What's wrong with the American auto industry?

In My Humble Opinion
1

-Cars are too expensive. There’s not much incentive for me to pay $25,000 for a new car when for $12,000 I can get one that’s a year or two old with 25,000 miles on it. If you’re buying a new truck, they can easily top $30,000.

-Not enough innovation. Where are the domestic hybrids or electrics? Come on people, we are the greatest country on Earth, right? Do we not have the brains and resources to build a kick-ass hybrid or electric?

-Cars too hard to work on. All manufacturers seem to be guilty of this, but how about some modularity, some user-friendliness for the shadetree mechanic? You shouldn’t have to be a contortionist to get to your oil filter.

-Reliability. I’m a Ford person and I’ve had good luck with the 4 or 5 I’ve owned, but over the years Ford has had been transmission problems, head gasket problems, and various electrical problems. For example on my 1995 F-150 there’s a recall for a cruise control switch/servo (forget which) that can cause a fire. How about putting more

-Unions. I think the cushy union salaries and benefits are probably a big reason why the American auto industry languishes and the cars are overpriced. Where is your incentive to work hard and smart when you’ve got the union taking care of you? The high union salaries and benefits undoubtedly raise the prices of new cars. Now I’m sure once you’re in a union you want to leave things alone, but let’s face it, workers are overpaid. As mentioned in this article, the average for a UAW worker is $27 per hour.

2

How is this limited to the US auto industry? You can buy Japanese and German used cars for a fraction of their original price as well.

Ford Escape Hybrid, Saturn Vue Hybrid. Both are money losers.

What is the average salary for a worker at Toyota, Honda, or BMW? Without those numbers, your argument is irrelevant.

3

My 1989 Mazda has way over 320,00 miles on it (stopped recording milage in 2005) and it’s in great shape. I drive it 40+ miles every day to work and back.

I’ve had Ford and Chrysler made vehicles that seemed to just quit.

My next car will also be a Mazda.

4

FORD, GM, and CHRYSLER share some common problems:
-high cost labor. Existing contracts with the UAW specify high wages and payment even if no work. This is very costly. also, health insurance is a big cost.
-no money for new product development. A new model costs 100’s of millions $ to develop. all three are losing money-so they make do with existing designs,
-Cost -cutting: all three have chiseled their components suppliers. FORD specifies 5% cost reduction/year-so components suppliers react by cheapening materials, and cutting testing. this is why components fail prematurely.
-High local taxes: the big 3 operate in states like Michigan-which taxes income and inventories. japanese and Koeran competitors operate in states like KY and Mississippi-frequenly pay little or NO taxes.
-stuck with poorly selling models: FORD was making $12,000/vehicl PROFIT on SUVs (Explorer). Now, they make less than $500/vehicle on cars like the FOCUS. Gas is nearing $3.00/gallon, and nobody is buying SUVs
I expect the Federal Government to intervene: the domestic auto industry will collapse otherwise-leading to recession in Michigan, and a HUGE increase in our trade deficit. UAW members now making $45.00/hour will NOT work at WALMART for $10.00/hour!

5

crazyjoe, why is it that American Hybrids are losing money as you say {Cite Please} but Japanese hybrids are making money?

Maybe this actually supports control-z’s op?

I could also be that the American car companies made Hybrid SUVs and not Hybrid family cars or Econo-cars. Perhaps they completely missed the concept of which consumers are interested in Hybrids?

The Unions do hurt the Big 3, there is little question about this, but poor management and design is at least as much to blame. All 3 companies have made many bad decisions over the last 10 years. The huge commitment to SUVs has bit them hard in the wallet. The pension and benefits owed to the unions and the retired workers is often cited as overhead problems that plague the American Car companies.

It appears that the American design engineers still cannot quite keep up with the Japanese Engineers.

Jim

6

I think a better question is “Why is the management of North American auto companies so incompetent?”

Pretty well all of the issues mentioned above can be classified as management incompetence. The management decisions seem to have been made by people who don’t live on this planet. (People don’ t want gas-guzzling SUV’s because gas is expensive and getting more so. How out-of-touch does one have to be to not see that?)

7

Don’t forget the larger political/regulatory environment too.

One reason the US makers are being eaten alive is that they provide health insurance in the US’s overly-complex and costly mesh of private providers; if the US had single-payer public health insurance, they could cut those costs way down. Look at Canada next door. I’m really surprised I haven’t heard more about this either as a competitive advantage for Canada, or from the makers as a disadvantage for the US.

But Ford and GM could survive that problem if they offered better cars in North America.

Example: there was a little blurb in the paper this past week about GM showing prototypes of three small urban cars. There were no plans to being them to Canada or the USA. Why the %$#*& not? GM and Ford, especially GM, do this kind of thing all the time and it drives me crazy.

I’ve seen some of the cars GM sells overseas. They would sell well here in Canada. As an example, take the Opel Zafira minivan. Looks great, along the line of the classic Chrysler minivan.

They sold it in Mexico, so it’s not like they couldn’t bring it over. But instead GM designed a separate model for Canada and the USA, wasting effort, and then made it bland and boring, losing sales. I don’t even remember what that model is called, but I remember what it looks like.

So yeah, ultimately it’s management’s fault.

8

American car companies made the strategic mistake of not pursuing alternative technologies. They have no long-term vision. Now, that the market is turning away from gas-guzzlers to more efficient tech, the Japanese manufacturers have a huge lead. American autos will be playing catch-up (or paying royalties to use Japanese tech) for years to come.

The existence of unions aren’t the problem. Instead it’s their similar inflexibility to adjust for the long term that’s the problem. The management focused on getting the most short term profit, while the unions did their best to maximize the workers’ compensation. No one was looking out for the industry.

9

Not really irrelevant. Both Japan and Germany have some form of state sponsored health care. Even if the hourly salaries are comprable, the US auto makers still have teh whole healthcare thing to deal with.

10

At least for Germany that’s not really true (yet.) Although the German health care sector is highly regulated, it is financed through premiums paid to the various health insurances. Part of it is paid by the employers directly, part is taken out of the gross salary automatically but the bottom line is that a certain fixed percentage of the cost of an employee goes into healthcare and there is nothing that they can do about it.
After the most recent health care reform (effective this month) there will be tax-financed subsidies.

11

You are ABSOLUTELY right! except, they are not from another planet, they just inhabit the 10th floor of the GM Building (or the “Glass House”-in the case of FORD). Think about it: yopu are a GM executive-pulling down $500K/year-do you really care if gas hits $3.00/gallon? plus, you drive a brand-new Buick or Pontaic-you never see the repair bills. Sop these guys look at eachother (after a round of gold at the country club) and wonder-gee, why aren’t people buying our cars?

12

I for one think of this a lot. Why the hell do American cars have to be so big? Have they got more shit to move around than Euorpeans?

But that’s beside the point. I think that it is indeed a highly mis-managed industry. It’s amazing that American cars have even held on this long. I think the reason for this is that so many Americans buy cars, because they are American. How many ranchers in Texas or Colorado would be caught with a Toyota or a Mazda? About 5 years ago, I’d say very few. It’s gonna be Ford, Dodge, GM or Chevy. These people and the people like them are really a gimme market for the American automakers. However I do seem to think that this is probably changing. Isn’t this whole, “Buy American Cars” something that really hit hard in the 70’s and 80’s when Japan really started kicking ass in the American market?

This can be the only reason why American cars in America suck so bad. Take a look at the “current” Ford Mustang. It’s meant to be a sporty car, yet it has a LIVE axle. This is so freaking old that it’s sad. I wouldn’t be surprised if the suspension was garbage too.

However, Ford makes pretty good cars in Europe, and has been for a while. The new Mondeo is pretty nice, from what I can tell. But what did they do to import it to America? Well they made it bigger and crappier as a Ford 500. The American car market is really weird, to be honest. Most people haven no clue about how awesome the cars are in the rest of the world, and the ones that do seem aren’t actually vocal enough to demand it.

And please, FORD, get rid of that damn slack in the steering wheel! It’s not really “steering” when you’re simply bouncing off the edges of the lane.

13

I can only cite myself as an example, but the newest car I own is a 1998 Ford Contour. Most are 4-cylinder and auto transmission, but I sought out the rare V6 model with 5-speed manual transmission. The Contour was a Euro import, known as the Mondeo there. In Europe the Mondeo can be had with several engines including a diesel, and 5-speed is the norm.

Since the Contour, Ford has not offered any 4-door sedan with a V6 an manual transmission. So they really don’t have anything I want, I just keep driving my Contour with 176,000 miles+ on it. I’d like a new Mustang GT, but they simply cost too much money. Same with the Chrysler 300m and Dodge Magnum, I like them, but can’t see shelling out $25,000+ for them.

And simple things like an input jack for MP3 players. It would cost probably $1 to build cars with one, but they’re still rare. Listen to the customers!

14

Well, it has always been true that Americans like big cars. Gasoline was always cheap, so people didn’t mind. Now, the USA is faced with having to import oil (and fund various reactionary regimes in the ME). So we have a problem-the Japanese made good quality, economical small cars-a market segment that Detroit ignored. That is why I propose a period of about 5 years, in which imported cars will pay a hefty tariff. It is necessary to allow the domestic industry to switch over to smaller cars. the alternative is to wind up like the UK-with an auto industry totally in foreign hands (and profits that LEAVE the country).

15

Is unionization of the US automotive industry a new thing?

Some of those complaining about “cushy” union jobs have changed their tune to our country’s lack of a health care system not dependant on employers. I agree, but don’t think that unions need to fold just because of wrongheaded government policy.

16

In my experience, it’s all about quality & cost of maintenance.

I’ve owned several cars since I learned to drive. They followed a fairly logical line of cost.

Lousy cars:
1982 Dodge Aries K car - POS with a carburator that needed rebuilding regularly, a valve job at 90K miles. Lousy drive characteristics.
1992 Chevy Cavalier - a constant replacement of wheel bearings, engine issues & lousy drive characteristics. Repairs became about the same cost as the payments at about 80K miles.

Great cars:
1988 Ford Festiva (built by Kia, badged by Ford, so really a Kia) - 185000 miles with NO issues. Cheapest car out there at the time (5600 new, no options). Very light, so fairly peppy, with good handling. Still had plenty of legs when I replaced it.
1998 VW Golf - 186000 miles when disposed of. I did have a transmission issue that was fairly expensive… at 150K miles. Still had plenty of legs when I replaced it.
2004 Subaru Baja - great driving car, and no problems AT ALL yet, through 50K miles. (Assembled in the USA, but designed by overseas folks).

The good cars I’ve owned have been foreign. The lousy ones domestic. My wife has a similar tale with the cars she’s owned. We’re continuously laughing that the inlaws, and my parents, who refuse to buy “foreign” cars… but spend thousands on continuous repairs on thier domestic cars. Dad bought his first Honda a couple of years ago, and is surprised at how much it’s on the road vs in the shop… so he’s converted.

Can you guess what my next car’s origin will be… domestic or foreign owned company?

Add to this the bad ergonomics in domestic cars vs foreign makes (except for cup holders, that’s the only thing the domestics get right), and it’s a no brainer. IMO, YMMV.

In general, it’s not the workers who put these together. Many foreign badged cars are assembled in the USA, so it’s not the workers. It’s the management that forces the engineers to go cheap… probably due to the high labor costs of the union plants/suppliers. Someday a domestic car company is going to start from scratch, and take over the industry, or at least compete successfully with the foreign badges, but the existing domestic manufacturers are just “Dead companies that don’t know they’re dead yet.”

17

Tariffs are not a good idea. Why should the consumer have to pay for the auto industry’s mistakes? They made their bed, now they have to sleep in it.

18

Really? Does this not seem like a perverse incentive to you? "Gosh, you’ve made one poor decision after another; produced cars that people don’t want to buy, and completely failed to predict future markets. Don’t worry; we’ll slap these tariffs on other companies that aren’t making those mistakes so you’ll have another five years to arse around”.

The profits should go to whoever is producing the products that people want, regardless of location. Indeed, I would argue that if there are import tax reasons that, all else being equal, make foreign cars less competitive than domestic cars they should be removed so that the best cars will come out ahead in the competition. If the American car companies get their act together and improve their product lines so that they are competitive again then that would be great for everyone. If they don’t, I believe the best solution is to just let them sink, rather than have the government in effect tell consumers what cars they should be buying through tax penalties.

All car companies (foreign and domestic) have had access to the same information. They made their decisions. Now they should have to live with them.

19

You might be interested in how various car companies bake potatoes

20

Nope, still irrelevant, as a large # of “Japanese” automobiles are manufactrured in the USA, and a large portion of “Domestic” autos are manufactured in Mexico and Canada, and there are still stark differences in profitability.