Now that Chrysler's HR honcho Nancy Rae has sent us a primer for pessimists, it's time for The Detroit Free Press to find some light at the end of the tunnel that doesn't look the headlight of an oncoming train. First the bad news, albeit with a light dusting of sugar coating. "Detroit's automakers are bleeding cash, despite massive cost-cutting and job reductions in recent years," Justin Hyde "reports." "And while each has socked away funds, the money will last only until 2010 at the latest unless the companies borrow to buy more time, analysts say." And then, hints of hope(tm)! "If you're looking for some sign of light in the gloom, there are glimmers. Unlike previous slumps, the vehicles built by Detroit's automakers are broadly on par with much of their competition. The landmark deal that will lead the UAW to take on health care for workers will free up cash in 2010, especially at General Motors Corp. All three companies are pushing new fuel efficient models, with side bets on more exotic technology such as plug-in hybrids." But even Hyde can't. "But a permanent cure — generating enough cash to pay their debts as they roll out new vehicles — appears unlikely before 2011, and another unexpected jolt could tear one or more of them asunder, analysts say." What corporate arrogance has created, let no market rent asunder? Good luck with that.
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Car makers (like airlines, my specialty) face a fundamental problem…the market size in which they operate is shrinking. Yes, what the article in the DFP says is correct, however it misses this one, overriding point.
The Big 2.8 cost basis, debt load, etc. is based upon an approximate market size (and previous bad decisions, I know). It’s kind of like having a 10K credit card balance, but you made 100K /yr – last year. Now, you still go the same bill to pay, but you’re only making 50K/yr. Uh oh.
Bottom Line, first one to file with a creative of bankruptcy filing, and a Democrat in the White House and someone just fixed 30 yrs of problems.
I wouldn’t go buying their stock, yet.
Detroit Free Press: “”If you’re looking for some sign of light in the gloom, there are glimmers. Unlike previous slumps, the vehicles built by Detroit’s automakers are broadly on par with much of their competition.”
Is this sentiment shared broadly? The Camcord owners I know don’t believe it.
Detroit Free Press: “All three companies are pushing new fuel efficient models, with side bets on more exotic technology such as plug-in hybrids.”
There’s no reason for optimism on this front…
In conventional powertrains, Detroit is still way behind on mindshare and in at least certain models. The automatic Cobalt is still an embarassment. The 6-speed automatic isn’t available in low-priced Epsilons (in a recent Motor Trend review of 4-cylinder misize cars, the Malibu was second-worst in fuel economy, in spite of the new 6-speed). GM imports cars built in euros to sell for dollars to bolster its small-car entries. Unless we forecast a rapidly rising dollar… Then, Detroit offers nothing like the Yaris or Fit.
And in advanced tech Detroit hasn’t shown any capability to sell hybrids at a reasonable premium, make money on the transaction and do it in volume. The Volt won’t be built in sizeable quantities until at least 2013, so no significant revenue or unit growth from it until that time. Ford has the most successful domestic hybrid but is taking a more conservative approach into the immediate future (improve the existing conventional fleet) and Chrysler is copying one of the worst pages from GM’s playbook (hybrid gas hog).
“vehicles built by Detroit’s automakers are broadly on par with much of their competition”
Can’t say that is an accurate statement.
“vehicles built by Detroit’s automakers are broadly on par with much of their competition”
Can’t say that is an accurate statement.
Yeah, I was going to pick up on that, too. Going by the numbers, there is some truth to it. But I wouldn’t blame any previous GM/Ford/Chrysler owner to turn Missourrian and wait till they show me.
But it was the previous three words that caught my eye. “Unlike previous slumps…” Did ANYONE in Detroit EVER, in a previous slump, admit they weren’t competitive?
maybe if the 'camcord' owners would give the new Malibu or Taurus a chance…. But NOOOOOOOOOOOO….."we couldn't do that" actually try a new American car,their blood would boil! I am TOTALLY SICK AND TIRED of listening to these closed minded 'toaster buyers' I just hope that some of them suffer with the demise of the American manufacturers due to them not giving them a fair shot! ALL the media is anti US mfg! Even if we built the best damned car money could buy they would find fault in it!!!!! there is no 'fair play' anymore… if its not a toyota or honda…its automatically junk!!! When the big 2.8 are gone…good help the next ones they pick on! How can you ask Americans to take pride in what we work so hard to do every day when every chance the media gets they smack us down! oops,I'm sorry,I forgot, YOU DON'T WANT US TO TAKE PRIDE IN ANYTHING WE HAVE ACCOMPLISHED SINCE WE ARE THE "GREAT SATAN" OF THE WORLD!!!!!!!!!!!!!!!
A very simple way for Detroit to get back on its feet:
-Keep the initial improvements in vehicles so that they’re on par or better than your Japanese competition. Don’t simply give up after you don’t see an immediate success (ala Oldsmobile like you did in 1997.) 10 years ago GM had a class-competitive mid-size sedan and lost interest.
-Spend the extra money to make sure your vehicles are not saddled with electrical gremlins (like failing turn signals), failing trim pieces, major mechanical troubles, and expensive repairs 5 years down the road. (This is what the Japanese competition tends to be better at, though some exceptions apply) It was like driving a lemon VW product- just without the facade of quality.
Follow my advice, and In 10 years, you’ll have people recommending the cars to their neighbors (“I owned a Malibu and the thing still runs like new today”) instead of the current “I owned a Grand Prix for and I liked it for the first few years but once it hit 100k it fell apart”
Ford seems to be starting to come out of the hole it was in back in the 90’s with its cars requiring major repairs after 60k miles (Taurus, Windstar anyone?), but as the former owner of a post-millenium GM product that fell apart after 4 years of ownership, it’ll be a long time before I’m convinced of GM’s long-term reliability. They’ve lost out on at least one model’s generation of sales from me, but if 10 years from now they become a paragon of quality, I’ll be more than willing to give them a look.
They all need to get their small-car act together. I’m not sure if GM is capable of building an appealing small car (The Cobalt is better than the Yaris, but that’s not saying much) , and Ford took its sweet little Focus and turned it into a mediocre car (at least Mazda is covering for them.)
Oldyak:
You might want to educate yourself as to the amount of ‘US mfg’ that goes into these ‘toasters’ you speak of.
That Toyota Camry that you so despise is made up of 80% American parts and is assembled in Georgetown, KY. That Taurus you want us all to ‘give a chance’ is built in Chicago and also has 80% American content.
Let me spell that out for you in case you didn’t understand – Americans build Camrys. And plenty of other foreign companies build (some of) their cars here, too, including Honda, Nissan, Mitsubishi, and Hyundai.
Plus, plenty of the domestics build their cars outside of the good ol’ USA, such as the 50% American-content Ford Fusion, which is built in Mexico. So is that a better alternative to the Camry?
# oldyak :
June 22nd, 2008 at 3:44 pm
maybe if the ‘camcord’ owners would give the new Malibu or Taurus a chance…. To many, once bitten, twice shy. Get a bad meal at a restaurant, do you go back?
But NOOOOOOOOOOOO…..”we couldn’t do that”
actually try a new American car,their blood would boil!Not at all. Traditional US cars are just not on their radar screens any more. And who’s to blame for that?
I am TOTALLY SICK AND TIRED of listening to these closed minded ‘toaster buyers’DONT listen! Be happy with what YOU own and dont worry about others.
I just hope that some of them suffer with the demise of the American manufacturers due to them not giving them a fair shot!
ALL the media is anti US mfg!ALL the media?, even this one?
Even if we built the best damned car money could buy they would find fault in it!!!!!Not if there were no faults, or if others didnt build a better product.
there is no ‘fair play’ anymore…This isnt a game, it’s a business, and those with the right product at the right time will succeed
if its not a toyota or honda…its automatically junk!!!Not true–other makers just arent being considered, and the consumer is content with those brands just to name but 2.
When the big 2.8 are gone…good help the next ones they pick on!
How can you ask Americans to take pride in what we work so hard to do every day when every chance the media gets they smack us down!
oops,I’m sorry,I forgot,
YOU DON’T WANT US TO TAKE PRIDE IN ANYTHING WE HAVE ACCOMPLISHED SINCE WE ARE THE “GREAT SATAN”
OF THE WORLD!!!!!!!!!!!!!!!Rave on, Mon ami..is that really helping your cause?
“Let me spell that out for you in case you didn’t understand – Americans build Camrys”
Let me spell this out for you- the profits of that Camry HEAD STRAIGHT TO JAPAN.
Oldyak,
First, if I accept your characterization of the Camcord as “toasters,” a car costs quite a bit of money. The purveyors of “style,” unfortunately, were also the purveyors of “crashing depreciation” and “wretched reliability.” People have turned to the purveyors of toasters out of the frustration of pouring money down a rathole.
Second, “style” is purely subjective. There is nothing in the Malibu that I can identify as “beautiful.” It has lines similar to a Camry or Altima. The grille is a different style… big whoop. A distinctive car would be the Cougars of ’00 or so… they looked attractive and distinctive. However, that also applies to the Celica of ’00 or so. And the Rav4 of ’96. And to quite a few other Japanese cars.
Detroit no longer has a lock on “styling” as a differentiator.
And most of their product is going to look increasingly similar due to a convergence of requirements for engineering, packaging aerodynamics. This is happening to Detroit, too.
As for not giving Detroit a fair shot… Do they give us a fair shot? Do they stand behind their product? They didn’t for me. Fair enough?
Cheerful? In this morning’s Bakersfield Californian newspaper there is a full page advertisment for Ford trucks with the following offer:
“Zero percent financing for 72 months plus $3,000.00 rebate plus employee pricing.”
The are advertising new F 150’s for slightly over $15,000.00.
yes I hope it is helping my cause!!!! and if you think just because Camrys and Accords are built here its an American car..0oh..boy… My point is that American cars be given fair review and a chance to succeed. and yes,this GREAT SATAN isn't a rave..its just a reality. The media has been so determined to belittle all of our good works that I think most people don't have faith in our ethic, or our accomplishments. and I assuse you..the 'world would like nothing better than to see our industrial base disintegrate!! what a joke on us huh!! Until the average citizen wakes up and realizes that our whole way of life is now under assault…. God help us!
Oldyak..what if the US cars WERE given a fair chance and THEN failed to measure up to custom er’s expectations? What then?
What if it wasnt just the cars–what about depreciation, dealer service, prior experience, etc? Do you not think consumers weight those items as well?
Where do you think all these import buyers came from? 3 guesses what they or their parents were driving before the Great Gas Crisis of ’73!! Why did these customers switch?
Face it…Detroit was caught up in the “Small car/small profit” routine, and put all their eggs in the truck/SUV basket. The basket broke, the domestics didnt have anything, and the rest is history.
If you think the US consumers are disloyal to the Big 3, what about ALL THE DEALERS THAT OPENED UP IMPORT SHOPS and NEGLECTED THEIR DOMESTIC FRANCHISES? Remember..50K ants at a picnic can’t all be wrong.
The domestics’ current danger is going to be investing all of their profits into cars and letting their SUVs and trucks die on the vine.
This seems like a ridiculous accusation to make. But it’s true. The domestics made very good trucks and SUVs in the 1990s, but put little thinking into their cars. When these cars proved to be unreliable, flimsy and uncompetitive with a Camry or Accord, buyers looked elsewhere.
Now, the Fusion and Malibu are competitive enough to warrant a look by most buyers, but the buyers aren’t coming back. It’s not unpatriotic, it’s simply a defense response.
The vast majority of today’s Ford, GM and Chrysler buyers are “truck people” who will buy trucks regardless of economic conditions, whether it be to haul lumber, build things, tow boats or stow camping equipment. Many of these people are looking to fuel efficient compact SUVs and trucks. Or they’re sticking with the full-sizes.
So, Ford Escape, Chevy Equinox, GMC Canyon, Ford Ranger are their choices in the compact range.
The outdated (and now ugly) 2009 F-150, the Silverado that won’t see a redesign till 2014 or later and the RAM are their fullsize picks.
Meanwhile, in these ranges, Toyota offers the RAV-4, Highlander, Tacoma, and Tundra, all of which are newer and better than the domestics they counter. Nissan offers the Frontier, Titan and Murano. Honda offers the Ridgeline, CR-V and Pilot.
Am I the only one who sees a problem with this? The domestics now build good cars, but the truck guys that traditionally buy domestic won’t consider them and the Camcord buyers are afraid to try them. Meanwhile, the domestics’ trucks and SUVs are now being neglected, meaning that truck guys will also begin defecting from the domestics and turning to the newer, better foreign competition.
In other words, the domestics risk losing what few customers they have left. The solution is of course to make all a manufacturer’s vehicles competitive, but there’s not enough money for that.
There’s just not a lot of options for the domestics’ recovery.
“The Luigiian”
And THERE you have it.
The problem for the FORMER Big 3 is that many will no longer buy their trucks. And now they wont buy their cars.
GAME OVER
oldyak, are you as angry with GM for the decade of intake manifold problems it foisted on customers of many of their V-6 engine designs as you are with their former customers who don’t trust them anymore?
Maybe, just maybe, SOME of the current offerings from Detroit are competitive in quality with Toyota and Honda. But reputation is built up over a long period of time, and the 2.8 spent several decades earning their low reputation. Don’t blame once, twice and thrice burned former customers for not believing that this time by golly Detroit is building good cars.
How many people got burned by Ford Taurus or Chrysler minivan transmissions which crapped about after the warranty, but still at a very young age? Some of those vehicles had over 90% transmission failure rates before 100k miles.
Burn your customers over and over again and they get the point. Heck, a couple of years ago GM even admitted that they had done so for years and begged people to give ’em one more chance in their short lived we screwed up and have learned our lessons ad campaign.
Skooter,
Regarding your comment about the profits going back to Japan: in terms of net economic impact, it doesn’t matter where the profits go, what matters is where the costs go. It may have mattered before globalization, free trade and just-in-time assembly, but it doesn’t now.
Think about this: a Ford Fusion (good car, by the way, just needs a stronger engine and some interior trim) is built in Mexico. By and large, most automakers try to source parts within the country of assembly as it makes just-in-time easier to achieve and keeps logistics costs down. The bulk of the materials and assembly costs are paid out to Mexican workers at Ford’s Hermosillio plant, and to workers and materials suppliers in an around Hermosillio. Some money was paid to engineerings, marketers and designers, but for every dollar of a Fusion’s price, the bulk is benefitting Mexicans.
The profit from the Fusion is a small fraction of the cost, and it gets paid out to a very small amount of people (rich guys: banks, administration, management, some of it gets back to R&D). The benefit to Americans from Ford’s profits on the Fusion is tiny.
Now, a Camry, assembled in Kentucky, employs a lot of people not just at the plant, but in satellite parts suppliers–again, mostly near said Kentucky plant. The costs of producing a Camry, again, far exceed the profit margin (it’s fatter than Ford’s, but not much). For every dollar in Camry’s price, the bulk of supports Americans in Kentucky. The sliver of profit, again, either gets reinvested, eaten by administration and management, or paid to rich guys in Japan.
But it’s still a sliver: the net economic benefit is still to those Kentuckians, not to suits in Toyota City.
This same logic applies to any product, and it’s an important lesson for people to learn: if you want to “support your local economy”, buy the product that’s made nearest to you that meets your needs, or at least the one made in your country/state/province. You want to keep the money in your community, and thinking about “profits” is the wrong way to do that when buying something like an automobile, because the profits never, ever benefit a community.
It gets hard if the kind product you want isn’t made near you (Bananas in Canada syndrome), in which case you can play the profits game, but even then you’re talking pennies.
the profits of that Camry HEAD STRAIGHT TO JAPAN.
WE ARE THE “GREAT SATAN” OF THE WORLD!!!!!!!!!!!!!!!
I am looking for a Japanese woman to marry. If she is a wiccan even better.
Oldyak… I’m 27. American cars have been sucking it up for my entire life.
The two American cars I’ve had went into a death spiral of endless 500 dollar repairs just after hitting 100k. I just had to repair (outside routine maintenance) my 133k Subaru for the first time last week in the 5 years I’ve owned it. It cost $7. And that includes the tools to fix the problem.
As far as I’m concerned, case closed. I have no reason to keep trying American cars cause this time they really don’t suck! Really, we promise, we mean it this time! The big 3 have had 30 years to get their shit together. They failed to do so, despite the many millions of people who still support them to this day for god only knows what reason. They’ve earned this in full. A couple of new models that haven’t had the chance to go to hell yet isn’t enough to convince me to take a $20,000 roll of the dice.
My Subaru has 134,000 miles on it.
I’ll be taking into the shop tomorrow for its first non-routine problem.
My American cars never made it this far before heading to the junkyard.
End of story as far as I’m concerned.
psarhjinian, the fact of the matter is the Toyota product directly profits to Toyota which is a Japanese company. It does not magically enrich America outside of the plant where it’s built and the local economy.
On the flip side, all the American automakers are right here in America. They all produce vehicles across the globe. The profits they make from producing and selling vehicles across the globe come back here. GM for instance is sucking a lot of cash out of China and Europe. Some is reinvested there and plenty of it comes back home here to buoy the home company. It’s no different for McDonalds, Apple, Coca-Cola or Microsoft.
Global companies compete globally to enrich themselves, not to benevolently bless wherever they do business with jobs and just leave all the money they make there.
The benefits to Americans are stark. When an American company succeeds both at home and globally they do not need to cut jobs. Ford has to because they are not generating enough profit and they have to cut.
The fact that they don’t sell enough Fusians directly effects Americans employed by Ford elsewhere in layoffs or raises.
I admit it.
I am part of the conspiracy. A mish mash of Muslim fundamentalists, Japanese industrialists and tree hugging liberals.
I will clue you in because you are the only one with your eyes open. This grand conspiracy is designed to polute the precious fluids of the American male. We started with Feminism and moved into art. We injected filth into Hollywood, and destroyed prayer in school. Now that God no longer looks at you with favour, we are now demolishing your greatest industry – the American Car industry, the dream of the nation. We will break Cadillac, Chevrolet and Ford, the three pillars of American society, and replace them with Lexus, Acura and Scion. Inevitable – unstoppable. You can see it but you can’t prevent it. We are invincible.
We will bring even you to your knees Oldyak. I intend that, by the end of the week, we will be receiving complementary sensual massages from desperate house wives when we purchase houses for pennies on the dollar from the jobless former employees of the American car companies. Then we will place images of Tojo and Hirohito in the streets of every city – and you will learn to hail the empire and speak nihongo.
Or, Japanese cars are just generally of better quality. Take your pick.
On topic, I probably should mention that GM needs to be making a profit if it is re-investing anything into the local market. I don’t see very many GM vehicles on the streets of Tokyo – or Seoul, or Singapore, or in any of the hot asian cities. Or Hong Kong, for that matter. Just mainland China. Guess which one of the above is not an avant-garde lifestyle center in Asia?
psarhjinian (and others),
Actually, there have been a couple of interesting articles I’ve read lately on what countries benefit from what parts of manufacturing.
The first was in the Atlantic Monthly, on manufacturing in China. The article remarked that the production of goods, in terms of profitability, is a curve shaped like a smile, with the most profitable parts at each end and the least in the middle. The left end (start) is design and engineering, the middle (slump) is in actual manufacture and assembly, and the right end is in marketing, sales and distribution. For all of the cry over outsourcing, China dwells mostly in the low-profit middle.
A couple of months later, I saw an article in the NY Times on a study which traced what companies and countries got what share of a $300 iPod. It turns out America gets at least half that ($80 to Apple alone). Japan runs second, with $73 to Toshiba for the hard drive. China, which actually manufactures and assembles the device and is supposedly sucking away America’s lifeblood? A lousy four bucks. So it seems the Atlantic article was right.
Actually, I don’t share skooter’s alarmist views. I agree with you that in this global day and age, everything pretty much runs together in the long run. The global economy is not a zero-sum game. In the end, I believe we mostly all win or we mostly all lose. However, in the short run, perhaps there’s a grain of truth to his assertion since, in the case of the American-built Japanese cars, we’re dwelling right in the thankless middle of the production curve. Then again, maybe autos are dramatically different from consumer electronics, where the markup is probably a lot higher.
Here’s the NYTimes article, as food for thought:
http://www.nytimes.com/2007/06/28/business/worldbusiness/28scene.html?ex=1340683200&en=e203025ba31afc1c&ei=5124&partner=permalink&exprod=permalink
The theory purveyed by dead-enders that Camcord buyers just aren’t willing to try American cars falls flat in the face of the fact that most of them get plenty of opportunities to try GM/Ford vehicles at the rental car counter at the airport.
IE, I KNOW the Cobalt is a piece of crap. I KNOW the G6 is a piece of crap. I don’t even need to go to the dealer to get disappointed. Thanks, GM, for saving me the trouble.
Actually, Toyota & co are publicly traded companies. As are, obviously, the American companies.
Which means the profits are going to whoever wants to buy the stock, whether they are in Japan, America, Zimbabwe, or the frigging moon.
I WANT to buy GM or Ford products. Chrysler not so much. I’ve driven VWs and Hondas for the past 18 years with good success. Actually compared to my family and friends who primarily buy domestic products – I have had MUCH better service out of my imports than they had out of their domestics.
I don’t have to put my $15K+ on the hood to try life with a domestic. I can watch my friends and family. My wife & I have been early adopters for all sorts of new tech compared to our friends and family. You’d think we’d try a domestic vehicle – just to see if the car is truly below par or it if it the care the cars recieve from our friends and family… Still not sure I can spend that kind of cash. $250 for a gadget is one thing. A bunch of money to replace a poorly engineered or manufactured automatic tranny at 80K miles is another.
I WANT to buy domestic but they continue to ignore the segments we buy. We buy compacts. Not just cheap and cheerful cars but clever cars with clever features. Detroit doesn’t build those.
The closest they come is the Astra and the Focus hatch. We’ll give them a look but nobody hold your breath.
Dear: “tokyoenthusiast”
It sure is a compliment to recieve such a well written summary of the label that has been applied to a middle class american who is just making ends meet.
I have to give you credit for your ability to turn my concern for U.S. prosperity into a joke on ‘me’.
You seem to imply that I was japan bashing.I harbor
no resntment to any car manufacturer regardless of origin.
It just boils down to this….
I just want to see folks trying out new offerings from the Big 2.8
nothing more…nothing less.
The American middle class is being driven(pardon pun) out of existence and they were the buyers of American iron.
I cant think of a way to change this other than to get the well paid liberals to try an american cars.
They sure have a lot more money to risk on a car purchase than most middle class…
and so it goes…the folks with the money wont give american cars a chance,and the builders and suppliers of american cars wont be able to afford to buy them.
Pretty simple…and sad
and so it goes…the middle class!
have an espresso on me!
Oldyak,
I wasn’t trying to belittle your point that much, and if you are hurt I apologize to you sir. I do strenuously disagree with the idea that many of the car-related manufacturing jobs deserve a middle class salary.
I studied 5 years in college, took risks, and am earning a fairly good salary. You can put the egg-head label on me, but I deserve what I get – they can’t replace me with any sort of ease. Why should someone, whose job can be replaced by a robot, be paid the same?
I don’t begrudge someone the efforts of a good negotiating effort, but remember that maintaining manufacturing supremecy requires using the latest technologies. These technologies were stymied by workers who (rightfully) feared losing their job. As a result, labor-intensive manual labor (that should not exist due to potential advances in robotics) have moved to China, rather than remain in America (as the domain of American robots).
Let me make it simple. The job is tough but it didn’t have to be. Sacrifices had to be made, but no one wanted to make them. Money plays no favourites, and quality issues haunt a company forever. My last three cars were a Ford Mustang, an Oldsmobile Alero and a Ford Taurus. The Taurus needed a new transmission (but was generally decent), the Alero has the worst seats ever put in a car and had terrible fuel efficiency, and the Mustang needed a new alternator at 30,000 km. Guess why I am a ‘Tokyo’ Enthusiast?