, where GM failed was their desire to build the best of anything other than trucks and SUV's. They built sedans and small cars because they felt they had too but never tried to make them great. Maybe in fear of pushing people who would buy GM cars from buying more profitable SUV's into less profitable sedans. On top of that, other companies made better sedans and they certainly knew it. GM has the resources and know how to be great at something (see SUV's and Trucks). But like many corporations, they are lazy. They give up on minivans because they feel they can't compete with Chrysler (didn't stop Toyota). They give up on small cars because they can't compete with Toyota and Honda (they can't even compete with Hyndai). Maybe they are smarter than all of us and know that their labor costs and the profit margins on these vehicle will never match up. But then like you say, be strong enough to walk away from them.

 

So Toyota, Honda, and Nissan would never be better than GM in this segment.......ever?

 

Interesting idea, but isn't that exactly what was killing GM when gas prices reached $4/gallon and big vehicle sales declined?
I agree, there will always be people that need such vehicles. But as we have seen there are far more that simply 'want' them and will drop them when gas returns to $4/gallon.

For a large company, appealing to more of the market helps smooth out the changes in desirability of specific types of vehicles.

 

This is like saying "put all your eggs in one basket then run across a football field during a game carrying the basket.
The current economic situation would have seen GM in bigger trouble if all it did was build oversize toy trucks for soccer mums and men with self esteme issues.
Diversification provides flexability. GM and Ford have too many brands, now that is rediculous. Why does one manufacturer make several cars of the same class?

Unions negotiate with management, collective bargaining isn't wrong.

 

The market segment for SUV's don't care about 4$/Gal gasoline.

The problem occurred when the smaller SUV's, the cross-overs, started appearing, where a car manufacturer tries to sell an SUV for the average soccer mom, thus, the masses.

If GM cuts off what is not profitable - what Fritz said recently - every vehicle has to pay the rent - what I said makes perfect sense. I also read on how the econo-cars like a Pontiac Sunfire, never made any profit. They simply drive the Aftermarket industry (spare parts) which GM mostly owns.

Most likely the Similar Parts Program, where Chinese make real cheap replacement bumpers and similar high-turnover parts, that the Insurers prefer for collision repair, instead of OEM, must ultimately hurt GM more than they let on.

UNIONS !!! They are not the problem. Toyota has the very same unions in their US plants, so does Ford. If they don't have a problem, why would GM / Chrysler?

No, it's not just the unions. The workforce is not costing billions per month.

Converting a plant to manufacture a small SUV instead of a mini-van or econo-car, that costs billions, and cannot be turned around quickly. It takes years.

GM never wanted to convert the GM Boisbriand Quebec (Camero) plant into making a small, efficient, commuter car - even though the UNION helped studies to show GM it was possible.
For GM - econo-car = no profit, too much overseas aftermarket competition. So the plant closed down.

Now GM needs a plant to mass-produce the Volt, the only way to bring down costs.

Tesla *cheats* by building theirs by hand. Who would buy Volts that are hand-built and cost 60k$?

To bring the price down by a 1/3, you need mass production. That requires billions today. The GM Boisbriand plant would have been perfect, considering that plant had been fully renovated, a brand new paint shop, in the mid-90's.
The Volt frame would have fit in the rails of the Camero frame. Retraining employees doesn't cost billions.

 

This is an interesting assumption. Do you have any sales numbers of the 'big' SUVs duing the $4/gallon gas price spikes? This would go a long way towards supporting your statement.

**edit**
I found some data which may help test this.
For 2008 Hummer sales (which pretty much is large SUVs?) declined 51%. Most of the other GM brands declined 25% to 30%. So Hummer (large SUVs) sales declined almost twice as much as other models. I think your assumption is in error.
************

So not only should GM stop building small and mid sized cars, they should stop building smaller SUV's as well??

And you don't think this has anything to do with the $1500/car legacy costs? No the UAW is not the sole reason GM is in this mess, but they play a role.

Why don't they let on? I mean that would be a great talking point and carry a lot of weight as a political argument. And since they are now answering to congress, it is a beautiful argument.

They don't have the same agreements with their unions. If they did they would be in the same situation.
Also, Toyota and Honda plants are much more efficient. They can be retooled much faster than the GM plants and for a much lower cost.
Ford built a beautifully efficient plant in Brazil. Part suppliers are right on site, it works like a dream.
The UAW blocked Ford from building any in the US. Now when the union has this sort of power and uses it to hurt efficiency, that union has got to go.

This is very true, it isn't ONLY the unions, it is unfair trade, management and other factors. But the union is a PART of the issue.

Nonsense. The first Volt will be hand built as well. The first cars of any brand new model are typically hand build as you don't yet have the details all worked out. If there is an problem with the assembly it is easy to fix and not costly if the car is assembled by hand. Once all the wrinkles are worked out the machine assembly can be set up.

 

GM's problem isn't that they update their cars every one or two years. They haven't done that in decades. GM's problem is that they haven't been able to update their vehicle fast enough. Right now the industry standard is to completely redesign a vehicle every 6 to 7 years. When a model is about 4 years old it gets a "facelift" where some of the sheetmetal and interior is changed but the chassis and mechanicals stay the same. Honda and Toyota have kept to this schedule like clockwork.

GM on the other hand has way to many brands and models for their market share. For the last 15 years or so they have been falling father and farther behind. They have so many models to redesign they don't have the resources, both manpower and capital, to redesign their vehicles in a timely manner and GM products have gone 10 years or more without a redesign. Some examples:

• The Cavalier went from 1995 to 2005 without a redesign
• The Impala has gone from 2000 to 2009 without a redesign. It got a facelift in 2006
• The Malibu went from 1997 to 2007 without a redesign. It got a facelift in 2004
• The Monte Carlo went from 1995 to 2007 without a redesign.
• The S-10 Truck went from 1994 to 2004 without a redesign
• The S-10 Blazer went from 1995 to 2005 without a redesign

 

Not true. The segment got shellacked when gas prices spiked. Not only did their sales go in the tank compared to other segements, but those that were being sold were heavily discounted (an acquaintance got one at 40% off.) Some folks were actually trying to sell their SUV's, but this was futile as prices tanked and there was a huge glut of them on the used market. Additionally, some folks bought cheap old used cars that got much better mileage so that they could park the gas guzzlers.

They do care about more expensive gasoline as they must buy a lot more of it. I could see this on the roads as the ratio of big behemoths declined rapidly for awhile. (I also put off some long distance cargo hauling trips with my Tundra until gas prices fell--this on top of cutting its normal use to a minimal level.)

I agree about unions not being the problem though. It's not a price disadvantage (which is what Union costs amount to) that has hurt the domestics, it was their market focus, styling, and lagging for decades in quality that made them less desirable (see price again.)

If the U.S. had an affordable health care system then much of the legacy cost burden would be gone. Plus the way nearly all U.S. pensions were done for most of the past century set up this sort of legacy cost scenario for ANY industry that had matured and/or was in decline. Folks want to blame this on unions but it applies across the board to anyone who had pensions...including non-union facilities. That's why companies of all types have been trying to ELIMINATE health care AND pensions.

 

The bottom line is that consumers want a quality auto, and domestics generally do not fit that bill.

The real question is WHY can't detroit make an auto that competes with the foreign competition?

There is plenty of blame to go around and there is no one good answer. However, it certainly starts at the top. Sadly, I don't believe the US auto industry will be able to survive the next 5-10 years. It will die just like every other industry where there is legitimate competition from abroad.

How many PCs, TVs, IPods and other electronics are made in America today? I see the auto market reacting just like these markets.

... Brad