The Big 3 Auto bailout

[frisco]

Their quality is quite good, their prices are great, and if we dont buy their cars they will really go out of business and this economy will really be in trouble if that happens.

With all due respect, the quality and dependability of a Chrysler or Ford can't compare to that of a Honda or Toyota. I think you'll be hard pressed to find anyone who disagrees.

 

[DLSuperVet]

American cars aren't garbage. They're just unfortunately held back by bean counters and are developmentally behind just about everybody else.

The Big 3 won't die. They may not survive in the same condition they started but they will make it out and will probably do it stronger and more efficient.

Henry Ford said it best.
"Failure is simply the opportunity to begin again, this time more intelligently."

Some people may be sad that they will not be able to buy a Pontiac ever again (with the exception of the G8) and I think that's fine. The world could do without all of this badge engineering.

Thin out their product lines, modernize their operating procedures. diversify their work force.

 

[bicker]

I have zero vested interest on the topic (I dont work for an automaker nor do any of my relatives), but why not buy an American car? Their quality is quite good, their prices are great, and if we dont buy their cars they will really go out of business and this economy will really be in trouble if that happens.

By that logic, everyone should have paid top dollar for lots and lots of Christmas gifts, last month, instead of looking for the best deal on a fewer number of the Christmas gifts their loved ones wanted most. That doesn't make sense.

As I mentioned earlier in the thread, the feature/quality/price proposition offered by American automakers is devalued by the pressure exerted on their offerings by their outrageously high cost structure. As long as the American automakers operate under the yoke of excessive cost, their features/quality/prices won't be -- cannot be -- as good as the alternatives. For certain cars, for certain people, American automakers may have a decent offering. However, that's not the case for everyone, and so that is why many people purchase cars from non-American automakers.

I certainly hope that people would value the services I provide that they would want to buy from me versus some one thousands of miles away.

That is key -- if there was more of an advantage to buying from American automakers, then perhaps more people would do so. Again, the excessive cost structure precludes them from offering such advantages. Furthermore, the fact that many foreign automakers actually build their cars here now means that they can offer such advantages as well, so the American automakers don't have a monopoly on offering such advantages.

 

[bicker]

That's because JD Powers ranks brand new cars when they first come out. Of course they'll rank well. Check the same cars in 3 years in the same magazine.

That's very interesting. Thanks for raising that issue. It is important to recognize that it is long-term reliability and quality that most customers are looking for, and until American automakers can prove the offer a better overall package, long-term, than other automakers, they cannot hope to use quality as a rationale for buying from them.

American cars aren't garbage. They're just unfortunately held back by bean counters and are developmentally behind just about everybody else.

They're not counting beans; they're counting money. If your retirement hinged on how much of a return you will get on your investments, you'd be concerned about the difference between what one investment could offer versus another, and you'd have to be either an idiot or excessively rich to deliberately choose investments that offer significantly lesser returns. So what's holding American automakers back is the fact that they are unsuccessful.

No one is going to continually give you new toys to play with if every time you are given a new toy you break it after a few minutes of playing with it.

Thin out their product lines, modernize their operating procedures. diversify their work force.

Absolutely. Unfortunately, what's really holding most of that back isn't "bean counters" but unions.

 

[minnie61650]

Just remember though: Most of Honda's and Toyota's ARE made in the USA. With over 80% parts content also made in USA.
Our Odyssey for example is made in Alabama.
The Accord, Ohio
They are very much American cars.

Here is an interesting article from USA Today:

How do you tell which car is more American?



By Chris Woodyard, USA TODAY

Joe Luehrmann likes American cars, has owned a string of them and is considering buying another.
But he faces a problem in trying to figure out what's American anymore.

His brother just bought a Chevy Equinox, but some of its parts are from China. And he knows all about the Kentucky-built Camry, but buying a Toyota ships the profit to Japan.

Toyota brags in ads about its growing list of U.S. plants, yet it imported 37% more cars from Japan last year to meet increased demand. General Motors promotes its trucks in TV commercials to strains of This Is Our Country but makes some of its best-known SUVs in Mexico.
"What's American, vs. what's foreign? I can't really say," says the frustrated Luehrmann, a Chicago accountant. "It's not that easy. It's very shades of gray."

The ambiguity creates a quandary for the many who consider "Made in the USA" a badge of honor. To them, the label means putting fellow countrymen to work at decent wages and supporting the U.S. economy in wartime. Some domestic-brand dealers use patriotic appeals to try to rev up the Buy American spirit.

But many consumers are increasingly confused. The world is no longer as simple as us vs. them, Detroit against the Asians and Europeans.

It's a global industry now, in which all manufacturers are touching their automaking toes on the shores of just about every industrialized nation. Even GM, long the icon of American industry, hedges its bets. "We're very proud for the economic role we play in this country," says GM spokesman Greg Martin. "However, we're a global car company that happens to be based in the United States."

The contradictions of a borderless automotive economy are borne out by government figures that track where vehicles are made and their domestic parts content. The search for the American car leads to:

•Foreign cars made in the USA. Honda's Ohio-built Accord is 70% domestic parts. Toyota's Corolla is made in a California plant alongside General Motors models.

•American cars made abroad. Ford's hit Fusion sedan is made in Mexico; only half its parts are from the USA or Canada. GM pitches its small HHR sport utility and giant Suburban straight at the American market, but they, too, are built in Mexico. HHR has only 41% American and Canadian parts.

•Famous American names and foreign owners. More than three-quarters of the parts in Dodge's new Nitro SUV, which is assembled in Toledo, Ohio, are American or Canadian.

Despite the confusion, about half of Americans surveyed say they still try to buy products made in the USA, says Britt Beemer of America's Research Group.

The government makes it easy for buyers wandering sales lots to figure out which vehicles are most American. The location of the plant where a vehicle was assembled and its amount of U.S. or Canadian parts — they aren't separated out — are pasted on the window sticker.

Arguably, the most American of all vehicles right now is Ford's hulking 2007 Ford Expedition, a USA TODAY check of government listings, manufacturers and dealer sales lots reveals. The SUV is composed of 95% U.S. or Canadian parts, and it was made in Michigan. Ford's new Edge crossover and the Crown Victoria sedan also have 95% components, but both they and their corporate cousins are assembled in Canada.

Even though individual models vary widely, Detroit automakers overall still had more domestic parts in their vehicles when weighted according to sales, says an analysis from a pro-Detroit trade group.

Detroit's Big 3 derived about 77% of their parts from U.S. and Canadian factories from domestic sources. That compares with slightly less than half for Japanese brands overall, according to the Automotive Trade Policy Council, which represents the domestic manufacturers in trade issues. Among Japanese brands, Honda had the most domestic content at 59%.

"The data is clear: Domestic auto plants create more jobs in this country than overseas producers who locate here," says United Auto Workers President Ron Gettelfinger in a statement to USA TODAY. But he was quick to note that foreign automakers have created more jobs in the USA by opening plants here, and he respects their workers. <SNIP>





In Roseville, Minn., Cadillac dealer Wally McCarthy runs radio ads on WCCO-AM in Minneapolis that say, "Buying a vehicle from GM, quite simply, helps support Americans." <SNIP>



Half the domestic pickup buyers surveyed by J.D. Power and Associates cited not wanting to own a foreign-made truck as the chief reason for their purchase decision, even more than the one out of three who said they didn't like foreign-truck styling.<SNIP>

Voss cites demand for small cars last year as the reason Toyota's Japanese imports rose by so much. Altogether, Toyota imported close to half of all the vehicles it sold in the USA last year from Japan, including all its gas-electric hybrids and most of its luxury Lexus division vehicles.

Honda's imports soared 30% last year, Mazda's rose 19%, and Suzuki's were up 23%, the Congressional Research Service finds in a new report. It says Japanese makers are simply trying to meet customer demand while running their U.S. plants at full tilt.

Japanese automakers encountered "capacity restraints in their existing U.S. plants as a sharp increase in the price of gasoline sparked greater consumer demand for fuel-efficient, environmentally friendly vehicles," says William Duncan, general director of the Japan Automobile Manufacturers Association's office in Washington, D.C.

All told, each of the Detroit automakers supports 2½ times more U.S. jobs than Toyota, says Jim Doyle, president of the Level Field Institute, a Washington research group. He acknowledges, however, that "people are trying to define what an American car is, and they are having a tough time."

The confusion pains Luehrmann, 48. Hoping to reach a decision soon about his next car, he's looking at everything.

He's a believer in American cars, but, says with a tinge of regret, "I don't feel any great loyalty anymore."

Link to full article:

http://www.usatoday.com/money/autos/2007-03-22-american-usat_N.htm

 

[edwardsfire]

Bottom line: If its made here, its American.
Jobs are jobs and the fella working at Honda in Ohio,Indiana,Alabama is just as important as the fella at GM.
Im proud to support American workers by buying Hondas or Toyotas....or Mercedes,Hyundai,Nissan,Subaru,BMW,Mitsubishi and soon to be VW. There are MANY many "foreign" cars that are made right here. Thats good for all of us.
The whole "American car vs. Japanese car" per say has been debunked since the mid 80's (the time when Hondas started being made here).

 

[minnie61650]

With all due respect, the quality and dependability of a Chrysler or Ford can't compare to that of a Honda or Toyota. I think you'll be hard pressed to find anyone who disagrees.

I respectfully disagree.

 

[minnie61650]

Bottom line: If its made here, its American.
Jobs are jobs and the fella working at Honda in Ohio,Indiana,Alabama is just as important as the fella at GM.
Im proud to support American workers by buying Hondas or Toyotas....or Mercedes,Hyundai,Nissan,Subaru,BMW,Mitsubishi and soon to be VW. There are MANY many "foreign" cars that are made right here. Thats good for all of us.
The whole "American car vs. Japanese car" per say has been debunked since the mid 80's (the time when Hondas started being made here).

As was pointed in one of my previous posts

Detroit's Big 3 derived about 77% of their parts from U.S. and Canadian factories from domestic sources. That compares with slightly less than half for Japanese brands overall, according to the Automotive Trade Policy Council, which represents the domestic manufacturers in trade issues. Among Japanese brands, Honda had the most domestic content at 59%.

All told, each of the Detroit automakers supports 2½ times more U.S. jobs than Toyota, says Jim Doyle, president of the Level Field Institute, a Washington research group.

Also Toyota imported close to half of all the vehicles it sold in the USA last year from Japan, including all its gas-electric hybrids and most of its luxury Lexus division vehicles.

 

[jenfur]

I grew up in a textile area. My single mom worked for Fieldcrest. Guess what happened to all the textile jobs in the area- they left or closed. My mom went back to college and got her nursing degree. She adapted. Thats what the big 3 and anyone associated should do. We don't get ice delivered to our homes so that the iceman still has a job, we went for the refridgerator anyway. I have a 2002 Honda Civic and a 2008 Jeep Wrangler, both were bought because they offered what we were looking for and have a good reputation for quality at a fantastic price. The Honda was the first "foreign" car anyone from my family or DH's had ever bought. We are probably going to look at an Odessey in 2009. We used to have a Caravan, but it broke down before we had even paid off the loan.

 

[bicker]

All told, each of the Detroit automakers supports 2½ times more U.S. jobs than Toyota, says Jim Doyle, president of the Level Field Institute, a Washington research group.

You still haven't found the data necessary to properly normalize that number. For all we know, a lot of that is attributable to how much less efficient US automakers are (how many extra people they need to make a car), i.e., it is just a reflection of their weakness, not a strength.

It is important to keep in mind, while you continue to look for the appropriate numbers, that how many cars built is no longer a good metric; Chrysler shut down its factories indefinitely because they were building up excessive inventories. That means that a lot of the employment you're referring to here attributed to waste (i.e., in the form of carrying costs, etc.), again a sign of weakness not strength.

You seem to be trying to present the information you're presenting as information that supports the idea of buying from US automakers but in reality you could be mostly supporting the idea of not buying from US automakers.

 

[minnie61650]

You still haven't found the data necessary to properly normalize that number. For all we know, a lot of that is attributable to how much less efficient US automakers are (how many extra people they need to make a car), i.e., it is just a reflection of their weakness, not a strength. <SNIP>

I did find a link that states that GM has less employees than these other automakers: Volkswagen, Renault/Nissan , Toyota ,or Daimler yet GM sold more vehicles worldwide last year than any other automaker.

GM has cut its payroll drastically, by 45.8 percent in the U.S. alone since 2000. In fact, GM is far from the largest employer in the industry. With 252,000 employees worldwide, GM ranks fifth overall behind Volkswagen (373,400 employees,) Renault/Nissan (316,121 employees,) Toyota (316,121 employees) and Daimler (272,382 employees). Yet GM sold more vehicles worldwide last year than any other automaker.

 

[frisco]

I respectfully disagree.

Fair enough.

How do you explain that 2 similar models priced the same, one by Chrysler and one by Toyota, would vary so greatly in their repsective residual values over time?

 

[rascalmom]

I did find a link that states that GM has less employees than these other automakers: Volkswagen, Renault/Nissan , Toyota ,or Daimler yet GM sold more vehicles worldwide last year than any other automaker.

So if they are selling more vehicles and have fewer employees, what does your research tell us about why they aren't profitable and why they need a bailout?

Because using the statistics and articles you are quoting, it would seem that they would have a great advantage that would make them more profitable than their competitors.

Bottom line is that these are for-profit publically traded companies who have come to the government asking for loans to sustain their unprofitable operations.

Quality and reliability is quantified by the resale value of a vehicle. Overall, Honda and Toyota hold their value better than most "American" cars. When a consumer is making a large investment in a vehicle, that difference will be taken into account by a wise consumer.

 

[minnie61650]

So if they are selling more vehicles and have fewer employees, what does your research tell us about why they aren't profitable and why they need a bailout?

Because using the statistics and articles you are quoting, it would seem that they would have a great advantage that would make them more profitable than their competitors. <SNIP>

I think Health care costs for their retired employees is the #1 reason they are not profitable.

When the UAW workers agreed years ago to work for less pay if they would get the benfits of health care after retirement the health care costs were not as high as they are today.

As most of us are aware health care costs have skyrocketed dramatically in the last few years. Unfortuatey the auto companies did not forsee that there would be such a dramatic increase in health insurance.

 

[rascalmom]

So you are saying that management made an unwise decision and/or the UAW contract has unsustainable terms?

This is why many of us were proponents of an organized bankruptcy as opposed to continued loans. Loans won't make those costs go away, so how do the companies expect to become profitable and repay the loans without getting to root of the problem?

When lifetime healthcare benefits were added, I suspect most employees worked until 65 and life expectancy was closer to 70. Now many employees retire earlier and live much longer - this coupled with the rising health care costs (which all of us face - not just automakers), has caused a great detriment to the viability of the American automakers.

I'm curious - once a retired UAW worker reaches the age to qualify for Medicare, does the contract still require GM to pay for private insurance for that worker?

I would question how much lower of a wage was accepted by the worker in exchange for healthcare after retirement. Haven't the autoworkers historically been very well paid? Was this a true negotiation, or did management have to acquiesce to such an agreement to avoid a crippling strike?

I blame the management of these companies, but I place equal blame on the union leadership and unreasonable contract terms.

 

[jodifla]

UGH!

Nobody (including Honda and Toyota!!!!!!!!!) is selling cars because of the CREDIT CRISIS! GM routinely outsold Toyota and Honda worldwide.


Toyota and Honda have more financial reserves so they are doing OK -- for now. (And yes, they have those reserves because of better management, but also because THEY ARE SUBSIDIZED BY THE JAPANESE GOVERNMENT!)

But if people aren't able to buy cars because the can't get loans or don't have employment, then Toyota and Honda are going to be in serious trouble as well.

 

[golfgal]

UGH!

Nobody (including Honda and Toyota!!!!!!!!!) is selling cars because of the CREDIT CRISIS! GM routinely outsold Toyota and Honda worldwide.


Toyota and Honda have more financial reserves so they are doing OK -- for now. (And yes, they have those reserves because of better management, but also because THEY ARE SUBSIDIZED BY THE JAPANESE GOVERNMENT!)

But if people aren't able to buy cars because the can't get loans or don't have employment, then Toyota and Honda are going to be in serious trouble as well.

Well, now the Big 3 are subsidized by the US Government.

 

[Lib E]

UGH!

Nobody (including Honda and Toyota!!!!!!!!!) is selling cars because of the CREDIT CRISIS! GM routinely outsold Toyota and Honda worldwide.

That is only because of their fleet sale contracts. Fleet sales have been the only thing keeping the Big 3 afloat.

 

[bicker]

So you are saying that management made an unwise decision and/or the UAW contract has unsustainable terms? This is why many of us were proponents of an organized bankruptcy as opposed to continued loans.

Myself included.

I would question how much lower of a wage was accepted by the worker in exchange for healthcare after retirement.

Big 3 workers get paid more than their counterparts working for other automakers in the United States.

UGH! Nobody (including Honda and Toyota!!!!!!!!!) is selling cars because of the CREDIT CRISIS!

Which makes me wonder why anyone tries to defend the Big 3 bail-out by criticizing the banking bail-out. Without the banking bail-out, there is no chance for the automakers to survive.

(And yes, they have those reserves because of better management, but also because THEY ARE SUBSIDIZED BY THE JAPANESE GOVERNMENT!)

Good thing (from the Republican's point of view) that the Democrats didn't get a fillibuster-proof majority in the Senate, so that the Republicans can effectively block any attempts by the federal government to subsidize US automakers.

Well, now the Big 3 are subsidized by the US Government.

Not really. Loans aren't the same as taking ownership interest.

 

[minnie61650]

... Loans won't make those costs go away, so how do the companies expect to become profitable and repay the loans without getting to root of the problem?<SNIP>

The Detroit 3 have been taking steps to get to the "root of the problem."(Your words. Not mine)

As part of its 2007 contract with the automakers, the UAW agreed to a two-tier wage system that pays new hires $14 per hour. Over the years, the UAW also has made concessions on wages to help pay the health costs of retirees and their dependents.

The Detroit companies will remove billions of dollars in financial obligations from their books when the U.A.W. health care trust takes over responsibility for the medical bills of retirees in 2010.