No Bailout of the 'Big Three'
For nearly three years I traveled around the United States to upwards of 30 states and every week I rented a car. Seldom did I use the same rental company and drove a potpourri of cars manufactured in this country, Korea, Germany and Japan.
Over the years, I have NEVER felt that cars manufactured in this country were anything but trouble. I have owned 2 Fords (Ranger and Aerostar), 4 Toyotas, 4 Mazdas, 1 Kia and 3 Hondas. The Fords were pure rattle traps. I never had an issue with any of the other cars except one Honda with engine trouble and the Kia was traded in at 169,873 miles and the only thing I had to spend any maintenance on was a timing belt that was suggested to be replaced at 60,000 miles and was replaced at 90,000 miles.
Also over the years I have had several company cars; 3 Toyotas, a Dodge and presently a Honda hybrid. The Dodge was a nightmare and undependable but the rest have been very dependable.
So, over the last three years I had the opportunity to rent so many different autos and I can say unequivocally that American cars are just inferior. Here are some of the worst.
Any Chrysler is a piece of trash. It reached a stage that if the only car the rental agency had on the lot was a PT Cruiser, I would leave and rent elsewhere. The PT Cruiser is truly one of the most awkward cars to drive and the suspension as well as the handling is poor. The Sebring is reminiscent of the Volare or Aspen. Beyond that, the transmissions are jerky and the fit and finish is straight out of the 1980’s. And the mini-van? Yes I was stuck with one of those once…..ughhhhhhh!
GM Products are a slight step up from Chrysler products but they are also lacking on handling, fit and finish. The suspensions are much better but overall it is an “American” auto and it acts like one. The Aveo, Malibu and Cobalt are throw- away cars. However the Pontiac G6 is reminiscent of a foreign car. It handles beautifully and is very comfortable. Still the steering can be choppy and the transmission is clunky. If I had a choice I would rent a G6. I will say that I had the opportunity to rent a couple of Saturn’s and they were OK.
Ford, what can I say? I own a Mazda6 as my personal car but the Ford Fusion (build on the same frame) is no Mazda6. It is a true American car; poor fit and finish, a clunky transmission and choppy handling. The Fusion is terrible and the Explorer is truly aggravating to drive. The worst is the Mustang……I had the indistinct pleasure of renting one in Detroit and I felt as if I was back in the 60’s. Nothing has changed on the Mustang…..nothing!
Now after ranting about American cars for four paragraphs you are probably asking, what is the point?
The point is that we should not bail out the American auto industry. For decades they have built inferior autos when the demand for foreign autos has grown, year by year. The engineers at America’s auto makers have continued to perpetuate mediocrity in design and performance. I know an engineer at GM and he admits that there has been so much pride in our own engineering that they completely missed the boat and have fallen behind foreign competitors.
Another factor plaguing the auto industry has been unions. Yes, many of you will probably say: “here he goes again”, but it is true. The average auto worker has a total compensation package of around $75 per hour (base wages, benefits, retirement, etc) and an effective wage of $43.75 per hour. That’s right, the guy attaching tires to a new auto earns about $340 per day usable wages and $600 per day all in with retirement. That translates into $2400 for a 40 hour work week in real wages and $4200 for a 40 hour work week for total wages and benefits).
Still another windfall that Japanese car manufacturers have is that their innovation has delivered them at an engineering advantage. Toyota has saved over $1000 per vehicle over the last five years by designing components such as hinges and air bags so that they can be used on a wide variety of cars and trucks. One U.S. automaker offers 81 varieties of side view mirrors as compared to two for its more efficient Japanese rival.’
Here are some more facts:
· Toyota spends $348 per car on warranty costs versus $500 for GM and Chrysler
· U.S. automakers spend $138 more per car on longer holiday costs for workers
· Union workers cost car manufacturers $1400 more than overseas competitors
· U.S. automakers spend $70 more per car on worker absenteeism
· Japanese spent $133 per car on 30 minutes of break time/day versus $203 break time for US counterparts
That applies to Toyota in both the U.S. and Japan. The bottom line is that Japanese autos are $2400 on average, more profitable than cars made by the big three. And….they are just more durable, comfortable and have better fit and finish!
Here are the reasons why we should not bail out the “Big Three”:
1) Out of pride and hubris, US manufacturers have had over 40 years to learn from the Japanese and compete effectively.
2) Unions have become greedy and have hamstrung US auto manufacturers from being able to be competitive
3) US auto quality is poor compared with their foreign counterparts. From fit and finish to ride to mechanical dependability.
4) Management and fiscal responsibility have been two issues that have been front and center in the profitability of US auto makers. Take a look at the “palaces” they have built in Detroit. I can never understand why companies spend so much on expensive real estate and buildings?
Now, I am not suggesting that we put the auto industry out of business, but, unions need to take a serious cut in pay and benefits to avoid their workers being left out in the cold in an all or nothing scenario. The auto makers MUST replace their engineers with innovative performers who understand that they need to compete with foreign auto makers who produce a more reliable, better product.
Now a bit about hybrids. Hybrids are a new technology and I drive one. Even foreign auto makers trade fit and finish for fuel economy. Yes, it runs at 40 MPG but often I wonder if it might get out of the way of other drivers if I scream “Yabba-Dabba Doo”! Just joking.
Finally, the “Big Three” have placed all of their eggs in one basket and over the last few years built gas guzzling SUV’s. They have become so bureaucratic that the introduction of new models takes years and the result is yet another inferior car.
We bailed out Chrysler before and Iacocca took the company to new heights. Since then, Chrysler has become synonymous with garbage. It is a slippery slope to bail out these inefficient dinosaurs and allow them to continue on the same track.
Now I am sure that some folks think it is un-American to buy foreign cars but in the end, why pay the same money for an inferior product and perpetuate the same mediocrity.
Just The Facts
Just the facts, Micheal and it has little to do with wages of the workers. As usual, once something like a "union" or high wages are mentioned, you go on the attack.
Try Forbes, the Wall Street Journal, The Detroit Free Press, New York Times, Newsweek and Time.
Two points:
This "crisis" in the auto industry has been caused by three things:
1) Unwillingness and inability to compete with foreign automakers.
2) Substandard engineering leading to poor mechanical performance, poor fit and finish, no durability, expensive repairs and poor ride.
3) Out of control wages. Michael, when a person makes $40+ per hour to place a nut on a bolt and receives the cadillac (no pun intended) of health coupled with lavish perks, that adds so much cost to a car.
At one point unions made a difference. Unions have now gone too far. I make far less than the average auto worker, if that is anyone's business as you bring up here.
The issue is that the unions, in order to keep ALL auto workers from winding up in the unemployment line will need to yield. If not, there will be chaos.
"You and yours". I guess that means that you support 'card check' for unions which completely overrides the right of workers to a secret ballot?
Michael, A Couple Of Other Things
1) Executive wages will have to be reduced as well. There is no question about that.
2) In October of 2007 the UAW struck a deal with GM which allowed those $70 per hour employees to retire and bring in employees at a lower compensation. The issue is not that steps have not been taken to reduce this but it was a too little too late.
If you read the blog, Michael, you will see that it is not all about unions and wages; it is a combination of things. Stop being so political....you were the first to complain about the previous bailout...why not this one????
When will we hit bottom?
My only hope right now is to hear "We've no where to go but up." Not feeling real warm and fuzzy about that, however.
Firstly, I don't want to bail out any industry.. but what is the ripple effect if we don't? CEO pay is a good start - and the vast difference between John Q worker and CEO/CFO's etc. is beyond appalling. Talk about wealth re-distribution, let's start there.
Secondly, the Big 3 don't just do business in North America (yet they want the USA to bail them out). Shame on them all. Hey, we started with the airline industry and now EVERY industry is going to expect a bailout.
Now it's trickling down to everyone. Who's going to bail us all out when no one has jobs anymore?
America can't bail out the world - yet it appears this horrible, misdirected country is being asked to do so.
My husband and I are already very much effected by the ills of the auto industry and we're bracing ourselves, expecting it to get a lot worse before it gets better.
A forced career change is likely in the future for him - a bit of a scary prospect after 25+ years in this business.
Bill, I do take a little offense at your "Chrysler is garbage" comment. As proud owners of 3 of them... (2 of them being 1997 and 1999's with over 100K miles on them and still going strong) - I think I might tend to disagree. There are lemons, but then there's lemonade.
Yeah, we tend to hold onto stuff. Along with our guns and religion. ;)
All, enjoy your Sunday! -J
_
That is America
No offense intended, Judy, if you are happy with Chrysler, then drive away! That is America.
However, if you look at the overall track record of Chrysler, fit and finish, reliability, overall life of the vehicle and especially resale it speaks volume.
You might pay $3000-$4000 more for a foreign car but most retain their value and offer more on a trade in. Few would agree that a Chrysler is the quality of a Honda.
Yes, we tend to hold on to stuff as well. Obviously guns and religion.
To Your Other Poins Judy
I too hope that we have nowhere to go but up. But not government created jobs, let the private sector take care of itself. If Obama can not do that then he will be a one term president. My guess is that they will find a way.
If we bail out the auto industry we need to require a complete management change, identifying those living in the past and recruiting those who have a vision. In fact, let's hire the execs over at Toyota to run the Big Three. They seem to know how to do it!
CEO pay, yes require them to take a 25% cut or enough to make their salaries reasonable or no bailout money.
The Big Three work out of beautiful glass palaces in Detroit so let's require them to sell that property for pennies on the dollar if they accept a bailout and the property belongs to the taxpayers!
Next, stop all foreign aid. Period. Spending billions in Africa on AIDS while we suffer is just dumb.
Next deal with the unions and make union demands and wages REASONABLE. It will take all in the auto industry to get this thing straightened out!
No Links
Again, no links. If you want people to believe your rants then you should provide documentation to support them.
Capitalism = Privatize the profit; Socialize the risk.
Why should we be bailing out banks, and insurance companies, and automobile manufactureres? If they can't make products that people want, then they shouldn't be in the business. Let them go belly up, right Bill?
Here's a Bone
This excerpt was in the American Prospect a liberal publication and it speaks to their wages:
Auto Worker Wages
"Articles on the wage costs of automakers routinely reported that autoworkers were paid in the neighborhoods of $75 an hour. This figure was obtained by averaging the cost of contributions for retiree' benefits over the hours worked by the current workforce.
If we looked at direct compensation for current workers, this would likely be in the range of $40 an hour.
--Dean Baker
Now, Baker was making a point that they really do not make $75 per hour they make $40 per hour; both facts in my original post.
Be a big boy, do the research and be informed. Conservatives don't spoon feed people with propaganda. You should do the research and realize that your own closed minded ideas are not the only ones in the world.
PRE-CRASH OF THE AUTO INDUSTRY STORY.......Michael J. Evans
More facts used in the blog post from Bloomberg......I think that is a pretty good source???
Japanese Earned $2,400 More Per Car Than U.S. Rivals (Updated)
By John Lippert and Barbara Powell
Oct. 2 (Bloomberg) -- The biggest Japanese automakers earned an average $2,400 more per vehicle sold in North America than U.S.-based rivals in 2005 by charging more and spending less on labor and health care, according to a study released today.
Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. persuaded buyers to pay an average $24,289 per vehicle, 12 percent more than U.S. automakers, the Harbour-Felax Group study said. The Japanese paid $1,400 less per vehicle on health care, and their workers spent more time on the job.
The study highlights topics that will be raised as General Motors Corp., Ford Motor Co. and Chrysler prepare to negotiate a four-year contract with the United Auto Workers. Ford and GM are working to revive profit after first-half losses, and Chrysler expects a $1.5 billion deficit in the third quarter.
``It's time for the Detroit Three and the UAW to get together and resolve these problems,'' Jim Harbour, the study's co-author, said in a statement.
This year's first half showed some improvement for GM's per- vehicle earnings. In the first six months of 2006, GM lost $326 for each vehicle it made, compared with $1,271 last year. GM reduced its reliance on rebates and other incentives and cut back on low-profit sales to rental-car companies and other fleet operators, Harbour-Felax said.
Ford's First Half
Ford, by contrast, lost ground. In this year's first half, Ford's per-vehicle loss rose to $738 from $451 in 2005. The study didn't give information on Chrysler's first-half performance.
``I believe you're going to see another strong quarter for General Motors,'' Laurie Harbour-Felax, who wrote the study with her father Jim, said in an interview. ``They really have gone the furthest in engineering efficiencies and lowering labor costs.''
Under current contracts, GM, Ford and Chrysler must continue to pay union employees in ``jobs bank'' programs even when there's no work for them, the study said. By comparison, workers at Toyota, Honda and other Asia-based automakers take less vacation and get shorter breaks.
Sales and market-share declines at GM, Ford and Chrysler ``over the last year have substantially increased the leverage they will have in bargaining with the union,'' said Michael Robinet, an analyst with CSM Worldwide, an automotive consulting company in Farmington Hills, Michigan. ``There's no doubt that jobs banks will be on the negotiating table.''
Market Share
Further contributing to U.S. automakers' problems is their loss of market share in the U.S. Through August of this year, GM's sales have fallen 12 percent, Ford's are down 9.9 percent and Chrysler's are down 9.7 percent. Consumers are buying smaller, more fuel-efficient vehicles from Toyota and Honda, and avoiding the large trucks and sport-utility vehicles that the U.S. automakers rely on for profit.
Quality problems add to the U.S. automakers' competitive disadvantage, Royal Oak, Michigan-based Harbour-Felax Group said. Toyota spends $348 per vehicle on warranty costs, compared with more than $500 each at Detroit-based GM, Dearborn, Michigan-based Ford and DaimlerChrysler AG's Chrysler unit.
U.S. automakers spend as much as $138 more per vehicle on longer vacations and holidays and up to $70 per vehicle on unscheduled absenteeism, Harbour-Felax said.
Japanese automakers provide workers with an average of 30 minutes of break time each day, costing $133 per vehicle, while GM, Chrysler and Ford provide 46 minutes at a cost of $203 per vehicle, she said.
Retiree Costs
Toyota spent $215 per vehicle on health care for active workers and has only a handful of retirees at its North American factories, which it began building in 1986. Last year, GM had to make pension payments to 337,588 retirees and surviving spouses. GM spent $1,120 per vehicle for retiree health costs last year and $515 for active workers.
James Harbour is a former vice president of manufacturing engineering at Chrysler Corp. and the founder a separate company called Harbour Consulting.
James Harbour said discounts and sales to car-rental companies reduced the average selling price for U.S. automakers' vehicles. ``GM gave away a ton of money last year,'' Harbour said today at a press conference.
Ford had a $1.44 billion first-half loss, while GM posted a $2.93 billion first-half deficit. Auburn Hills, Michigan-based Chrysler expects a net loss in the third quarter because of slowing sales of its pickup trucks and SUVs.
Union Talks
Union contracts at GM, Ford and Chrysler expire in September 2007, and the automakers are preparing to negotiate a new four- year accord.
Troy Clarke, head of GM's North America unit, said in an interview last week that he has begun preliminary talks with the UAW on the new contract.
``We got where we are together and we'll get to the future together,'' Clarke said. ``That's the spirit we enter into this with.''
UAW spokeswoman Christine Moroski didn't immediately return a call seeking comment.
Toyota, Nissan and Honda also are helped by exchange rates. ``The Japanese yen is an absolute major problem'' for U.S. automakers, James Harbour said. A weak yen makes the export of Japanese vehicles into the U.S. less expensive.
Of the 1.47 million Toyota models sold in the U.S. through July, 45 percent were imports, 34 percent more than a year earlier. If that pace continues, Toyota will this year top the previous high of 1.02 million vehicles imported in 1986, surpassing a million for the first time since Toyota made its first Corolla in the U.S. late that year.
Currency Advantage
Today's yen-dollar exchange rate widens Toyota's advantage over domestic automakers by $1,054 per vehicle, Harbour said.
Toyota saved $1,000 per vehicle over the last five years by designing components such as hinges and air bags so they can be used on a wide variety of cars and trucks, Harbour-Felax said. In an August speech, she said one U.S. automaker, which she didn't name, offers 81 varieties of side-view mirrors, compared to two for its more efficient Japanese rival.
Of the U.S. car companies, Ford is least adept at using ``common'' components among its vehicles, Jim Harbour said. ``Chrysler is approaching it. GM's whole focus is `common.'''
The auto business sucks
"If they can't make products that people want, then they shouldn't be in the business"...sounds like he gets it to me. Isn't that just plain ole common sense in the world of business? I get your point, Bill, and I am certainly not liking that my tax dollars will be used to bail out yet another industry that isn't smart in how they've done business, especially when the people in charge usually end up being "taken care of". Personally, I think these engineers and CEOs who ran the business into the ground and planned poorly should start right back at the bottom a la "Welcome to Burger King; may I take your order please?" That being said, I spent a fair amount of time working in this industry. It is an industry that is extremely sensitive to consumer demands and a huge contributor to our country's economy and work force, I can understand why the government feels it is important to keep these companies from going belly up, but like any company they feel the need to bail out, there needs to be conditions that come with that bailout. I wouldn't "bail out" one of my own children without expecting some conditions be met to ensure the bail out was productive. It's our money bailing out these companies, we need to be sure we have a say in how that money is spent, even how the company is run. I will also say that I don't think it's entirely fair to blame the companies for putting so much into the SUV craze. This is what the consumers demanded and demanded in a big way. I worked for Volvo 10 years ago when they weren't making SUVs yet. Everyday we were fielding questions about when Volvo would start making an SUV. Volvo took their time jumping into the SUV business because they wanted to design it to Volvo standards and they wanted to be sure this wasn't something that would fizzle out after only a couple of years. Volvo eventually produced their very first vehicle that wasn't a sedan (not including their commercial truck and heavy equipment lines of course) after all the other major car companies had already been raking in huge profits on this new craze for several months. Even with gas prices what they are today, trucks and SUVs are still selling well. My S.O. still works in this industry and we worry, bail out or not.
The way it Was
Talking Stimulus ! Lets get back to the old ways of America .. Salvaging Cars and Rebuilding our DREAMS . WE can help you fulfill ALL your Dreams at www.prestigeautobrokers.com.
has lots of numbers, Bill, but no documentation for those numbers, as usual. Site your sources so we can take a look ourselves. Being a regressive, you would be opposed to people making a standard of living similar to your own, thus you and yours would negate what unions have done for American workers in the last 100 plus years.