Holman Jenkins offers his analysis of the Motown meltdown under the TTAC-usurping title “The Truth About Cars and Trucks.” According to the Wall Street Journal scribe, we should blame the current domestic auto industry implosion on the United Auto Workers’ (UAW) monopoly on Detroit production. Oh, and the manipulation of federal law to protect same. I think. “For three decades, the Big Three were able to survive precisely because they skimped on quality and features in the money-losing sedans they were required under Congress’s fuel economy rules to build in high-cost UAW factories. In return, Washington compensated them with the hothouse, politically protected opportunity to profit from pickups and SUVs. Doesn’t sound much like what you hear incessantly from your Congressman, about how Detroit’s problems are all due to management ‘incompetence’ in deciding to build ‘gas guzzling’ SUVs, does it?” Uh, it kinda does. And I’d like to see a bit more detail on this assertion, please: “Washington’s latest fuel-economy rules actually reward manufacturers for increasing the size and weight of some vehicles.”
But Holman is not without reason, as he condemns the feds for molly-coddling the UAW. Again. Still.
“The Obama strategy does nothing to change the basic dynamics of the homegrown auto sector — a labor monopoly combined with endless finagles in Washington to help the Big Three survive competition from Japanese, German and Korean auto makers. But maybe the shock of seeing GM nationalized will at least cause some in politics and the press finally to think about how we got here.”
I agree! But I would do, as I already said as much (if not so elegantly) in Bailout Watch 509. Anyway, Eddy and I reckon the MSM will have a lot of time to do Holman’s kind of thinking. “Look how long it took British Leyland to unwind,” Eddy reminded me. Jenkins should put that in his editorial pipe and smoke it. Then again, we call dibs on the American Leyland meme.
The auto industry is an evolution.
As Americans got fatter and fatter/ families got bigger and bigger/ jobs got more diverse / etc/ the Big 3 moved from the Bronco to the Excursion and from pickup trucks to the Avalanche.
As credit got easier and easier to get, subprime and prime borrowers moved from Explorers to Escalades.
Japanese auto manufacturers did more with less – producing gas sippers because since Japan has to import almost everything, they have no choice but to do so to keep their vehicles relatively affordable and to be more size efficient. And fortunately for the Japanese, they aren’t home to the fattest states on Earth – and they’ve got SUMO !
This hybrid, EV phase is a farce. The only people moving to those cars are people who can “fit” in them and people who are trying to avoid fuel costs.
Ultimately, people are going to buy what they feel comfortable in – and if your 6’7 like me, or 450 lbs like my neighbor, you’re getting a truck or a big car. It doesn’t matter if a car gets 1000MPG. If people can’t fit in it comfortably, and it doesn’t meet their needs, they aren’t gonna buy it.
“Washington’s latest fuel-economy rules actually reward manufacturers for increasing the size and weight of some vehicles.”
The claim, as I’ve heard it:
The latest fuel-economy rules recreate a version of the SUV loophole. While they want to get away from the light truck exception that treated, e.g., station wagons worse than truck-based SUVs, there’s still the problem that some people really do need trucks for work. They can’t be banned overall. So the government rules more closely regulate the fuel-economy of vehicles based on size and weight, so hypothetically a wagon gets treated like a similar weight SUV, rather than getting lumped with cars while SUVs got lumped with trucks. A certain weight and size means a certain fuel-economy limit, and there’s a sliding scale. The problem is that if you’ve got a vehicle that can’t make the limit for its class, you might sometimes have an easier time bumping up the weight and size to push into the next weight class, a la the Accord over the years, than improving the fuel economy.
The rules are designed to increase average fleet fuel economy, but there is of course plenty of room to game the system. It won’t work if people just move up to larger cars, or if manufacturers produce a wide range of cars but people just buy more of the larger ones.
The rules could actually hit hardest on small sporty cars with bad gas mileage. If they were larger, they’d be fine, but you’re not allowed to want a small fast car. Bad gas mileage is for big hulking work-capable cars, not fun. No wonder the Cobalt SS had to die. Of course, the Germans will just cheerfully continue to pay the fine. But other people may wonder why their Honda Civic Si now violates the rules, whereas an identical gas mileage V6 Accord is perfectly fine, since it’s larger and in a different class.
It’s called “attribute-based” CAFE standards. As Edmunds noted a while back, using attributes was mandated by the recent energy bill. Some consider it a sop to Detroit: the idea was that your target, rather than being the same for all manufacturers, was based on what type of vehicles you sold. The old rules used just a (sales-weighted) fleet average, and luxury car manufacturers just paid fines.
It depends on exactly how the rules are set, but I guarantee that it’s the nature of rules that people will find the best loopholes, which may in some cases mean moving up a weight class to make standards. But again, they just can’t ban large cars and trucks since some people do need them. Ordinarily, price is one way to distinguish want and need, so they could tax emissions or gasoline, but it looks like we’re getting regulations instead.
Longtime conservative commentator Jenkins blames the unions and government for all that went wrong at GM. No surprises there.
Farago, will you do a little ditty about the MPG of the car that Jack and Diane were fondling one another in that queen sized back seat.
My point is 40s-80’s these CARS, not trucks and not GAS GUZZLING SUV’s were the most unefficient, gas whorish, four barrel, big block, bloated SOB’s on the planet. Your Grandmothers Ford olds got much shittier fuel mileage than your wife’s escalade.
aside from my rant-The Jenkins article this entry is linked to….is one of the best, on the money mainstream reporting I have seen on this topic thusfar.
Ultimately, people are going to buy what they feel comfortable in – and if your 6′7 like me, or 450 lbs like my neighbor, you’re getting a truck or a big car. It doesn’t matter if a car gets 1000MPG. If people can’t fit in it comfortably, and it doesn’t meet their needs, they aren’t gonna buy it.
A punitive displacement tax on anything over 2.8 liters new and used would help change that tune. Then again, the whole CAFE thing will be moot because people will end up buying (and by extension, have the “Big Soon to be 1” making) smaller, more fuel efficient cars.
Nobody is making smaller cars. Every model is bigger than the last.
If Washington wanted Detroit to have an even playing field, they would do away with the fines and not allow CAFE rule breakers in the US – or GM (et. al.) would just pay the fines! Notice Ford, Chrysler, GM and the Asians meet the standard yet NO European does? (OK, maybe VW but aren’t they Porsche now anyway?)
CAFE is the wrong way to get where we want to go. A gas tax that stabilizes fuel prices (with a floor and ceiling) is. as well as lowering diesel prices is the US to encourage more oil burners. Finally, bring back the 2-stroke!
Braaap!
Kurt: Nobody is making smaller cars. Every model is bigger than the last.
So it is that when Taadah! VW finally imports the Polo, it’s the size of the original incarnation of the Rabbit/Golf. And about as anemic.
And Kurt, your Braaap at the end….you have a car with Jake braking?
I have raised the point that the UAW was a monopoly before. While I would not give them full “credit” for the mess, it certainly helped create the culture in which disaster flourished.
Bunter
Government is encouraged by lobbies to impose complexity on systems that would often perform better by being simpler. Anybody who has ever filed a federal tax return knows this.
People vote with their wallets. Simply impose a heavy tax on all sources of fossil fuels at the source (coming out of the ground or into ports). This way the cost will ripple through to consumers and they will vote with their wallets when they purchase vehicles, how they use electricity in their homes, etc. It will also make the long-term cost of energy more predictable which is a good thing for auto manufacturers and consumers alike.
I also don’t fit into a lot of cars because, despite being quite tall, I am, as they say, too short for my weight. Some small cars (I have a MINI Cooper) are intelligently designed and accommodate people of all sizes. Plenty of large cars fail that simple test.
I was disappointed to test drive a Fusion–a very worthy car that generally suits my needs–because someone in marketing decided that any well-optioned car should have a sunroof. This means I can’t comfortably drive one because the lower headliner necessitated by the sunroof means I don’t fit. I’m beyond the point in my life where I want to drive a car that doesn’t have leather seats, seat heaters, and a good audio system.
VW is FINALLY importing the Polo when they should be importing the Lupo! A Lupo with a Polo 1.2 might just be the small car America is looking for. (Not you taller/larger folks though). But you make my case. Now the Golf (or whatever they call it) is a large car with two versions smaller.
The Civic used to be a 750cc micro car. Now it comfotably fits a family of 4 on a long drive.
The Mini could fin IN the MINI.
As for the two-stroke, it is really for a different thread but technology is available to make the two stroke engine run clean with MUCH improved gas miliage. It only reckons that it you can create twice as much power out of half the engine, you will improve economy over the long haul.
None of us want to be hypermilers. We want power – but we also want to afford that power. American’s in general (stereotype) would not suffer what European’s (stereotype)consider NORMAL since Euros have LEARNED to live with less power do to artificially high gas prices.
The only way I see it is to tell the safetycrats to get real and have acceptable risk per vehicle weight so we can use smaller, more powerful engines in lighter (thus less safe) cars to satisfy our addiction to POWER.
And that’s what it is, you know. Power. European Supercars hit the 250 MPH barrier in the 1930’s. It’s not about building a faster car anymore. You just want it to FEEL fast. Well, drive a 1980’s FIAT Panda 750 on a fast, twisty road and you’ll either be juiced on adrinalin (sp) or scared silly!
Kurt, how politically suicidal would that be? Yes, CAFE has its flaws but it’s easy for us voters to swallow.
Detroit has had more than 30 years to adjust to CAFE and the standards have remained stable for much of that time.
“American automakers can’t compete because of the UAW.”, same ol’ neo-con pap. If you haven’t noticed, the Europeans and Asians were competing quite nicely, even when they were building cars in their home countries, with labor costs that were as high as those in the US, and paying more in taxes to boot. Fact is the US automakers didn’t want to produce cars, certainly not entry level models. Aging, obese American asses, combined with gas that had never been so cheap(adjusted for inflation), easy credit, and a general attitude of entitlement sent Douchebagus Americanus on an SUV/cowboy Cadillac buying spree. The US auto industry abandoned the car market because the light truck/SUV market produced a much better ROI, not an illogical thing to do. What was illogical, was expecting things to remain the same in perpetuity. The US automakers squandered their SUV generated cash hordes on one idiot project after another. Meanwhile the easy credit dried up as gas prices went up. The result was the US auto industry went tits up. To hell with them.
Jenkins is dead-on correct. The poetic justice of the UAW owning the dead car companies that they’ve killed off will be tempered by the reality that Obama is setting up the taxpayers to pay the platinum plated benefits for UAW workers for decades, all while the car companies build cars that the “greens” – and nobody else will want.
The UAW and its members fully deserve this fate. The rest of us do not.
if your 6′7 like me, or 450 lbs like my neighbor, you’re getting a truck or a big car.
I’m 6’8″ and 250lbs. I drive a Honda Fit every day. I’ve driven a Smart car for hours on end. The most comfortable car I’ve ever driven is a MkV Golf. I can’t properly fit in a Crown Vic and end up with my knees bashing the dash in the 4Runner.
Car size is only tangentially related to people size.
skor: If you haven’t noticed, the Europeans and Asians were competing quite nicely, even when they were building cars in their home countries, with labor costs that were as high as those in the US, and paying more in taxes to boot.
And the cars cost more over there than they do here.
skor: Fact is the US automakers didn’t want to produce cars, certainly not entry level models.
True, to some extent. But note that Honda, Nissan, Toyota and Hyundai have all moved aggressively into the luxury car, pickup truck, SUV and crossover segments, too.
Last year, Toyota sold more light trucks, crossovers, SUVs and mid-size and larger cars than it did small cars (and that includes the Scion models).
And the Europeans haven’t been in any rush to bring over their smallest models. The smallest VW available for sale in the U.S. is the Rabbit, and VW pretty much acts as though it doesn’t exist.
skor: Aging, obese American asses, combined with gas that had never been so cheap(adjusted for inflation), easy credit, and a general attitude of entitlement sent Douchebagus Americanus on an SUV/cowboy Cadillac buying spree.
Please note that Mercedes and BMW build SUVs, their larger luxury cars don’t get much better mileage than an SUV or a Cadillac, and lots of people used easy credit and lease deals to buy their vehicles.
Are the people who buy those vehicles “douchebags” too, or are they exempt from name-calling because you approve of their choices?
…and JSForbes hit the nail on the head. It’s not about what’s right. It’s not about the American auto industry, or the environment, or the American auto worker. It’s about not having to make the tough calls and the preservation of political careers. It’s about adding a little honey to the Castor Oil shoved down the voters throats.
CAFE is flawed. Detroit DID adjust to the standards. They built SUV’s instead of station wagons. Not the improvement the GOV had in mind? Change the rules? OK Detroit built LARGER cars and just moved up a class.
And what did the Euros do? Paid the fine. Porsche said “Screw it, we won’t even try”. Same with Damiler, same with BMW.
And I ask you this? Had Ford built the Fiesta, had Chevy built the (Opel) Corsa, had FIAT imported the Panda or 500, had BMW imported the 1 series, had Merc imported the A class…had any of these happened in the 90’s or early 2000’s, whould it matter? Would American’s buy them? Except for the second half of 2008 – not only no, but HELL NO! You wouldn’t even have made enough to pay the shipping costs.
I will agree though that CAFE wasn’t THE problem. All three US manufactures made billions on the SUV/Pickup/Minivan craze but instead of paying down their dept or developing new technologies, they pissed away their profits on shareholders, directors pay, UAW etc. and then when they ran out of that, they took MORE debt to piss more into shareholders, directors pay, UAW etc.
The grassbopper didn’t put anything away for the winter.
The CAFE rules are classic good intentions leavened with politics. The SUV loop/light truck loophole was written with Detroit in mind, as pickup trucks and vans were already Detroit’s biggest sellers at that time.
If there had been any intent to have the CAFE exceptions actually skipped for those who need light trucks and Vans for business, how simple would it have been to have the CAFE regulations waived for vehicles designed registered as commercial vehicles?
I mean, how many delivery vans have you seen lately which have leather interiors?
The attribute based CAFE standards proposed for MY2011-2015 are based on a car’s footprint, in other words, it’s wheelbase multiplied by its track width. The way the fuel economy target curve is set up is that it’s more or less flat on both ends with a relatively steep middle section. In the middle section a really small change in a cars footprint can alter it’s fuel economy target by several MPG. There are all sorts of little details and loopholes like that in CAFE, but the easiest way to fix the whole issue would just be a gas tax.
Like the war on drugs, you can try to deal with issues on the supply side all you want but until you change consumer demand for the products, you won’t really get anywhere.
Jenkins is dead-on correct.
He’s actually factually wrong. The $2,000 figure is really nonsense, and not supportable.
Here’s a challenge to you — show me something in GM’s financial statements that supports that data point, after everything has been netted out. I wish you luck with that, because you’re not going to find it.
Once you’ve given up trying to find it, take a look at the statements of cash flows to watch the movement of money within GM, and you’ll find that over the last five years, GM used its combined pension and VEBA transfers to **improve** its cash position by $6.7 billion.
Yes, Virginia, GM has supporting its operations by drawing down on this money, while simultaneously renegotiating the packages so that it could defer payments that it knew that it would never make, all while complaining to the media about this “overhead” that it wasn’t paying in the first place.
Meanwhile, you have Toyota with more people on the payroll and with higher operating expenses per unit. Yet despite that burden of people and costs, Toyota turned a profit because it has revenues per vehicle that, as of 2007, were about $8,000 higher than GM’s.
Why the fixation on the fictional $2,000, when there is $8,000 of real, quantifiable bleeding right there in the income statement? My guess is that journalists and pundits like Jenkins can’t even read a financial statement, so they just regurgitate what they’ve been told by Detroit PR departments, instead of doing their homework. Now tell me who’s dumb and lazy.
The Truth About Cats and Dogs, 1996, with Uma Thurman and Janeane Garofalo
So skor, seeing how many SUVs were/are parked in the big 3 employee parking lots, I guess you are calling the UAW a bunch of DoucheBags.
Good for you!!!!
The SUV loop/light truck loophole was written with Detroit in mind, as pickup trucks and vans were already Detroit’s biggest sellers at that time.
Yes, but the minivan (in the modern sense, and certainly in the Detroit big seller sense) and the SUV didn’t exist when CAFE was first written in 1975, and they definitely got a boost because of CAFE. The loophole didn’t intend to create the minivan and the SUV, it was also intended because some people just do need larger vehicles. Once people and Detroit got used to the lesser-regulated vehicles, it was difficult to change it.
Meanwhile, you have Toyota with more people on the payroll and with higher operating expenses per unit. Yet despite that burden of people and costs, Toyota turned a profit because it has revenues per vehicle that, as of 2007, were about $8,000 higher than GM’s.
Ah, so your point is that GM is producing too many inexpensive cars, perhaps. But some people don’t want to spend a lot of money on a car. Should everyone only cater to the high end of the market? If someone really doesn’t care about interior quality, and wants to save $8,000 by not caring, shouldn’t someone be allowed to market to them? Admittedly, catering to the high end of the market allows you to pay your workers more, which is what people seem to want, though some of the same people seem to criticize GM for making too many high-margin upmarket SUVs and trucks, and not enough low-margin downmarket economy cars. (Although, yes, if there were a greater market in the US for small but luxury cars, perhaps.)
Saying that GM’s costs are too high or that revenue is too low is really the same thing, or two sides of the same coin. And that point is efficiency.
You can produce cheap cars cheaply, or expensive cars expensively, and both are fine strategies. What you can’t do is produce cheap cars expensively and still make a profit. Complaining that “GM’s costs aren’t an issue, because their costs are competitive, they’re just selling the cars for less” is missing the point. For GM to make cars that they could sell for more, one presumes that they would have to increase their costs. It’s ridiculous to assume that GM could just increase the revenue per vehicle by $8,000 without also increasing costs, both capital and labor. Vice versa, if Toyota were producing exactly the same kind of cars that sold for the same amount of revenue as GM, their costs would be lower.
The fundamental problem is that GM and Chrysler have never responded to the increase in production efficiency that the Japanese automakers confronted them with. There are only a handful of ways to increase your efficiency, and most of them result in needing fewer workers to produce the same amount of stuff, unless you’re also able to counteract this by producing and selling more goods thanks to your better efficiency and perhaps lower prices. And the UAW does make it difficult to improve efficiency in this way. The contracts assumed that GM would always have half the US market, and make it difficult for GM to shrink.
Ah, so your point is that GM is producing too many inexpensive cars, perhaps.
No. They aren’t intended to be inexpensive. The market renders them as being inexpensive because they aren’t as desirable. If GM could sell Cadillacs at Mercedes prices, it would, but it can’t.
Nobody with half a brain would pay Civic prices for a Cobalt. The Civic is better and sells at a higher price. Yet despite the higher price, Honda can retail far more Civics than GM can sell Cobalts, even when including fleet sales.
GM does not have a cost problem, it has a product problem, which leads to a revenue problem, which leads to losses.
Saying that GM’s costs are too high or that revenue is too low is really the same thing, or two sides of the same coin.
No, it absolutely is not the same (although the mistaken belief that it is is the very same error that has led to GM’s failure.)
Cost and revenue are not the same. Revenue is a reflection of desirability, and the company that has the most desirable lineup is bound to win. At this point, cost has become a function of letting suppliers operate on the verge of bankruptcy and paying less money to fewer people, while competitors with higher costs make more money.
GM already has some of the lowest costs in the business. There is very little left to cut, and everything that they do cut comes at the expense of suppliers and workers. Unless you expect everyone to volunteer to be a GM supplier or employee, that’s a rathole of a business plan.
GM needs to sell cars that people want. The cost cutting strategy doesn’t make the cars desirable. If anything, GM may need to increase its costs, so that the customer gets a better car and is willing to pay more for it.
I’m no fan of the UAW and its impact on the auto industry in the last 30 years, but to blame them solely or even mostly, is inaccurate and risks repeating the same mistakes by taking the wrong corrective action.
The senior management of the auto companies and the government, in that order, are the two most important factors. Every union contract had two sets of signatures, management and union. Managements’ (plural to reflect all members of the big 3) acquiescence to union terms is a big part of the problem. This is short-sighted thinking that is pervasive among the management team.
Labor costs, however, were not the only problem. I worked at an Asian manufacturer in the late ’80s and 90s that had a joint venture with one of the big three. The development costs at the domestic company were often a multiple of the Asian costs and sometimes 10x higher. This is the white collar side. When the market changed from selling 500,000 units of a model to 50,000, the inflated cost structure couldn’t compete in development. One result was mass badge-engineering.
The government shares blame for several boneheaded policies. My top 3 failures are:
1) Not breaking GM up in the ’60s when they had monopoly power under anti-trust laws. I believe this is the most important factor in the bloated cost structure and poor competitiveness ever since.
2) CAFE laws that tried to mandate consumer action from the supply side of the equation. If Americans were willing to accept this change, they would need the political will to pay for it (aka a fuel tax that forces change of behavior–maybe $4-5/gallon gas in today’s terms). The rise of SUVs is directly attributable to the unintended consequences of this law.
3) Voluntary import quotas in the late ’80s that pushed the japanese brands upmarket and into US production. Profitability greatly improved allowing them to survive the later Yen devaluation. Increased volume meant they could drastically increase share.
There’s a lot more but this is a good start. I look forward to reading more thoughts on this.
As a trader I’ve been well-aware that CAFE favors classifying more and more domestic vehicles as trucks thereby ensuring the Big 2.8 build more and more trucks.
As a Minnesotan I’m happy to see more trucks and nicer trucks because we use trucks as God intended light trucks to be used in the northern half of the state.
PCH,
If you will only take as proof, evidence on the financials, then you aren’t playing fair. The financials are a lousy place to look for the facts on government intervention. They simply won’t show there.
I don’t know about the 2k figure, and I disagree with blaming the whole thing on the unions, but anyone who doesn’t throw the union/labor law situation in the top causes has a problem with reality.
If you will only take as proof, evidence on the financials, then you aren’t playing fair.
Forgive me for using facts to support my position. But Detroit managers have spent years pointing at financial excuses for their problems. So when I look at the financial statements, I would expect those statements to support those management alibis. Yet they don’t.
General Motors has fewer employees than Toyota, even though it makes more cars. On top of that, Toyota has higher operating costs. By those measures, GM is vastly more efficient.
The problem is on the revenue and inventory side. For every dollar that GM takes in from car sales, Toyota brings in $1.42. Toyota market share is going up, while GM share is going down. Toyota focuses on retail sales, while much of GM goes to fleet.
To hit the same types of sales figures, GM needs to produce double or triple the nameplates, while selling cars at lower prices. It also ends up with twice the inventory sitting around at any given point, because their turn rate is half of what it should be, thanks to the undesirable product.
Government and labor have nothing to do with any of that. Nobody forced Detroit management to design and build cars that people don’t want, even when sold on the cheap.
What people are missing – and I think what Pch101 is pointing to – is the impact that a manufacturer’s reputation has on its ability to obtain a certain price for its products.
Honda and Toyota have delivered consistently reliable, attractive products in two key segments – compacts and family sedans – for over two decades. As a result, people are willing to pay a premium for a Civic or a Corolla. They pay this premium because they expect to receive a reliable, well-built, good-performing car in return. Both manufacturers have consistently delivered.
Beginning with the Vega, and continuing on through the Chevette, the various versions of the Cavalier, and finally the Cobalt, GM has spent the last 30+ years building small cars that have ranged from awful to mediocre. People have learned that buyers who want a top-notch small car should give their Chevrolet dealer a very wide berth.
Even if the new Chevrolet Cruze is better than the Corolla and Civic, it will be hindered by the ghosts of small Chevrolets past. Thus, people will initially be unwilling to pay a premium for it, as compared to a Civic and a Corolla.
Plus, the Cruze nameplate has no brand equity. Even my grandmother who knows next-to-nothing about cars knows what a Civic is. GM, meanwhile, will have to spend a small fortune introducing the Cruze to a marketplace already crowded with established nameplates.
Note that Ford is taking a leaf from the Honda-Toyota playbook and trying to consistently improve its products to meet the competition. Hence, the new versions of the Focus and the Fusion. And, just like Honda and Toyota, it is keeping nameplates in critical market segments to build brand equity (although whether this will work with the tarnished Taurus nameplate remains to be seen).
Labor costs are one part of the puzzle. Note that Ford is building the critical Fusion in Mexico to improve profit margins on the vehicle. But labor costs are not the end-all and the be-all. Paying UAW workers $1-an-hour isn’t going to make Cobalts more attractive than a Civic, especially if GM doesn’t believe in the small car market enough to use the savings to upgrade the Cobalt (and history suggests that GM won’t do this).
PCH,
Any other theories about the failure aside, you know that while evidence can often be found in financial statements, the contrary idea, that all evidence must show up there, is false. Those who worship the statement always use hindsight to show the evidence was there all along, but it’s always BS.
Argue all you want about it being management’s fault. You have heard me say a million times that the government and the UAW have so hamstrung GM that they now can’t attract enough good managers.
Lastly, numbers of employees no longer means squat. And, you know that too. It’s circular nonsense that you will turn around to blame on management issues no matter what case is made against it.
Big failures are rarely caused by single issues. The idea that you can blame the problems on management or UAW while excusing the other is just foolishness in the highest degree. There are only four groups possibly responsible and we aren’t able to blame the customer. So government, management, and UAW all are to blame, and their is plenty of evidence to convict them all.
you know that while evidence can often be found in financial statements, the contrary idea, that all evidence must show up there, is false.
I have no idea what this is supposed to mean. What I do know is that cost data is supposed to be booked in the financial statements.
If it isn’t, then GM had better go to the SEC and refile those statements, because that data is supposed to be in there. If you wish to claim that the statements are false, then you had better be prepared to prove it.
Lastly, numbers of employees no longer means squat.
It sure does when bitching about the payroll is a basis for the argument, which is precisely what GM management has been doing for years.
The point being is that GM management exploits your anti-labor sentiments to lie straight in your face, while folks of your persuasion swallow what are obviously misleading statements because you don’t even bother looking at the numbers.
I look at the numbers, because they matter. In this case, looking at them also details the lies being spun by the corporate managers responsible for running the company. The problems are obvious; the only way to miss them is if you willfully choose not to see them.
Number of employees cannot be compared due to outsourcing. If one company outsourced a part the other did not, which is certainly the case, then comparing headcounts is fruitless.
I would be very interested in how I have been exploited by GM management.
Are you levin labor and government blameless of do you just contend that management is so bad they don’t matter?
“I’m 6′8″ and 250lbs. I drive a Honda Fit every day. I’ve driven a Smart car for hours on end. The most comfortable car I’ve ever driven is a MkV Golf. I can’t properly fit in a Crown Vic and end up with my knees bashing the dash in the 4Runner.”
I’m 6’0″ 275#, the Fit is uncomfortable, Hondas tend to be too short, (head hits the roof in Accord and Civic) never seen a Smart, VWs are fine if a little narrow, the Beetle is the best.
Number of employees cannot be compared due to outsourcing. If one company outsourced a part the other did not, which is certainly the case, then comparing headcounts is fruitless.
The same company that had fewer bodies on the payroll is the very same company that had the lowest operating costs. And that company would be GM.
This is the same company that spent the last five years using the pension and VEBA accounts to improve their cash position by sucking money of them, while negotiating away some of the obligation and not paying the rest.
There’s just no way to spin it in your direction. The facts are not on your side here.
do you just contend that management is so bad they don’t matter?
Isn’t that obvious? Nobody told Detroit management that they were require to build inferior products and destroy the goodwill that they had built during their days of oligopoly.
These companies refused to learn how to compete. GM is particularly guilty, because as the top dog, the corporate culture was offended by the idea that they had something to fear from their competition. It’s a David vs. Goliath story, except Goliath slit his own wrists while blaming everyone else for not supplying enough Band Aids.
Are all those “family sedans” really “family” sedans? I thnk that is bogus marketing speak. It’s purveyed by the same people who tell you that 3 people fit in the backseat of a Toyota Matrix. I don’t think I know any families who just have an Accord or Camry. It’s either an Accord/Camry/Sonata and a Sienna/Odyssey/Caravan or if it is a lower income family a CR-V/Rav4/Equinox. I see older folks with sedans but rarely mom+dad+kid(s)
The mid sizes are the average lone drivers car of choice.
Right on Pch101. Good work.
I have argued for months now that the anti-UAW arguments are about 1975, not 2009, not even about 2002. The GM plants can build any car you want. I sometimes thought that they should just buy old BMW (E46) or even Mazda (929) designs, freshen them up and call them Pontiacs or Buicks.
Good design costs no more than bad design. I cannot even begin to understand why GM couldn’t buy, beg, or steal a good mid sized car design for example. Upstart Asian makers on their second effort do better than a GM that has been at it for a hundred years.
lbc_conejo also makes a very good point about GM not being broken up in the fifties/sixties. It became a quasi governmental corporate entity, thinking of itself as basically beyond such mundane things as good design. When a company gets large and rich enough power becomes its own justification.
Wow, lowest operating cost. Show me where it says in the statement that the cars are crap or agree that there are problems that can’t be diagnosed with a finacial statement.
Show me the union shop state manufacturer with an almost all UAW workforce doing well or admit there may be something wrong there.
I say there is blame all over, you say it’s all management. Which of us is hamstrung with ideology this time?
Pch101:
As a NYer familiar with the multitude of ways that unions rent seek, I think Jenkins has a point. I don’t know how he gets to $2K, but individual labor costs at the plant level are a start.
There’s no way a UAW plant can compete with the transplants in producing smaller cars. Not with work rules, pension and retiree health benefits. Not with the quality of managers you tend to attract to union shops. The domestics saved by cutting corners – on parts, quality, warranty payments.
GM would have been justified in off shoring small car plants long ago and sticking to trucks in NA plants. But they couldn’t, because (union backed) CAFE regs mandated production location.
That Toyota has more employees is a side issue. Toyota can afford more employees because they’re not in the retiree health care business like GM.
Show me where it says in the statement that the cars are crap or agree that there are problems that can’t be diagnosed with a finacial statement.
That’s a straw man argument if there ever was one.
Be serious here. Financial data is supposed to be contained in financial statements. If you want to talk about expenses, then we can and should use financial statements to figure out what they are.
Information about quality is available from other sources. We all know what those are, and we know that what they say isn’t particularly positive. Those results are reflected in the sales and market share figures, which are heading in the wrong direction for GM in particular. It isn’t logical to argue that we can’t talk about financial data and reliability in the same sentence just because we don’t get both of them from Consumer Reports.
I don’t know how he gets to $2K, but individual labor costs at the plant level are a start.
That’s a blind man/ elephant approach. If an individual worker on an old contract makes a higher wage than a younger worker in a transplant factory, that does nothing to deal with the big picture: the domestic has lower operating costs and fewer workers.
Jenkins’ argument is as sloppy and lazy as the stereotype UAW line workers whom he dislikes. It is just as hollow and cliche as these wingnuts who complain about the other fictitious bogeymen, such as “currency manipulation” and “dumping”.
Detroit has failed because it failed to serve the customer with products that consumers want to buy. It is no more complicated than that. I would no sooner blame the government or UAW for the design and engineering of the Aztek than I would give them credit for the Mustang. This is a management failure, through and through.
PCH,
Strawman? It would be a strawman if it wasn’t actually my original point. Reread the thread and you will find that you tried to make the standard of proof that the evidence must be found in the financial statement.
You are mostly ignoring my main points because you have apparently closed your mind. Bookmark this for next time you want to accuse me of same.
you will find that you tried to make the standard of proof that the evidence must be found in the financial statement.
You must be reading a different thread. What I said was “What I do know is that cost data is supposed to be booked in the financial statements.”
You can’t possibly deny this point. Costs are supposed to be booked in the financial statements.
Detroit claims that it has labor costs that are substantially higher than does everyone else, as if that’s some sort of clincher. Yet if you do the math, you can see that they have smaller workforces, lower operating costs and that they have a tendency to raid their pension and benefit accounts in order to grab cash.
Those are just facts, and they’re hiding in plain sight. You can admit it or deny it, but they are there.
A lot of what you miss is this — in the case of car manufacture, most of the costs is in the parts and components, not the labor. This may not be true of every consumer product built on an assembly line, but in the case of a parts intensive, costly product such as an automobile, this is the case.
Accordingly, slashing labor costs cannot be a lone salvation, because labor is not a large part of the expense load, even when the wages and benefits are above those of other industries. That’s exactly why automakers did so well for decades, despite relatively high wages — they could easily hurdle their costs with relatively high prices.
Their problems come fron a lack of pricing power, which comes from having inferior products. Toyota is able to support more workers and higher costs because it sells cars for higher prices. As Geeber points out, Ford appears to be copying Toyota in this regard, hoping that selling a lot of bread-and-butter vehicles of high quality will eventually support higher prices and more sales. That’s what the rest of Detroit is going to have to do with they want to stay in the game.
PCH,
You wrote, in this thread, “Here’s a challenge to you — show me something in GM’s financial statements that supports that data point, after everything has been netted out.”
To which I replied, also in this thread, “If you will only take as proof, evidence on the financials, then you aren’t playing fair. The financials are a lousy place to look for the facts on government intervention. They simply won’t show there.”
Frankly, the amount extra that UAW costs will never be able to be ascertained by looking at the financial statement – NEVER. It’s not that granular, and even if it were, it would always be debatable how much of any figure was actually due to government influence. I won’t sit here and list all the costs that won’t show up on a balance sheet even one that isn’t meant to be as misleading as the investors and regulators will allow.