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...they like the cars they bought from the foreigners, so getting our people to switch back is almost impossible, or a long, year-after-year process, winning customers among the newer generations who don’t carry a grudge going back 20 years. So winning them back will take a decade or more, so it means continual improvement of the product and the marketing, too. (http://www.thecarconnection.com/blog/?p=794)

http://www.cleanmpg.com/photos/data/500/gm_ford_chrysler_copy.jpgJerry Flint - The Car Connection - Feb 13, 2008

What’s difficult to understand is why Detroit’s automakers lose billions of dollars making cars and trucks here, while competitors like Toyota, Honda, BMW and Mercedes, who build them here too, make a fortune at it.

They’re all building new plants or expanding production at the old ones while Detroit is shutting factories.

General Motors, for example, reported a loss of $39 billion for last year, and my guess is that Toyota will have an operating profit approaching $20 billion for its March 31 fiscal year, with the North American operations the greatest contributor to that.
Here’s my explanation:
...http://www.thecarconnection.com/blog/?p=794

One might suppose that Detroit's problems stem from a failure to modernize (their production methods are antiquated and expensive) and a failure to innovate (many Detroit models use obsolete transmission designs that sap fuel economy and power). Additionally, they do not refresh their lineup as frequently as their Asian counterparts. Finally, they offer too few choices in vehicles costing under $25,000.

It is much simpler than that.The Big 3 have to pay UAW wages in their USA plants.Their foreign based competition built plants in Union unfriendly states,and their wage/ benefit/pension costs are less than 1/2 the Big 3.This is why GM continued to stay with big vehicles;they were the only ones they could build and sell for a profit.GMs management wasn't terminally stupid;they had no choice.Why do folks look for other answers-the gist of which is GMs management knows less about selling cars than I do-when the real answer is sooo simple.
You can't compete if you competition gets the same work for 1/2 the price.This is why GM,Ford are closing plants.This is why GM abandoned many promising ideas(the 90's electric cars/trucks).The accountants told them-you can't build these here and sell them for less than Toyota.
This isn't a cheap shot at UAW workers-it is the simple truth.UAW workers produce more car value per hour than non union USA auto workers workers-unfortunately,they also cost 2x more in labor/medical/benefits.
It is a holdover for another time-1950's-when every auto worker in the USA was union worker.Once the Japanese companies were allowed to build non union plants in the USA- it was over.They-Big 3-are working with the UAW to lower wages/benefits, but I doubt they can survive with the current contracts.I expect they will eventually go bankrupt, voiding the UAW contracts,and start over much smaller.
Why do you think European cars are soooo expensive?Dollars to donuts the EU "makes" all the manufacturers pay the same sort of wage/benefit.This is why the Euros pay about 75% more for the same car.This is why GM doesn't bring "cool,small" Euro cars here-they are too expensive.
The "GM is stupid,and the Japanese are smart "argument is getting old.It is easy to be "smart" if you labor cost is 1/2.GM and Ford build some very good vehicles, but they can't build for less than Toyota/Nissan etc.They have to cheap out on materials and quality control to try to stay competitive.This is why GM has a rep for decent drivetrains, but cheapo plastic trim,and lots of rattles.
Charlie
PS -Do you really think the management is just terminally stupid-you know soo much more than they do?? Now that Toyota and Nissan are moving into the 1/2 ton,and 1 ton markets then end is near.This was the last segment where they could make $$ building in the USA.
It really isn't anyones fault.The UAW protected current workers as they were supposed to.There won't be many future workers.I bet current pensions are at risk also.You just can't compete with 2X wages.

You just can't compete with 2X wages.

Yeah you can, build a product of 2x the quality.

If detroit cars didn't have a reputation for being rattleboxes that probably wont last past 100,000 miles, they might sell more. If they didn't have a reputation for being gas hogs they might sell more. If they didn't have a reputation for requiring serious repairs after 30,000 miles they might sell more.

I look at cars like video games sometimes. Think of a game that gets everything perfect, it ends up becoming a best seller that people play for years even if it comes out from some company nobody's ever heard of. Half life is a good example. Perfect game, always updated, kept people playing it with TFC for the multi player component. Other FPS games, even released by the big companies, wouldn't be updated more than a year or two after they came out. And even then the updates were just purely bug fixes instead of game enhancements.

If you don't make any money selling small cars then stop making and selling them. I don't think people walk into a GM dealership to buy a Cobalt and walk out with a Cobalt and Suburban. It's not a freakin hot dog stand it's a car dealership.

But I guess you're right though that they can't just stop making cars because they'd still have to pay the union fees.

Phoebeisis:

Actually, your argument is flawed. The BBC did on a story on the different manufacturers and how their production lines work a while back. One of the main points was the Big 3 discouraged workers from stopping the line for problems while foreign manufacturers encouraged worker responsibility and cooperation.

The Average Big 3 line stopped 2-3 times a week for problems. The average foreign line stopped 2-3 Thousand times a week. Net impact? The Big 3 took 10-20 more hours per car in production time and had lower F&F.

The simple fact of the matter isn't that GM lost $38 billion because of higher wages. They lost $38 billion because they pay higher wages for less productivity and quality while producing cars with vastly higher O&M costs because of reliability and uncompetitive designs.

My family's owned Dodges for years with GM and Ford products here and there. When I look at new cars now, I don't bother going to domestic dealerships because they have lower FE, F&F, less reliability, and higher prices.

For the Big 3 to survive, 2 things have to happen:
1) The UAW has to realize that high wages without contributing more than physical labor to a company won't cut it today
2) The manufacturers have to realize that they no longer have a lock on the car market and that selling poorly made gas guzzlers ISN'T what consumers want.

Warthog,
If you have to pay your workers $44/hr to stand there twiddling their thumbs while the line is stopped ,you would be a lot more reluctant to stop the line than someone paying $10/hr.Soooo,I guess my argument is just fine-thanks for the help!!
You can't afford QC if you pay high wages-not on low end cars like Chevys.
We had a 1965 Fury 3 stationwagon-it lasted 150,000 mile after being by two teenage boys( the 111 mph indicated top end was reached many time 318 cu V-8).It was a good car. In 1980 I bought a Dodge D100 with a 318.It stumbled off idle from new(typical for carbs back then),and the windows( hand crank) rusted shut after 3 years.It wasn't a really bad car back then-despite the windows-there were many much,much worse!
Yes, the BIG 3 made plenty of junk over the years, but they have greatly improved QC since 1990 or so.GM/Ford aren't as good as Toyota or Honda, but they are about as good as Nissan-maybe a bit better.Yes,they will have lots of trouble winning back customers.
I currently have a 199000 mile used 1998 Suburban(for about 8 months).It was a pleasant surprise.Uses zero oil,and gets about 15 mpg in mixed city(driving to get good mpg.Driven carelessly, it would get 10-11 mpg city).It would get about 20 mpg at 58mph.
We had $$ problems,so we had to sell the Pilot,and buy a very high mile Suburban.For the $2950 I paid I expected a POS than ran(for a little while).It is pretty decent-typical body on frame rattles on city streets, but very quite on smooth interstates.It is only 2 mpg down-city vs the Pilot,and maybe 3.5 mpg hy.I would never pay $35000 for a new gas guzzler like this, but for a low use evac/home depot/ vehicle it is a bargain.All the electrical gadgets work-pleasant surprise.
Dodge unfortunately is screwed.Their Diesel pickup is the only product anyone would actually buy because they think it is "good".The rest of their lineup sells only if it is cheapest.Every one of their vehicles get worst in class mpg.They has some attractive designs(I like that Magnum SW)but terrible FE. FE sells,so Dodge won't.
BOMBER- GM is slowly selling off subsidiaries,and the subs are using cheaper union labor- unions that aren't UAW- or non union labor.
They will sell off all their parts manu facilities,and they will use non union labor.The union guys will strictly assemble cars-as fast as possible!!
I'm pullling for GM-Ford also- but Dodge(Chrysler) hasn't a chance.
Charlie

Charlie

Charlie:

So according to you, the UAW workers make too much for them to stop the line, fix problems, and save 10+ hours of production time and associated costs? I fail to see the logic in saying costs are too high to save $$$.

Also-
You can't afford QC with high wages? Actually, if you pay high wage and charge high prices, you can't afford NOT to have excellent QC.

Try again.

The Japanese do quite well with fairly high wages. You make this distinction between European cars and Japanese cars as if the Japanese are sitting around paying $10 an hour - Japan's wages are on par with US wages (they do have a bit less legacy costs though) and they really save money when they build in the US. The fact is - you could add $1000 to an American car and if it was a good car - I might buy it. The labor costs are an excuse and a poor one at that.

I have suspicions of the high salaries quoted here. I suspect that thay include benefits which distorts the wage. It's a management trick to get people against the workers.
Their sale are down because their product are uninspiring. The management live like kings, and have a let them eat cake mentality about anyone who does not travel ny private jet.

I think the Issue is complex.

With good reasons fighting both sides.

I know the US companies have good reasons for doing everything they have done... but they are getting the public image of not knowing what they are doing... and for being over priced and for being lower quality.

It doesn't really matter how good their reasons were or are... the public has been and still is loosing faith in them... to the point that more and more people do not even bother to check what the US car companies offer anymore....

The US car companies have to get ahead of the game and get the consumers faith back... if they don't in 40 years it won't matter much what their vehicles can do or what they cost...

To me.... the best way for them to get ahead of the game... it to introduce niche vehicles... they should produce and sell a EV commuter car priced to turn a profit ... get the PHEV to market ahead of the competition .... at this point it doesn't really matter what % of their sales come from these niche market vehicles... just by offering them for sale to individuals at a price to turn a profit it will help to restore their image.

I know they have good reason for focusing on the large % business and on more profitable vehicles... but it is hurting their public image which in the long run 30 to 40 years from now means more than their profits 2 or 3 years from now.

The big 3 have convinced everyone that they need huge vehicles. They now need to convince them that those vehicles are not for these times and sell them new efficient cars. I remember when I was young and liked to ride dirt bikes that you had to have a new bike at least every 2 years. This was due to the improving technology that made the older bikes seem slow. Anyone remember the Honda Elsinore? You had no choice. Buy a new bike or get left behind. Ford and GM could build a new car that would FORCE everyone to pony up and buy it. They would reap an incredible profit. The future is not in SUVs and trucks.

PS, the new Malibu is a start.

Japanese factory workers make more than US factory workers - fact.


Direct wages (and benefits) represent less than 8% of the COGS (cost of goods sold) for cars - fact


the issue of wages and legacy costs is ismply a red herring.




the big 3 make a fortune overseas - where they sell a completly different range of cars than here in the US.

The reason the big 3 are dieing in the US is simple - their product stinks

Vooch-
References please. Thanks.
Keith

Vooch,
You say fact,I say-show me.
GM frequently claims that they spend $1200 per car on medical benefits -just medical benefits!! $1200 is about 6% of the cost of building,so I can't see your 8% being correct.I would bet wages/benefits/pensions are waaaaaay over 1/2 the cost if you start with raw steel/aluminum/plastic/copper and add up all the wages start to finish.Now,the only way you can get 8% is to consider all the finished components costs to be "not wages".As if engines/transmission popped out of the earth fully formed.
GM/Fords lineup is inferior to Toyota's Honda's in most respects(1/2 ton,and heavier trucks I would call a tie-GM VS Toyota-the rest Toyotas are better).It is top heavy with 1/2 ton guzzlers-pickups,Tahoe,Yukon/Suburban/Trailblazer which they continued to build because they were the only profitable vehicles they could sell.The Cobalt is undistinguished-the Focus(Ford) is actually pretty good-maybe as good as a Corolla(except in reliability) but not as good as a Civic.
The Big 2 have a tough roe to hoe-They will continue to shrink in the USA.
GM can't really afford the Volt(it will be waaaaay expensive I think-$30,000+), but they have to build it, or they won't have anything to sell other than full sized pickups,and Big SUVs which will be fleet/niche vehicles.What is to stop Toyota from building a "Volt" with lower cost labor?? NOTHING!!! There isn't a solution for GMs labor/pension costs-other than going broke,and reorganizing with no union contracts, or extensively reworked contracts.
The Japanese (in Japan) have no direct medical costs benefits.Frankly,I have always been suspicious of their claim that they make $$ on the Prius-no way to really tell, but I have my doubts.It is a lot of car for $22000-seems too cheap-same price as an obviously less complicated-CHEAPER- HCH II.
Charlie