Back when The Big 2.8 were fighting the United Auto Workers (remember them?) for contract concessions, the automotive press considered it the battle to end all battles. Once the New Deal was ratified– courtesy gi-normous union bribes and epic deferred costs– the pundits proclaimed themselves satisfied. It was time for Detroit to roll-up its sleeves and compete. No more excuses! Well, it’s been exactly a year since the UAW OK’ed the GM deal and we’re [still] hearing nothing but excuses. Oh, and the sound of your tax money lighting CEOs’ cigars.
Let’s face it: federal loans will do fuck-all to save the domestic auto industry. Even if you’re not a student of TTAC’s Chrysler, Ford and GM Death Watches, the idea that The Big 2.8 will resurrect their fortunes by sharing $25b+ of your hard-earned tax money is completely, utterly, mind-blowingly preposterous. To even CONSIDER this boondoggle, your elected representatives had to ignore a prima facie case that these companies are past saving.
The single most important and [you would think] inescapable fact arguing against the loans: lost market share. In 2004, ChryCo, FoMoCo and The General accounted for 60 percent of all vehicles sold in America. Just three years later, that number dropped by more than 12 percentage points, down to 47.7 percent. J.D. Powers’ most recent stats on consumer preferences indicate that the domestics’ slide into the heart of darkness (or at least relative obscurity) is set to continue, if not accelerate.
Why wouldn’t it? As America switches to more fuel-efficient vehicles (a.k.a. cars), Detroit simply doesn’t have the kind of frugal machines that consumers want to buy. Notice the qualifier: “the kind.” Even if Motown (via Korea, Mexico, Canada, etc.) offered class-leading vehicles, decades of brand dilution, lackluster models and dealer shaftage have created a built-in barrier to sales success. If not for fleets, flag-waving and force of habit, The Big 2.8 would already be dead in the water.
So how can Uncle Sam’s handout– I mean, “hand-up” reverse the curse?
It can’t. Think of it this way: no one in Detroit wakes-up in the morning and says “How can I create a crap car today?” What you see at the dealership is the best they can do. Ford, GM and Chrysler aren’t dying because a lack of funds. (Lest we forget, they were RAKING it in during the SUV boom.) They’re on the ropes because of their greed, sloth, arrogance, stupidity and insularity. Your $25b+ ain’t gonna change that.
Common sense says that The Big 2.8 can’t compete in the future because they haven’t been able to compete in the past. If they could have, they would have. And if they had, or even looked like they could in the future, someone other than you and me would have been happy to lend them the money to do it.
Oh wait! They already did! Look how THAT turned out. GM has burned every stick of furniture in its corporate house– and it’s still paying over $250m in interest on its debt. Ford has hocked everything up to and including its logo. Chrysler is on private equity life support, only a RAM away from total collapse.
Throwing federal tax money at this situation is worse than pissing in the wind; it’s like buying an alcoholic a brewery.
Please do NOT tell me that the plug-in electric – gas Chevy Volt will reinvent the automobile for all time and, by the way, save GM from bankruptcy. Or that a hybrid Chrysler minivan will end our dependence on foreign oil and breathe new life into ChryCo’s rigor-ridden corpse. Or that the Ford Fiesta will usher in a new generation of high margin small cars for the Blue Oval Boyz, and keep Bill Ford from taking the bus to work. Hail Mary, schmail Mary. It’s too little, too late.
While Motown’s planning on using our taxes to try and reinvent itself as a profitable maker of something other than large SUVs and pickup trucks, its competitors are busy reinvesting their profits, creating new and/or improved non-truck vehicles that sell in sufficient quantities (at enough of a price premium) to maintain the profits so they can reinvest enough money to maintain their lead over Detroit and (they hope) everyone else. Funny how that works. Or, in Detroit’s case, doesn’t.
No matter. Detroit’s short-term future doesn’t depend on its near-future products. Chrysler, Ford and GM’s survival now depends on their ability to convince the Department of Energy (DOE) to change the rules for their share of the $25b low-interest federal loans, so they can somehow use the cash to keep the lights on.
Good luck with that. Contrary to popular opinion, I predict that the Department of Energy will not bow to political pressure and hurry their due diligence for Detroit. The Big 2.8 may not run out of excuses. But they will run out of time.
Well, you don’t know what will happen if you don’t try. What’s wrong with taking a look at the glass half full? Or was the water already drunk? I’d rather see GM, Ford and Chrysler survive than be doomed to a future of driving a Prius, and nothing but.
ferrarimanf355: What’s wrong with taking a look at the glass half full?
That would have been in about…1988 or so. Today, the glass only has a few suds and some back-wash in it.
If the government gives $700 billion to the obscenely-paid, arrogant, reckless financial sector, well then how can it not give $25 billion to an industry that is responsible for around a million jobs in crucial states?
I’m not American and I don’t claim to have a deep understanding of American politics. So just correct me if the logic of my argument is not compelling.
Martin Schwoerer :
If the government gives $700 billion to the obscenely-paid, arrogant, reckless financial sector, well then how can it not give $25 billion to an industry that is responsible for around a million jobs in crucial states?
This is something I have been wondering too. Wallstreet white collar criminals have managed to stick every man woman and child in America with an unpaid bill of $2300 for their reckless behaviour and rather than executions or at least life jail sentences they get at a stern warning that there will be no more golden parachutes for them (which there will be of course in due time).
To steel $700 billion of the taxpayers money and only getting a slight slap on the wrist in return must be the ultimate perfect crime.
What they want you to believe is that civilisation will come to an end if you don’t eat it up. I doubt that and nor do I think that civilisation will come to an end if some automotive dinosaurs went belly up.
In fact I reckon there is a far bigger chance of western civilisation coming to an end if these paragons of consumer excess don’t go belly up (or at least reform fundamentally)because their corporate strategies force America in a position of dependency of oil from it’s enemies that’s having increasingly disastrous consequences to the point that it is becoming a fundamental threat to America’s (and western) future.
Is there a chance that DOE foot dragging is a calculated exercise to not pay the 25B, at least for as long as possible? Politically, Washington needs to be seen as “doing something”, but even they know that the D3 aren’t worth saving.
“What you see at the dealership is the best they can do.”
-I disagree. I think that management incompetence has hamstrung the engineers for decades. Managers being shuffled from one job to another with no regard for the final product have produced these crap results.
“They’re on the mat because of greed, sloth, arrogance, stupidity and insularity.”
-I agree. One thing I have noticed over the years is that every time there is a new vehicle out on one of the Big3 the management proclaim it to be their savior, and they seem so proud of their epic achievement. News flash guys: designing an all-new car ISN’T AN EPIC ACHIEVEMENT!!! It is standard operating procedure at every other car maker in the world!
When one of the Big3 produce a 2nd generation of a car that is better than the one before and actually increases sales over the previous generation, I’ll be impressed. GM does seem to be able to redesign its cars every 5-6 years reusing the same chassis, but it’s just crap after crap, never competitive. Ford is on the 10 year plan, designing an all-new car, the waiting 6-7 years before a mild restyle, the all-new again 3 years after that.
They HAD to give them the money, otherwise if Detroit tanked the voters would claim the politicians stood by and did nothing. At least this way the politicians can say to their constituency “At least we tried”.
Detroit will wind up tanking anyways. Even with this money given to them it’ll only have the effect of keeping the lights on for a few weeks or months more. Detroit needs to downsize and slash brands, and come up with a plan where they can actually survive on a smaller piece of the pie. Niche market cars like the Volt and the electric minivan aren’t going to save them.
I figure Ford has the most promise. Mulally is leading the charge and he’s a proven and capable leader, Ford’s Euro cars are competitive and would likely do well here and bring competitive small products quickly.
If you can wrestle the unfair voting control from the Ford family and allow this to be a truly publicly owned company maybe they would be the best American automaker – just no more dangerous defects – listen to your engineers when they find some major faults and don’t ignore them.
It’s official:
http://www.breitbart.com/article.php?id=080928164938.dtc44u1c&show_article=1&lst=1
The $700B bailout at least has a tiny restriction on the pay of those at the top, while the Detroit bailout does not. With Wagoner in place, the money is wasted as a means of helping the survival of GM. He’ll continue to draw his pay and enjoy the CEO lifestyle a few more months.
If the government gives $700 billion to the obscenely-paid, arrogant, reckless financial sector, well then how can it not give $25 billion to an industry that is responsible for around a million jobs in crucial states?
Honestly? Because the financial industry has it’s tentacles into everything. If certain institutions crater, they end up taking a lot of the economy with them. Unfortunately, a side effect is that the barons of finance feel no pain–but hey, it’s not like people who were pulling seven figures were going to feel pain, bailout or now.
That said, not backing up the auto industry is a bad decision for exactly the reason you cite. There are a lot of jobs at stake, and a lot of resulting fallout if it fails. Sugarcoating it as an energy issue was stupid on the part of the automakers: calling it a “We’re screwed, but we still employ 10% of the workforce” grant would have been more likely to succeed, but it certainly would have resulted in the automakers’ management being asked to step aside.
Rick et al were hoping that by cloaking it as an R&D grant that they wouldn’t be required to accept provisos or oversight. But by asking for it as such, they’ve cut the amount and more or less put the timetable at the government’s discretion. And now they can’t ask for the real bailout they actually need.
Actually Detroit has done better than most US companies. Here is the hard reality. Once your country’s standard of living goes up, you can no longer be cost competitive in manufacturing. Just as the British were the world leader in ship building, as workers wages went up, ship building moved to Japan. Once wages in Japan went up, it moved to Korea. There is no profit in small cars, which is all most drivers really want or need. Detroit could only survive by making large profits on huge trucks no one needs. Once the public has decided they want low cost small cars, Detroit has to fail. It is mathematical and unavoidable. No management can change the laws of economics. Detroits survival depends on convincing consumers to buy something which makes no economic sense, like a 500 hp Camaro, or a supersized Sierra. They lose money on every Cobalt they sell, so guess where GM is headed (and Ford and Chrysler).
1. What is on the dealership floor now is the best that GM, Ford and Chrysler can do given their messed up internal corporate fiefdoms, which no one has been able to fix in 30 years.
2. The amount of the loans, spread across three dying companies, is insufficient to address the scope of their problems to produce a RANGE of products people want to buy and doesn’t address the core reason these companies keep losing bucket loads of cash.
3. As always, the competition is profitable and using those profits to Keep Moving Forward at a pace unmatched by GM, Ford and Chrysler.
dwford said: “I think that management incompetence has hamstrung the engineers for decades. Managers being shuffled from one job to another with no regard for the final product have produced these crap results.”
Agreed, I would add the plants to that as well. If a plant is forced to build a vehicle with sub-standard Chinese parts, the good parts made to spec can’t save it, and are tainted by association.
mel23, the $700 billion pay restrictions don’t apply to existing employment contracts, only new ones. So Wagoner would be safe under that plan as well. Congress completely blew it as far as attaching meaningful oversight or reform to the financial bailout. They’re all convinced that the economy will blow up if they don’t give huge amounts of free money to Bush’s Wall Street buddies, because the Bush Administration told them so.
Is it managerial incompetence or engineering incompetence? Well, here is one tiny example: the other day I was looking at a Ford and noticed the dash top was very light-colored. That created an awful reflection of the dash in the windshield. The visual impairment is irritating and unsafe.
I can’t believe that after a hundred years of making cars, Ford is unaware of the foolishness of having light-colored dashes. So who is responsible for this example of stupidity–managers or engineers? Anyone know?
It is astounding to see the utter lack of leadership in Congress. I don’t see how anyone can be a glass half full person while reading this.
Reality is that the $700B bailout will cost taxpayers an average of $4700 – $9k depending on your tax bracket. Got the low number by dividing $700B by 150mm people (approximate number of people who pay taxes).
Capitalism on the way up, socialism on the way down for the big boys. For us small fries, we’ll, it’s just a big middle finger.
Some seem to think that employment is actually a good argument to safe the automotive dinosaurs. Think again.
With the trade unions sidetracked jobs in the car industry have degenerated to the hire/fire kind making the big 2.8 basically automotive variants of Macdonalds.
Who is going to give a housing mortgage to people with no job security to speak of in an industry that’s clearly going nowhere fast? Even mathematically challenged Freddy Mac and Fanny May will think about 700 billion times before making that mistake again.
Secondly even without the big 2.8 Americans will presumably keep on motoring so they’ll turn to “Imports”. Except most imports aren’t actually imported but are produced locally because car economics seem to dictate that that’s the most efficient way to go. And with the dollar nowhere to go but down no carmaker can afford not to shift production to the US.
Once wages in Japan went up, it moved to Korea. There is no profit in small cars, which is all most drivers really want or need.
That’s a load of nonsense. Toyota makes money on the Yaris, the Corolla, and the Prius (midsize, but still ‘small’ to some). Honda makes money on the Fit, the Civic, and the Accord.
Boatloads of it.
Which of those cars is made in Korea again?
The funny thing about Detroit is that they clearly can, under the right circumstances, produce some fine machines. GM has a few rays of light in the otherwise overcast sky: the Cadillac CTS, the new Malibu, the Enclave, and the Corvette. Ditto Ford (and despite what the overwhelming consensus here is, I feel the new Focus is light years ahead of its predecessor, especially the higher trim levels). But then I stop and look at Detroit’s other offerings, and it’s clear that they have only taken the first steps to actually becoming competitive. Particularly in the small car segment, where the imports are now making a killing. The Aveo is a rolling punch line (how it manages to sell is beyond me). The Cobalt still isn’t there. The PT Cruiser’s time in the sun faded a while ago.
One of the problems of the Detroit 3 is that their “competitive small cars” won’t be in showrooms until 2010; they are needed now. Though the Volt won’t be a financial game changer, the Cruze is showing a lot of promise. As does the forthcoming Fiesta revival. I foresee a continuing demand for more fuel-efficient vehicles, even if the fuel prices continue to drop (and especially if fuel prices swing upwards!); I think people won’t be so quick to purchase an SUV again. Granted, it would’ve be nigh-impossible to predict the massive rise in gas prices, but that’s no excuse for Detroit letting their small cars wither on the vine. And even though the Cruze/Fiesta/et al could be the capable small car Detroit needs, they still face some major hurdles.
Some of Detroit’s new offering are fine cars. Even if the Cruze and Fiesta turn out to be great, they still face the dreaded perception gap. And at the same time, other small cars, that have already established themselves in the market, will be on their second and sometimes third generations. The perception gap will be enough to keep many potential customers away (lest we forget, many have already sworn off Detroit forever), and some others will simply not abandon their Fits, 3s, and Yarii. This potentially could leave Detroit with only its bread and butter customers, with very few “conquest” sales. This is exactly where Detroit has been for the last two decades. The consequences of this scenario have already been seen: continuing decreased market share!
Even with a flawless product portfolio and exemplary product, the perception gap will loom over Detroit for some time to come. The only true way to combat it is improved product and time’s inevitable passage. Both ingredients are essential, and it will take years to erase the damage. Detroit can whine and point fingers all it wants, but a lot of the blame lies on Detroit itself. Boneheaded corporate decisions mixed with horrible product and blowing off customers equal bad times down the road for Detroit. And now Detroit’s facing the consequences. And just as it took time to build the momentum of the perception gap, it will take time to remove it as well.
The perception gap has been thirty to forty years in the making, and there is no amount of bailout money that can help the Detroit 3 erase it! $50 billion can help them retool plants to build better cars. It can help them cut dealers/brands. It can help them with their problems with the UAW. It can help their research, their marketing, their branding; hell, it could even help their product. But no amount of money can expunge forty years of perceived quality lapses, even if their current products were absolutely stellar.
Define “boatloads” for me. No, Japan has the same problem the US does. Korea can produce for less. China and India can produce for less than Korea. Eventually, production has to move to the lower cost producer, if you have free trade. Europe keeps their car industry through protection. You either protect your market, or let it go.
Toyota would much rather sell you a Lexus than a Yaris. I do not include the Accord as a small car, it is clearly in the category they sell you more than what you need, just as GM sells pickup trucks. The survival of these companies is persuading people to buy for lifestyle or fun, rather than necessity.
Japans day will come, just at a later day than the US.
Only the Koreans are making money at the small end of the market here in the US.
And the Prius is an upscale car. However, even here, I believe Toyota loses money on every one they sell.
Fellas, I don’t have access to my email at the moment, but thought I’d tell you: It seems that the whole TTAC site suddenly got a lot wider.
I haven’t made any system changes and my IE7 window is as wide as it can be without being “fullscreen,” yet I suddenly have to scroll right to see the topics of the items in the right-hand column.
My screen resolution is 1024 X 728, the same as it always has been in the past.
My apologies for having to type this here in a bailout article… Feel free to delete this post once you’ve checked up on things!
M1EK: That’s a load of nonsense. Toyota makes money on the Yaris, the Corolla, and the Prius (midsize, but still ’small’ to some). Honda makes money on the Fit, the Civic, and the Accord.
Boatloads of it.
The Accord is no longer a small car, and most of the ones I see at the dealership START at $24,400+, with prices all the way up to $29,000+ for the EX V-6L sedan models with navigation system, leather and satellite radio.
I wouldn’t use the Accord as proof that a company can make profits on small cars, as it is no longer even remotely a small car, nor is it even especially cheap. It has become your father’s Oldsmobile (Cutlass Supreme).
The Fit is made in Japan, and there was an article on this site a few weeks back where even the head of Honda admitted that the company makes very little money off it.
Most Civics start at $19,000, and go up to $22,000. They aren’t cheap, and pretty much have cornered the market for pricey smaller cars.
Toyota makes money through volume. It doesn’t make much money on each Yaris and Corolla, and whether it is actually making money from the Prius is a very good question – at least for those of us with a healthy dose of skepticism regarding information contained in press releases.
Note that VW must import a fair number of its small cars from Mexico, and it still loses money in the U.S.
Dutchchris: With the trade unions sidetracked jobs in the car industry have degenerated to the hire/fire kind making the big 2.8 basically automotive variants of Macdonalds.
The Jobs Bank still exists for the Big 3, which means that UAW workers don’t necessarily lose their jobs when there is a layoff. They sit around, receive almost their entire pay, and wait to be called back to work. Union jobs have hardly been “sidetracked,” and unions members can’t be fired without a very good reason.
UAW jobs are not “hire/fire” type of jobs at this point.
Chapter 11, obviously, could change this, but for now, there are still pleny to UAW workers at GM, Ford and Chrysler, and they are protected by the national contract from losing their jobs or suffering pay cuts.
Plus, the wages made by UAW workers are MUCH higher than those paid to McDonald’s workers. There is absolutely no comparison.
Matt51, neither Toyota nor Honda makes a single car in Korea. That makes your statement untrue. There’s no reason American car companies couldn’t make a profit on ‘small’ cars if the supposedly too-high-costing Japanese do it (in some cases with US labor).
And if you think Toyota makes most of their corporate profit on Lexus sales, you are numerically challenged.
You guys are arguing fundamentally counterfactual premises here. Both are extremely profitable companies; and both make mostly small cars. At least, small compared to the SUVs that the US car companies tried so hard to get us to buy for so long against our best interests.
And the Prius is an upscale car. However, even here, I believe Toyota loses money on every one they sell.
Yet another counterfactual statement. Also known as a lie in some circles. Toyota has said flat-out that they make money on the Prius and have for a very long time.
M1EK: Yet another counterfactual statement. Also known as a lie in some circles. Toyota has said flat-out that they make money on the Prius and have for a very long time.
Not good enough. Please show me an independent source that confirms (not merely repeats) what Toyota said. I don’t take Toyota’s statements at face value any more than I take GM’s statements at face value. I’m keeping an open mind about this, but your post is not enough proof.
M1EK: You guys are arguing fundamentally counterfactual premises here. Both are extremely profitable companies; and both make mostly small cars. At least, small compared to the SUVs that the US car companies tried so hard to get us to buy for so long against our best interests.
Saying that the Japanese make primarily small cars because they are “small compared to SUVs” made by the Americans (and the Japanese, and the Koreans, and the Germans) is skewing the playing field to get the result you want.
That’s like saying that most people are beautiful and fit – because they look better than Danny DeVito and Sandra Bernhard. Well…who doesn’t???
The Accord and Camry are NOT small cars by any stretch of imagination. They are medium-size cars both inside and out. Those two cars are where both companies make a large part of their profits. Honda sells about 85,000 Fits in the U.S., as compared to over 400,000 Accords. Quite a big difference. It also subsidizes U.S. Fit sales by selling the car in other markets were small cars command more of a premium.
And both companies sell a large percentage of their production in overseas markets, which has an entirely different size-and-price correlation than the U.S. market did (and still does, despite the recent runup in gas prices).
M1EK –
You won’t persuade many people to your position by calling them liars. It is arguable whether they make money on the Prius I sincerely doubt it, but since you know so much, tell us how much profit they make on each one sold in the US. Not in Japan, but each one sold in the US.
Your argument also fails in telling us – I am guessing because you are using emotion rather than facts – that because Toyota and Honda are profitable overall, therefore they must be making money selling their base cars in the US. I always was led to believe, the Japanese went upmarket in the US, precisely because they could not generate profit at the low end. The same problem Detroit has. They cannot make money at the low end. So they sell base cars, but want to upsell the customer to something nicer.
Korea has lower costs and they are profitable overall, just as Honda and Toyota are. I am sure the Koreans will over time move into more and more of the market, as they have relentlessly been doing so. And they will be joined by the Chinese and Indian car companies. So what is the basis for your argument – that Korea does not have lower costs? Telling us of your love of Honda/Toyota does not alter the fact, Honda and Toyota are facing the same competitive world pricing pressures the domestic three are facing. If the yen strengthens as it probably will, it becomes harder and harder for Japan to make cars domestically. Not only that, they may not be able to keep their US plants open in the long run. After the big three die, pricing pressure would force the Japanese to the lowest cost markets, or they die.
And see, I never called you a liar.
Matt51, the only company that knows is Toyota, and they have no reason to lie. You do.
The fact is that both make a ton of money making ‘small’ vehicles both in Japan and in the US. Not one single car sold here by either company is made in Korea.
geeber, the assumption ought to be that somebody is telling the truth, all else being equal, and nobody has brought forth one bit of evidence that Toyota isn’t telling the truth – they’ve been consistent in their story and it matches all the available data.
As for cherry-picking, Honda sells more Fits+Civics than they do Accords. You chose the brand new subcompact model which is still undergoing production adjustments. Talk about a red herring. Same with Toyota – they sell more Yaris+Corolla than they do Camry. And when it suits you guys, you’re more than happy to call the Prius a ‘small’ car too, so throw that one in too.
Oh, another fact: Both make a lot of money. Both sell mostly cars, and mostly small cars at that. If you’re going to argue the counterfactual premise that somehow they don’t make a lot of money on ‘small’ cars, you need to do a lot better than you’ve been doing so far.
It is inevitable – you protect your market as the Europeans do, or manufacturing must move to the lowest cost producer country – in the long run. Take your pick. Any car design can be copied. China and India have maybe 10 times the engineering graduates the US does. Korea has already bloodied Japan Incs nose in more than one industry.
We were told not to worry about losing our manufacturing base – there was always the next new “great thing” like the dot com industry. Of course, the dot coms died, and the next great thing never happened.
This is exactly what happened in ship building. Maybe the benefit of having low cost ships is worth it. Maybe the same for cars. If only it did not create a massive trade deficit which kills our currency at the same time. Do we have a trade deficit in cars and car parts with Japan? Then they have not really moved all that much mfg here have they.
Seems the Europeans have it right. Allow some competition, but retain most of your manufacturing, and keep your currency strong, and keep the trade deficit low.
Cars which are sold here, need to be made here. Putting an assembly plant here is not being made here. Made here means like Opel is to Germany. The Japanese will move their plants out -once Detroit dies.
Trying to compete against the lowest cost country in the world, means we have to also accept their standard of living. We are well on our way down this path. US blue collar wages peaked in 1973. Where will it end?
Those excuses are a load of garbage. If US car companies made cars worth buying, I’d buy them (I did, the last time they seriously tried – ’92 Saturn SL2 owner here). Instead, they tried to convince me to buy an Osama-funding climate-destroying SUV. No friggin’ thanks.
And what small cars does GM have to sell me today? The awful Cobalt and the Aveo, which DOES come from Korea.
So if you’re really afraid of offshoring, you should be avoiding GM, right?
M1EK: geeber, the assumption ought to be that somebody is telling the truth, all else being equal, and nobody has brought forth one bit of evidence that Toyota isn’t telling the truth – they’ve been consistent in their story and it matches all the available data.
That amounts to “because I said so,” and isn’t enough.
I’m giving Toyota’s statements as much credence as you give GM’s statements that it can’t make money on small cars in the U.S.
M1EK: As for cherry-picking, Honda sells more Fits+Civics than they do Accords. You chose the brand new subcompact model which is still undergoing production adjustments. Talk about a red herring.
Except that you specifically said that Honda makes “mostly small cars.”
Let’s look at Honda’s sales figures through August 2008:
The Accord and Accord Hybrid sold 291,053 units, while the Civic, Civic Hybrid and Fit combined moved 346,518 in that same time frame.
In other words, one large, relatively expensive model sold almost as much as two smaller models combined. Honda is profitable, but the big profits are coming from those Accords it sold this year, which are not small cars by any measure, nor are they cheap.
And then let’s add the 201,355 Odysseys, Pilots and Ridgelines it also sold through August 2008, which are high-priced vehicles (Odysseys and Pilots regularly go for well over $30,000), and are anything but small. Plus, another 142,096 CR-Vs which, while not large, are hardly inexpensive.
So, WITHOUT Acura, Honda sold 346,518 small cars, versus 634,504 of everything else. (Acura would raise the total of SUVs and larger cars.) Obviously, most of Honda’s sales are NOT small cars. Unless you have a different defintion of “most.” If so, please share it with us.
And that’s not even considering the different profit margins earned by different vehicles. Honda makes more money selling one Accord or Pilot than it does selling one Fit. Still want to say that Honda makes most of its money in the U.S. from the sale of small cars?
So looking at volume without considering profit margins on each vehicle doesn’t give us the entire picture, but to do so would undoubtedly puncture yet another hole in your contention.
And that’s just for Honda. We aren’t even looking at Acura, which doesn’t sell small cars anymore.
M1EK: Same with Toyota – they sell more Yaris+Corolla than they do Camry. And when it suits you guys, you’re more than happy to call the Prius a ’small’ car too, so throw that one in too.
So, let’s look at Toyota sales, too.
Yaris, Prius and Corolla and Scion (I counted four Scions) sales through August totalled 550,478. Meanwhile, sales of the Camry and Avalon in the same period were 356,981. So it takes SEVEN small cars to outsell two large cars.
Do you really think that Toyota is making most of its North American profits off of small cars, especially given that smaller cars have a lower profit margin than larger ones?
Trucks and SUVs add another 468,169 to the total. While the RAV-4 may be considered fairly small, it’s hardly cheap, and that truck and SUV figure includes the Sienna, FJ Cruiser, 4Runner, Highlander, Sequoia, Land Cruiser, Tacoma and Tundra, which are neither small nor cheap – all of which were bringing higher profit margins than the Corolla and Yaris. Of course, this will change as sales of Toyota’s SUVs and pickups decline. But then, I’m willing to bet that Toyota’s profits will decline, too, as its vehicle mix becomes less profitable.
So, Toyota sold 550,478 small cars, versus 825,150 of everything else. And, remember, this doesn’t include Lexus sales. Lexus, like Acura, would raise the total of SUVs and larger cars.
That hardly sounds as though “most” of Toyota’s sales come from small cars, although, again, if you have a different defintion of “most,” please share it with us.
But wait – Toyota sells more different truck and SUV models than it does small cars (nine versus seven). So shouldn’t that lower profitability of its trucks? Not necessarily, because there is more room for differentiation among higher-price vehicles (because of the greater profit margin).
That is why, for instance, GM for years badge-engineered its subcompacts and compacts (the NOVA cars of the 1970s being the prime example), while still maintaining distinctions among its bigger, more profitable vehicles (the Eldorado, Toronado and Riviera, for example).
M1EK: Oh, another fact: Both make a lot of money. Both sell mostly cars, and mostly small cars at that. If you’re going to argue the counterfactual premise that somehow they don’t make a lot of money on ’small’ cars, you need to do a lot better than you’ve been doing so far.
I just did. The figures are available to anyone. You might want to consult them before making the above contention, and accusing me of not backing up my arguments.
“That amounts to “because I said so,” ”
No, it doesn’t. It amounts to “Toyota said so, and we haven’t caught them lying enough times in the past not to trust them, and what they’re saying isn’t wildly contradicted by other observed facts”.
And this paragraph shows that you’re interested in nothing more than shilling:
Yaris, Prius and Corolla and Scion (I counted four Scions) sales through August totalled 550,478. Meanwhile, sales of the Camry and Avalon in the same period were 356,981. So it takes SEVEN small cars to outsell two large cars.
To equate each of the niche-market Scions to major models is dishonest at its core. You have to know this, and yet you did it anyways.
Far more honest to point out that the top-selling vehicles in the country include both Corollas and Camries and both Civics and Accords. And, again, looking at the product mix of the Big Three, Camries/Accords aren’t that ‘big’ either.
The conclusion is that you can and do make money selling cars, even ‘small’ cars, or Toyota and Honda wouldn’t be making the profits they’re pulling down. You’re arguing an apparent counterfactual here – it’s YOUR obligation to provide extraordinary proof, not mine.
Geeber, there is no point trying to talk to someone who will not listen.
GM sold large trucks because that is where they could make a profit. Toyota had to sell small cars in Japan, and has a larger base of small cars. Toyota lusted after the profits of large trucks and built the Tundra.
Lower cost producers will put the hammer to the Japanese, just as has happened to the domestic producers. Profits are always low or non-existent on entry level cars, this is acknowledged throughout the industry, only an idiot would challenge this. Could GM have sold a small car and made a profit in the 90’s on it? no. Now with higher gas prices – maybe.
Loading a car that is physically small to a high price means no profit was available at the low end. Look at how few base Tacomas are manufactured and sold, the goal for Toyota is to sell loaded trucks.
The large increase in fuel prices has favored the Japanese sales in the US, however serious competition to them is on the horizon. This competition is unavoidable in the system of free trade. As any economist will explain, ultimately the low cost producer wins. The low cost producer will never be a developed nation which pays a decent wage. Already Hyundai Elantra is winning head on competition with the Corolla on car reviews. Designing to a price point, the low cost producer can always add more content.
Mr. Farago:
Your writing is fantastic. I laughed so hard I forgot about the wall street bailout/failout.
Matt and geeber, again, it’s extraordinary claims that require extraordinary proof.
Here’s things we know to be true:
1. Honda and Toyota’s vehicle mix is tilted MUCH more towards cars (and small cars) than is Detroit’s. Not a small difference; a large difference.
2. Honda and Toyota make a lot more money than does Detroit. Not a small difference; a large difference.
Yet you expect us to believe it’s impossible to make good money selling small cars? And don’t try the gambit of saying you really meant subcompacts – we know that for Detroit, anything less than an SUV is a ‘small’ car – but even if you move the goalposts like that, you still have to deal with the fact that they sell so many Civics and Corollas, and make money on every one of them, without resorting to Korea to do it.
M1EK: No, it doesn’t. It amounts to “Toyota said so, and we haven’t caught them lying enough times in the past not to trust them, and what they’re saying isn’t wildly contradicted by other observed facts”
As I said before, when you have an independent source that verifies this, let us all know. In the meantime, you obviously don’t, so I’d suggest that you stop trying to dodge the issue and do something called “research” to find an independent source that verifies your assertion.
M1EK: And this paragraph shows that you’re interested in nothing more than shilling:
Yaris, Prius and Corolla and Scion (I counted four Scions) sales through August totalled 550,478. Meanwhile, sales of the Camry and Avalon in the same period were 356,981. So it takes SEVEN small cars to outsell two large cars.
To equate each of the niche-market Scions to major models is dishonest at its core. You have to know this, and yet you did it anyways.
No, it shows that I am interested in accuracy, and make sure that the facts are on my side before making an assertion. (You might learn to do this.)
We aren’t talking about whether models are niche models or mainstream models.
So stop trying to change the subject.
The question was whether Toyota and Honda sales mostly consist of small cars, and to measure this, we must include the sales of ALL small cars.
You said that Toyota sells mostly small cars. I counted Scions because they are small cars, and, if anything, help BOOST your case, as they raise the total sales of Toyota’s small cars.
(And if I had not counted Scion sales, one guess as to which poster would be squawking about the omission.)
M1EK: Far more honest to point out that the top-selling vehicles in the country include both Corollas and Camries and both Civics and Accords. And, again, looking at the product mix of the Big Three, Camries/Accords aren’t that ‘big’ either.
Far more honest would be to admit that you are again trying to change the subject, as the rank of those vehicles on the sales chart was not the original question.
How these cars rank in sales in irrelevant. The question is whether most of Toyota and Honda sales come from small cars, as you asserted, and they clearly don’t.
And the Camry and Accord are NOT small cars. They are anything but small, and if you doubt this, please visit your local Toyota and Honda dealer before posting so that you know what you are talking about.
The fact that GM, Ford and Chryrsler sell lots of trucks and SUVs doesn’t make the Camry and Accord “small” any more than it makes a Cadillac CTS “small.”
M1EK: The conclusion is that you can and do make money selling cars, even ’small’ cars, or Toyota and Honda wouldn’t be making the profits they’re pulling down. You’re arguing an apparent counterfactual here – it’s YOUR obligation to provide extraordinary proof, not mine.
Nice try, but no. First, as we’ve seen, contrary to your assertion, MOST of Toyota and Honda sales do not come from small cars. You can re-read my post that gives you the exact sales figures. If you have trouble with reading comprehension or basic math, please let me know, so that I can help you.
Second, it is a FACT that smaller cars have a lower profit margin than larger vehicles, so if anyone is making a “counterfactual” assertion, it is you, and you’ve done nothing to back up your assertion.
Do Honda and Toyota make money on small cars? Yes, but I never denied that. What is undeniable is that large vehicles make more money per vehicle than smaller ones (anyone with knowledge of how the industry operates knows this), that Toyota and Honda sell lots of larger vehicles, and they sell more larger vehicles, as a whole, than small cars. So, one can logically conclude that Toyota and Honda rake in a very large share of profits thanks to the sale of larger vehicles.
M1EK: Here’s things we know to be true:
1. Honda and Toyota’s vehicle mix is tilted MUCH more towards cars (and small cars) than is Detroit’s. Not a small difference; a large difference.
What the figures show is that Toyota and Honda sell more larger cars, trucks and SUVs than small cars. And anyone who has studied this industry knows it that profit margins have historically been higher for large vehicles than for small cars.
M1EK: 2. Honda and Toyota make a lot more money than does Detroit. Not a small difference; a large difference.
Yes, which has as much to do with success in international markets, greater production efficiency and a better reputation as anything else. Not to mention sales of trucks, minivans, SUVs, luxury cars and family sedans…
M1EK: Yet you expect us to believe it’s impossible to make good money selling small cars?
You need to take that one up with Honda and Toyota management, as they are the ones that have upsized the Accord and Camry and invaded the pickup and SUV markets. Or do the Tundra, Pilot and Sequoia exist only in my imagination?
Maybe, just maybe, they were motivated to invade these markets by the idea of…making greater profits?
M1EK: And don’t try the gambit of saying you really meant subcompacts – we know that for Detroit, anything less than an SUV is a ’small’ car –?
Apparently, since you can’t win on the facts, you are now engaging in mind-reading, as you now KNOW what Detroit considers to be a small car, and this somehow makes your case.
That isn’t just “counterfactual,” it’s just plain silly.
You should join the Psychic Hotline; you can charge good money for that kind of mumbo-jumbo passed off as mind-reading.
A little education here – what Detroit thinks regarding vehicle size is irrelevant. If GM calls the Malibu a minicar, under your “logic,” we must accept that designation.
What matters is the actual size of the vehicle. The Accord and Camry are not small cars by any measure (neither is the Avalon, the Acura lineup, or the Lexus lineup apart from the IS).
M1EK: but even if you move the goalposts like that, you still have to deal with the fact that they sell so many Civics and Corollas, and make money on every one of them, without resorting to Korea to do it.
Uh, no, you are the one moving the goalposts by attempting to have the Accord and Camry classified as “small cars,” which makes about as much sense as classifying Rosie O’Donnell as a swimsuit model. They are large cars. Period. As I said, visit your local Toyota and Honda dealer to actually look at these cars so that you know what you are talking about.
And, yes, Honda and Toyota sell lots of Civics and Corollas, and make money from their sales, but please quote the post where I denied this. What is undeniable is that Toyota and Honda sell more larger vehicles than small cars, and anyone with an inkling of how this industry operates would realize that those vehicles are responsible for a hefty share of their profits.
The goalpost moving is the effort to pretend that the Fit is the only small car Honda sells, and that GM doesn’t consider the Accord to be a ‘small vehicle’. The excuses GM and others have made is NOT that they couldn’t make money selling their smallEST cars – it’s that they couldn’t make money on cars, period, and we KNOW they consider the Accord/Camry to be ‘small’ in relation to their overall vehicle mix.
Despite that, even when you just consider the Civics and Corollas, it is crystal clear that Honda and Toyota make money on those vehicles – they don’t sell nearly ENOUGH bigger vehicles to make their overall profit so high otherwise.
Now, if Honda and Toyota were making only a little bit of money, you might have a case. One might stretch and conclude that they made so much money on their SUVs (even though they sold far less of those than did Detroit) that their small cars might only be marginally profitable. But for them to make the money they do, with the product mix they have, they simply HAVE to be making a LOT of money on the combination of (Fit+Civic) or (Yaris+Corolla+Prius). Nothing else remotely makes sense.
You guys are making the extraordinary claims here. Again, it’s you that needs to supply the extraordinary proof.
And don’t back up to “I never said they didn’t make money on small cars”. You know what you were trying to imply – that the small cars were practically loss leaders; that is not remotely the case. If they make $1000/car on Civics, that’s a lot of money, even if they also make $2000/car on Accords.
M1EK: The goalpost moving is the effort to pretend that the Fit is the only small car Honda sells, and that GM doesn’t consider the Accord to be a ’small vehicle’.
Wrong. I specifically classified the Civic as a small car, along with the Fit.
The only “pretending” that is occurring here is being done by you, as you are now pretending that I said that the Fit is the only small car sold by Honda.
Instead of accusing me of making “counterfactual” arguments, how about getting your own posts straight, and not putting words in another poster’s mouths?
Here is my original post for your convenience:
The Accord and Accord Hybrid sold 291,053 units, while the Civic, Civic Hybrid and Fit combined moved 346,518 in that same time frame.
In other words, one large, relatively expensive model sold almost as much as two smaller models combined. Honda is profitable, but the big profits are coming from those Accords it sold this year, which are not small cars by any measure, nor are they cheap. (emphasis added)
Who cares what GM considers the Accord (or Camry) to be. What matters is its actual size. It is not a small car; it is a medium-size car aimed at the family sedan market. I should know – I drive a 2003 EX sedan, and the new-generation model is bigger yet.
Repeat that 10 times before posting again.
M1EK: The excuses GM and others have made is NOT that they couldn’t make money selling their smallEST cars – it’s that they couldn’t make money on cars, period, and we KNOW they consider the Accord/Camry to be ’small’ in relation to their overall vehicle mix.
Again, irrelevant. And if GM can’t make money on ANY cars, then you need to explain why it recently introduced a very competitive CTS and Malibu, and is prepared to introduce an all-new LaCrosse replacement, all of which cost a pretty penny to develop.
And have you missed the news stories explaining how GM has been revamping its factories for improved efficiency, working with the UAW to implement more cost-effective work rules, and is using global platforms in the U.S. to reduce costs? Think that maybe those moves have had a positive effect on the profitability of lower-margin vehicles? So maybe there was a reason(s) GM wasn’t able to make money on many car lines?
M1EK: Despite that, even when you just consider the Civics and Corollas, it is crystal clear that Honda and Toyota make money on those vehicles –
I never said otherwise, so you can put that strawman in the corn field where he belongs.
M1EK: they don’t sell nearly ENOUGH bigger vehicles to make their overall profit so high otherwise.
Please reread the sales figures I posted, then remember that profit margins are higher on larger vehicles than on smaller vehicles, so that you gain at least some semblance of an understanding of the autombile business.
M1EK: Now, if Honda and Toyota were making only a little bit of money, you might have a case.
That would be true if they only sold Fits and Yarises.
M1EK: One might stretch and conclude that they made so much money on their SUVs (even though they sold far less of those than did Detroit) that their small cars might only be marginally profitable. But for them to make the money they do, with the product mix they have, they simply HAVE to be making a LOT of money on the combination of (Fit+Civic) or (Yaris+Corolla+Prius). Nothing else remotely makes sense.
Except that they sell LOTS of SUVs, medium-size cars, pickups and minivans. And, one presumes, at a profit.
After all, profit margins have been higher on those vehicles than on smaller cars. Reread my original post – Toyota and Honda sell MORE larger vehicles than they do small cars.
M1EK: You guys are making the extraordinary claims here. Again, it’s you that needs to supply the extraordinary proof.
Nonsense (and I’ve yet to see independent proof that the Prius makes money for Toyota). You’re the one making the extraordinary claim – that these companies are reaping most of their profits from small, low-margin cars. Sorry, this runs counter to the history of this business.
M1EK: And don’t back up to “I never said they didn’t make money on small cars”. You know what you were trying to imply – that the small cars were practically loss leaders; that is not remotely the case. If they make $1000/car on Civics, that’s a lot of money, even if they also make $2000/car on Accords.
You can’t even read what I posted, and apparently don’t realize that the difference between $2,000 and $1,000 is a HUGE difference in the automobile industry, where costs and margins are broken down to the level of cents, so please don’t tell me what I meant.
What I meant is there in plain English. Let me help you by breaking down what I’ve said:
1. I never said that Honda and Toyota lost money on the small cars.
2. I never said that they don’t make some money on them.
3. I said that the profit margins on smaller cars are not as high as the profit margins on bigger ones (and trucks and SUVs).
4. I’ve PROVEN that they sell more larger vehicles than smaller vehicles, contrary to your original, erroneous assertion. (Which left you whining that I had the gall to include Scion sales with Toyota’s small car sales totals, which actually BOOSTED the number of small car sales, and could have strengthened your case. LOL!)
5. It’s therefore logical to assume that a big, fat percentage of their profits come from these larger vehicles, and they wouldn’t be nearly as profitable if they were relying soley on Fit, Civic, Yaris, Corolla and Scion sales.
If you have trouble understanding these points – or want to continue mischaracterizing them – there is nothing that I or anyone else can do to help you.
The fundamental fact is that despite selling a lot of small cars, Honda and Toyota make a LOT more money than do Detroit (than did Detroit even when times were better). This makes your claim the extraordinary one – because H/T would have to be making incredibly larger profits on their SUVs to keep up with Detroit otherwise.
The characterization of your point is accurate: you pretend that you can’t make much money selling small cars. Obviously, Toyota and Honda make a lot of money selling small cars. You’re wrong.
And this statement shows quite succinctly how your goalposts keep jumping around:
“Toyota and Honda sell MORE larger vehicles than they do small cars.”
So which is it? Vehicles or cars? The Camry is a smaller-than-average ‘vehicle’ (when SUVs/pickups are included), but a midsize ‘car’. Which way do you want to take this?
By the way, the difference between $1000 and $2000 per vehicle is chicken feed compared to the $10000 they might have made on an SUV during the bad old days.
By the way, here’s a quote from YOU in which you attempted to compare ‘small’ versus ‘large’ cars, implying that the Fit was the only small car they had:
The Accord and Camry are NOT small cars by any stretch of imagination. They are medium-size cars both inside and out. Those two cars are where both companies make a large part of their profits. Honda sells about 85,000 Fits in the U.S., as compared to over 400,000 Accords. Quite a big difference. It also subsidizes U.S. Fit sales by selling the car in other markets were small cars command more of a premium.
M1EK: geeber, the first attempts by you and the other shill were to compare the number of Fits sold to Camries. That’s misleading nonsense.
I compared the number of Fits sold to Accords, but then in a later post I compared the number of small cars sold by both companies to the larger vehicles sold by both companies.
I moved beyond the original point to further prove incorrect your contention that these companies mostly sell small cars.
They don’t; this has been proven with sales figures; get over it.
M1EK: The fundamental fact is that despite selling a lot of small cars, Honda and Toyota make a LOT more money than do Detroit (than did Detroit even when times were better). This makes your claim the extraordinary one – because H/T would have to be making incredibly larger profits on their SUVs to keep up with Detroit otherwise.?
Yes, it’s completely out of the question that companies with a lower cost structure that are able to charge similar or higher prices for larger cars, minivans, SUVs and pickups would be making more than Detroit per vehicle, and this would have a significant contribution to their bottom line, even at a lower volume.
M1EK: The characterization of your point is accurate: you pretend that you can’t make much money selling small cars. Obviously, Toyota and Honda make a lot of money selling small cars. You’re wrong.
I never said that; here is what I posted:
4. I’ve PROVEN that they sell more larger vehicles than smaller vehicles, contrary to your original, erroneous assertion. (Which left you whining that I had the gall to include Scion sales with Toyota’s small car sales totals, which actually BOOSTED the number of small car sales)
5. It’s therefore logical to assume that a big, fat percentage of their profits come from these larger vehicles, and they wouldn’t be nearly as profitable if they were relying soley on Fit, Civic, Yaris, Corolla and Scion sales.
MIEK: And this statement shows quite succinctly how your goalposts keep jumping around:
“Toyota and Honda sell MORE larger vehicles than they do small cars.”
So which is it? Vehicles or cars? The Camry is a smaller-than-average ‘vehicle’ (when SUVs/pickups are included), but a midsize ‘car’. Which way do you want to take this?
For the 20th time, the Camry and Accord are not small cars; they are not small vehicles. Period, end of story. They are medium-size vehicles, whether you are comparing them to a Silverado or an Avalon.
I made this very clear in my post on September 29, 2008 at 4:57 p.m., when I listed the sales of not only small and large cars, but also pickups trucks, SUVs, crossovers and minivans, and then made SEVERAL comparisons, one of which was sales of small cars to all larger vehicles.
M1EK: By the way, the difference between $1000 and $2000 per vehicle is chicken feed compared to the $10000 they might have made on an SUV during the bad old days.
First, you have no proof that $1,000 is the actual per-vehicle profit for small cars, and second, I would like you to tell a manager at Honda or Toyota (let alone Ford or GM) that a $1,000 difference in profit per vehicle is chicken feed.
M1EK: By the way, here’s a quote from YOU in which you attempted to compare ’small’ versus ‘large’ cars, implying that the Fit was the only small car they had:
That was one example, and considering I made several more posts that further explained my position and made more in-depth comparisons, it hardly constitutes my final word on this subject.
If you scroll up through this thread, you will see that I made several additional postings that moved beyond that initial comparison, and were far more in-depth and have, if anything, further demolished your original contention.
Nice try
I know that you know that the Civic is a small car by most peoples’ definition; but I also know that when you first opened your mouth, you tried to pretend that the relevant number was “Fit versus Accord”. It tells a lot.
As for large vehicles vs. large cars – again, there’s much more reason to believe Toyota when they say they make money on the Prius than there is to believe GM if they say they make money on their midsize cars – given the financial results we have access to.
GM didn’t make money on cars the last decade or two because their cars suck – not because you can’t make a lot of money on cars, even small cars. You can’t explain the COMPARATIVE results of Honda/Toyota vs. GM/Ford/Chrysler given their relative product mixes without a healthy profit on small cars for H/T.
I would like you to tell a manager at Honda or Toyota (let alone Ford or GM) that a $1,000 difference in profit per vehicle is chicken feed. Don’t complain when they laugh you right out of the room…
It’s chicken feed compared to a $9,000 difference in profit per vehicle.
Likewise, I’d like to hear you claim to Honda and Toyota that they don’t make a healthy profit on small cars.
Look. I hate the Prius, but admit it makes money and sells like hotcakes. But I hate it with a passion. I’m waiting for a Honda hybrid.
M1EK: I know that you know that the Civic is a small car by most peoples’ definition; but I also know that when you first opened your mouth, you tried to pretend that the relevant number was “Fit versus Accord”. It tells a lot.
In my post of September 29, 2008 at 4:57 p.m. I furthered fleshed out the sales figures.
Whatever point you are trying to make by focusing an early post is irrelevant; I’ve proven incorrect your contention that Toyota and Honda sell “mostly” small cars in later posts.
You made that statement; it has been proven incorrect by unbiased sources (in spite of the amusing and desperate attempts to classify the Camry and Accord as “small” cars because…they are smaller than a Suburban or Silverado; I guess under that standard, a Cadillac DTS is a small car, too).
M1EK: As for large vehicles vs. large cars – again, there’s much more reason to believe Toyota when they say they make money on the Prius than there is to believe GM if they say they make money on their midsize cars – given the financial results we have access to.
Really…given that GM has been examined closely by independent organizations and even an independent auditing firm hired by the UAW, and Toyota is a Japanese-based company subject to completey different disclosure requirements.
I’m still waiting for that independent source of information from you on this matter, but I’m beginning to feel as though I’m waiting for Godot.
M1EK: You can’t explain the COMPARATIVE results of Honda/Toyota vs. GM/Ford/Chrysler given their relative product mixes without a healthy profit on small cars for H/T.
I have explained that there is a difference in cost structures, union agreements (or lack thereof) and legacy costs, which the companies and the UAW have attempted to address, but you chose to ignore these critical factors.
M1EK: It’s chicken feed compared to a $9,000 difference in profit per vehicle.
Which, of course, is irrelevant.
M1EK: Likewise, I’d like to hear you claim to Honda and Toyota that they don’t make a healthy profit on small cars.
Considering that I’ve never made this claim, you’ll be waiting for a long time. The simple fact is that the profit margins on smaller cars are less than the profit margins on larger vehicles, which is why Honda and Toyota (and others) have moved aggressively into larger cars, luxury vehicles, pickups, crossovers and SUVs within the last decade. Considering that these two companies are very efficient, and masters at platform sharing, and their new entries have mostly been successful, it would stand to reason that their forays into these more profitable market segments are responsible for a large share of their profits.
“Considering that I’ve never made this claim”
Yes, you have.
The Fit is made in Japan, and there was an article on this site a few weeks back where even the head of Honda admitted that the company makes very little money off it.
and
Toyota makes money through volume. It doesn’t make much money on each Yaris and Corolla, and whether it is actually making money from the Prius is a very good question – at least for those of us with a healthy dose of skepticism regarding information contained in press releases.
M1EK: Yes, you have.
The Fit is made in Japan, and there was an article on this site a few weeks back where even the head of Honda admitted that the company makes very little money off it.
Um, considering that Honda said so, and you have said that you trust these companies to be always truthful, there’s your proof.
And please note that it is a well-known fact that profit margins are lower on small cars than on bigger cars. So the head of Honda wasn’t saying anything that is “counterfactual” to those of us who understand how this industry operates.
This is in contrast to the profitability of the Prius, which certainly could be profitable (I never denied that it could be – I said that I would like to see independent proof), but, given its new and very advanced drivetrain and other technology, will logically cost more to make than comparably sized cars, but still must be sold at a price most people can afford.
M1EK: Toyota makes money through volume. It doesn’t make much money on each Yaris and Corolla, and whether it is actually making money from the Prius is a very good question – at least for those of us with a healthy dose of skepticism regarding information contained in press releases.
Um, again, that doesn’t prove anything, and certainly not the point you are trying to make. They make money through their smaller cars on volume, so they make healthy profits on small cars, but just not if you look at it on a per-vehicle basis. Given that they sell fewer small cars than medium-size and large cars, not to mention trucks, SUVs, minivans, crossovers and luxury cars, it’s pretty obvious that they depend on said larger vehicles for a hefty share of those profits.