What's wrong with the American auto industry?

[ralph124c]

[QUOTE=Pleonast]
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.
[/QUOTE]

Well, you have to remember on thing:every laid-off auto worker costs you and me about $26,000/year in unemployment benefits. Not only that, they are not paying into Social Security. Plus, if we allow the Koreans, Japanese, and Chinese to destroy the domestics, you will have NO price competition in whgat you buy-that $16,000 Toyota will now be $35,000! Second: the domestic auto industry generates about 8 external jobs (suppliers, subcontractors, etc.) for every direct job. japanese imported cars generat 1.2 jobs per direct jobs (mostly sales and marketing). So to allow the domestics to collapse would send a huge number of jobs to Asia-which will never return. So don’t expect ME to fund YOUR retirment-ask Japan Inc. to help you!

[crazyjoe]

[QUOTE=What Exit?]
crazyjoe, why is it that American Hybrids are losing money as you say {Cite Please} but Japanese hybrids are making money?

[quote]

How about a cite that Japanese hybrids make money? Here’s an article that suggests otherwise:

http://www.businessweek.com/2000/00_33/b3694130.htm

I couldn’t find a direct quote about the Hybrid Escape, but it was well known around the Ford buildings, and I have a lot of family in the Auto industry.

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.

Toyota cars built in the US are built by the highest paid workers in the industry.

http://www.autoblog.com/2007/01/31/toyota-workers-in-us-made-more-than-uaw-members-for-first-time-l/

Also, don’t blame the designers and engineers, they are capable of making superb cars. It’s mostly management and marketing guys falling down on the job. The mustang lamented above was actually initially designed with independent rear suspension. Ford thought they could save money by going with a solid rear axle, so they did, and it ended up costing them MORE per car to go with a shittier technology.

[crazyjoe]

[QUOTE=What Exit?]
crazyjoe, why is it that American Hybrids are losing money as you say {Cite Please} but Japanese hybrids are making money?

[/quote]

How about a cite that Japanese hybrids make money? Here’s an article that suggests otherwise:

http://www.businessweek.com/2000/00_33/b3694130.htm

I couldn’t find a direct quote about the Hybrid Escape, but it was well known around the Ford buildings, and I have a lot of family in the Auto industry.

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.

Toyota cars built in the US are built by the highest paid workers in the industry.

http://www.autoblog.com/2007/01/31/toyota-workers-in-us-made-more-than-uaw-members-for-first-time-l/

Also, don’t blame the designers and engineers, they are capable of making superb cars. It’s mostly management and marketing guys falling down on the job. The mustang lamented above was actually initially designed with independent rear suspension. Ford thought they could save money by going with a solid rear axle, so they did, and it ended up costing them MORE per car to go with a shittier technology.

[Ins_Outs_What-have-yous]

A significant contributing factor that has not been mentioned yet: Toyota and Honda and those who supply to them embraced Lean Manufacturing much earlier than their domestic competitors. Lean methods improve quality, reduce costs, and encourage better safety.

These days, the line between foreign and domestic auto-makers is blurred. Toyotas are assembled in Kentucky, Indiana, West Virginia, Texas, and Alabama with most of the supplied parts also coming from within the USA. Hondas are assembled in Ohio (mostly), Alabama, and soon in Indiana.

Meanwhile, General Motors now supplies parts (and even whole autos in some cases) to the USA from Mexico and South Korea.

It is more difficult for the ‘Big 3’ to compete when the foreign competition becomes more domestic while manufacting cars with better reliability and durablilty.

[Cheesesteak]

[QUOTE=ralph124c]
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.
[/QUOTE]
Ralph, the '70’s called, they want their crisis back.

Seriously, does it not strike you that Detroit did this exact same thing 30 years ago? Build conspicuously consumptive, gas guzzling behemoths because “Americans want big cars” and gas is cheap. Whammo, an issue in the Middle East causes oil to get expensive, so people start to want smaller cars that are better on gas, and Detroit doesn’t do that.

On the American vs. Foreign car thing, I recall this hilarious fact from the Daytona 500. Toyota entered the Camry into NASCAR this year, so it was the first D500 that wasn’t “all-American”. The funny fact is that the Camry was the only model in the race that is actually assembled in the US. The rest are assembled in Mexico or Canada.

USA! USA! USA!

[Patty_O_Furniture]

So are there still high tariffs on imported cars, even though those cars are manufactured in the U.S.?

[Driver8]

[QUOTE=ralph124c]
Well, you have to remember on thing:every laid-off auto worker costs you and me about $26,000/year in unemployment benefits. Not only that, they are not paying into Social Security. Plus, if we allow the Koreans, Japanese, and Chinese to destroy the domestics, you will have NO price competition in whgat you buy-that $16,000 Toyota will now be $35,000! Second: the domestic auto industry generates about 8 external jobs (suppliers, subcontractors, etc.) for every direct job. japanese imported cars generat 1.2 jobs per direct jobs (mostly sales and marketing). So to allow the domestics to collapse would send a huge number of jobs to Asia-which will never return. So don’t expect ME to fund YOUR retirment-ask Japan Inc. to help you!
[/QUOTE]

I’m confused. Your solution to the price competition issue is to impose tariffs on foreign cars so that domestic companies have the advantage on an unleveled playing field. Could you explain more about how this five year tariff creates additional pressure on the American companies to become more competitive? Because it seems to me that protecting companies by placing artificial barriers to entry on external companies would decrease these companies competitiveness. Surely this would make the situation worse, unless the tariffs are meant to be permanent (or some other protective mechanism is used, say government subsidies for the domestic producers or legislation imposing rules on Americans regarding which cars they are allowed to buy).

How far do you want to take this? If the companies are truly incompetent and remain that way should we permanently protect them from competition? Should this philosophy apply to other industries as well? In general if one company falls behind another should we impose penalties on the company that is doing well to “ensure competitiveness”? This would have exactly the opposite effect.

[ralph124c]

[QUOTE=Driver8]
I’m confused. Your solution to the price competition issue is to impose tariffs on foreign cars so that domestic companies have the advantage on an unleveled playing field. Could you explain more about how this five year tariff creates additional pressure on the American companies to become more competitive? Because it seems to me that protecting companies by placing artificial barriers to entry on external companies would decrease these companies competitiveness. Surely this would make the situation worse, unless the tariffs are meant to be permanent (or some other protective mechanism is used, say government subsidies for the domestic producers or legislation imposing rules on Americans regarding which cars they are allowed to buy).

How far do you want to take this? If the companies are truly incompetent and remain that way should we permanently protect them from competition? Should this philosophy apply to other industries as well? In general if one company falls behind another should we impose penalties on the company that is doing well to “ensure competitiveness”? This would have exactly the opposite effect.
[/QUOTE]

You are partly right-however, we HAVE to have a domestic auto industry, because if we don’t , there won’t be any domestic steel industry, domestic electronics industry, domestic tire industry, etc. What I’m saying is this: OBVIOUSLY (as gas gets more expensive), people will NOT be buying 12 MPG FORD Explorers. Yet FORD has dedicated assembly lines to make these behemoths-they don’t have the money to retool. If we gave the industry a breather (5 -10 years), they could recoup their losses, and retool to make small cars. Then, the domestics would be profitable, and we could drop the tariffs.

[Anne_Neville]

[QUOTE=Merkwurdigliebe]
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.
[/QUOTE]

I rented an 07 Chevy Malibu recently, and the steering was horribly, horribly slack. I complained to the rental car company when I returned the car, and they told me that most if not all of the 07 Malibus have that problem. GM certainly used to be able to make a car that didn’t have that problem- my 98 Pontiac Sunfire had its issues (on some of them, it had subscriptions…), but that wasn’t one of them.

[mambocrow]

I think the answer would lie in the last two reasons you listed in the OP (reliability and labor costs). I’ve been driving Honda Civics since 1978. I’m on my third one now (I keep cars a long time if they work well), and I’ve had relatively few problems with any of them. The only two American cars I’ve ever owned (a 1977 Camaro, and a 1981 Oldsmobile Omega) were poorly constructed and trouble prone. I couldn’t wait to get rid of both of them.

American car companies traditionally did well just selling cars in the American market and thought they had a handle on what American car buyers wanted. American car buyers wanted big metal (to protect themselves in accidents, their hugemobile could crush the smaller other vehicles involved and leave them safe as houses), and big torque (they think they want big horsepower, but what they really want are engines that develop a lot of torque at relatively low rpm’s - like the generic General Motors 350 cubic inch pushrod operated overhead valve V-8). Most still want this, but the economics of operating such monstrosities have begun to make themselves felt.

Out of touch management is something I’d add to your list. Remember H. Ross Perot being brought in as a consultant to General Motors in the early 90’s and telling the shareholders what a nimrod the CEO Roger Smith was? Or Car and Driver interviewing Chrysler CEO Townsend Parker in 1978 (four years after the oil embargo or thereabouts)? Car and Driver asked Mr. Parker if Chrysler would be designing any smaller cars for domestic sales anytime in the future, Mr. Parker sniffed and said “Chrysler is not in the business of building small cars”. Two years later Congress was bailing their haughty asses out of certain bankruptcy.

I feel sorry for the workers affected by the inevitable melt down, but I don’t really feel I owe the UAW anything, it’s not like they’ve done anything for me lately (or ever). Screw the American automakers.

[Driver8]

[QUOTE=ralph124c]
You are partly right-however, we HAVE to have a domestic auto industry, because if we don’t , there won’t be any domestic steel industry, domestic electronics industry, domestic tire industry, etc. What I’m saying is this: OBVIOUSLY (as gas gets more expensive), people will NOT be buying 12 MPG FORD Explorers. Yet FORD has dedicated assembly lines to make these behemoths-they don’t have the money to retool. If we gave the industry a breather (5 -10 years), they could recoup their losses, and retool to make small cars. Then, the domestics would be profitable, and we could drop the tariffs.
[/QUOTE]

I assume this tariff will only be applied against the importing of cars? If Toyota manufactured a car in Alabama with resources sourced from domestic suppliers it would not be taxed? Likewise, if Ford manufactured their cars in say Mexico they would be taxed when it was imported into the US?

[LVgeogeek]

I for one wish that there were more options for hybrids in the pickup/SUV market. The first that came out was some small Ford SUV, then Toyota came out with a hybrid version of its Highlander SUV.

I currently drive a 2002 Toyota 4Runner, and I get about 24-27 mpg on the highway and about 17-20 mpg in the city. (I also only buy gas every 2-3 weeks) Some day when I replace it many miles from now, I just hope there are more hybrid choices on the road by then. Not saying that I would buy a Ford. I’ll probably buy another Toyota.

I did own a 2004 Honda Civic, it got about 25 mpg in the city and maybe 35 mpg in the highway. When I bought it I did look at the Civic hybrid, but I couldn’t afford a $5000.00 up charge on the hybrid. Also it was only available in white, black and beige 4 doors. blech. But it was the first year the hybrid Civic was available (I think). Now it is available in almost every Civic color and 2 and 4 door models. Although I am not sure what the price variance is now for the standard vs. hybrid. Maybe the price gap is closing.

I ended up getting the 4Runner because I was using my own vehicle for work so often. It is really hard to drag all the stuff I needed for drilling oversight/logging soils and collecting water samples in my Civic, I needed something more practical for work. Sometimes I do miss my Civic, but I really love my truck.

I also have to say that I really hate the Hummers, and those huge Nissan behemoths that I have seen driving around. I have been in Dodge 2500, Ford F-250/150 work trucks. So much wasted space. I swear they are big for the sake of being big.

On American cars, my dad drives a Chevy S-10 that is now about 10 years old. All sorts of weird problems. When I was a kid (in the late 70’s early 80’s) he drove some sort of 1970’s Chevy pick up, never had a problem with it. My mom had a 1980’s Pontiac SW- no problems, then a 1990 Chevy- all sorts of problems. Now she drives a 2006 Saturn, and it’s a pretty good car.

I had a 1995 Saturn, OMG is was being fixed all the damn time, but I had a 1990 Chevy Cavalier who’s only problem was that it ate starters and alternators for breakfast, other than that it ran like a champ until I got rid of it with 150K + miles on it.

[Little_Nemo]

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.

The UAW doesn’t run the auto companies. Line workers build the cars they’re told to build the way they’re told to build them. Management are the people who are supposed to be making plans and decisions about what cars to make and how to make them.

Ford CEO Alan Mulally made $28,000,000 in the last four months. Assuming he worked a forty hour week, that works out to $43,750 an hour.

Where’s your incentive to work hard and smart when you can get paid over a hundred million a year while losing business? And you get to blame your mistakes on the unions?

[What_Exit]

[QUOTE=crazyjoe]
How about a cite that Japanese hybrids make money? Here’s an article that suggests otherwise:

http://www.businessweek.com/2000/00_33/b3694130.htm

I couldn’t find a direct quote about the Hybrid Escape, but it was well known around the Ford buildings, and I have a lot of family in the Auto industry.

Toyota cars built in the US are built by the highest paid workers in the industry.

http://www.autoblog.com/2007/01/31/toyota-workers-in-us-made-more-than-uaw-members-for-first-time-l/

Also, don’t blame the designers and engineers, they are capable of making superb cars. It’s mostly management and marketing guys falling down on the job. The mustang lamented above was actually initially designed with independent rear suspension. Ford thought they could save money by going with a solid rear axle, so they did, and it ended up costing them MORE per car to go with a shittier technology.
[/QUOTE]

Your top link is from August 14, 2000 and if anything it shows how caught up in SUVs and how far behind American Manufacturers were back then.

The Toyota employees being the top paid means less than you think, the Union problems involves pension and benefit liabilities and are very tough holes for the American car companies to dig out of. This is specifically what I mentioned when I said the “The Unions do hurt the Big 3, there is little question about this” & “The pension and benefits owed to the unions and the retired workers is often cited as overhead problems that plague the American Car companies.”

As far as my cite, here is a few easy ones: from last month to.
Toyota Reports March Sales
http://www.sptimes.com/2007/04/04/Business/Record_Hybrid_sales_p.shtml
http://www.9wsyr.com/news/local/story.aspx?content_id=3b373147-8836-490f-a68a-e3e787b90f4b

I will accept your correction that it is not the US engineers but the US management and marketing guys that prevent the Big 3 from building cars as well as the Japanese. This sounds right to me.

Jim

[Burrido]

I have a problem with styling. There is not a single car I like in Chevy and Chryslers lineup.

[Cheesesteak]

[QUOTE=Little Nemo]
Ford CEO Alan Mulally made $28,000,000 in the last four months. Assuming he worked a forty hour week, that works out to $43,750 an hour.

Where’s your incentive to work hard and smart when you can get paid over a hundred million a year while losing business? And you get to blame your mistakes on the unions?
[/QUOTE]
Man, these are some seriously twisted facts. Mulally was hired 6 months ago, in an attempt to save Ford, he didn’t lead them into this mess. Also, much of that money was to compensate him for earnings from his prior job (at Boeing, a company that seems to be doing well) which he had to give up to take over Ford. His annual salary is $2M plus incentives, not $100M.

[crazyjoe]

[QUOTE=What Exit?]
Your top link is from August 14, 2000 and if anything it shows how caught up in SUVs and how far behind American Manufacturers were back then.

[/quote]

Well color me embarassed. I don’t have the sales figures for the recent Escape Hybrids, but I have seen quotes from Ford Execs saying they needed to sell 70,000 of them to turn a profit. I don’t think they are selling more than 25,000 of them.

The Toyota employees being the top paid means less than you think, the Union problems involves pension and benefit liabilities and are very tough holes for the American car companies to dig out of. This is specifically what I mentioned when I said the “The Unions do hurt the Big 3, there is little question about this” & “The pension and benefits owed to the unions and the retired workers is often cited as overhead problems that plague the American Car companies.”

Certainly some legacy costs for GM and Ford are hurting them witrh respect to the unions. However, the average legacy cost for salaried workers is about double that of the UAW worker, so it’s really just propaganda used to try to drive out the unions. Besides, I feel like if it was promised to the workers, it should be delivered, regardless of whether they have a Union to protect it. I’ll repeat, it is not the union that’s the problem, it’s the management that doesn’t deal with them effectively. Sure there’s corruption at the union level, but it pales in comparison to the corruption and stupidity that occurs at the management level.

[What_Exit]

[QUOTE=crazyjoe]
…
Certainly some legacy costs for GM and Ford are hurting them witrh respect to the unions. However, the average legacy cost for salaried workers is about double that of the UAW worker, so it’s really just propaganda used to try to drive out the unions. Besides, I feel like if it was promised to the workers, it should be delivered, regardless of whether they have a Union to protect it. I’ll repeat, it is not the union that’s the problem, it’s the management that doesn’t deal with them effectively. Sure there’s corruption at the union level, but it pales in comparison to the corruption and stupidity that occurs at the management level.
[/QUOTE]

I think we basically agree, we both blame the ‘Management’ the most, we just differ a little in how much we blame the management.

Jim

[Little_Nemo]

Man, these are some seriously twisted facts. Mulally was hired 6 months ago, in an attempt to save Ford, he didn’t lead them into this mess. Also, much of that money was to compensate him for earnings from his prior job (at Boeing, a company that seems to be doing well) which he had to give up to take over Ford. His annual salary is $2M plus incentives, not $100M.

Look at the list of complaints about the American automobile industry in the OP. Do you think the union workers made the decisions about innovations, hybrid engines, modularity, and reliability? No, management made all those calls and the workers did what they were told. Then when the automakers found themselves with a bunch of unsellable cars, they pointed the finger back at the guys who built them. I’m a manager myself but I believe that if you give bad directions you don’t blame the people who followed them for the consequences.

And if the line worker wages was a factor in the high cost of cars, why wasn’t the higher wages of managers a bigger factor? I have no problem with incentive pay but I think it should be a reward tied into actual performance. Mulally may have only been hired a few months back but he’s already taken home the twenty eight million I mentioned. Wouldn’t it have made more sense to wait and see if he was actually going to produce results before rewarding him so lavishly?

[Cheesesteak]

[QUOTE=Little Nemo]
Wouldn’t it have made more sense to wait and see if he was actually going to produce results before rewarding him so lavishly?
[/QUOTE]
Sure, for Ford, but there is someone else who has to sign the contract, you know. For Mulally, he was sitting pretty at Boeing, in charge of the aircraft business, at a company that’s had it’s stock price triple in the last 5 years, sitting on tens of millions of dollars of stock and options.

Ford approaches him and wants him to try and turn the company around. He says, I’d love to, but there’s nearly $20 million of options and stock that are not vested and I’m going to lose it all if I join your company. So, Ford agrees to pay him money to compensate for that loss, and puts aside something like $8M to cover stock and options for incentive pay. Those two payouts, and $600,000 of salary equals the big number you saw.

If you don’t want Ford to pay that money, you’re asking for two things. #1, Mulally is going to throw away $20 million to leave his job at wildly successful Boeing to head a company that just crapped it’s pants. #2 Ford is going to give him incentive pay (like everybody wants for CEOs), but somehow doesn’t have to put money in an account to pay it from.
ETA - On management, I’m one of the guys who gives management credit and blame for the success and failure of a company. If I bring the workers in at all it’s in regards to collective bargaining, at which time the union has management level power to affect a company’s prospects.