7 myths about Detroit automakers (Detroit Free Press)

[LuckyTheDog]

The debate over aid to the Detroit-based automakers is awash with half-truths and misrepresentations that are endlessly repeated by everyone from members of Congress to journalists. Here are seven myths about the companies and their vehicles, and the reality in each case.

Myth No. 1: Nobody buys their vehicles
Reality: General Motors Corp., Ford Motor Co. and Chrysler LLC sold 8.5 million vehicles in the United States last year and millions more around the world. GM outsold Toyota by about 1.2 million vehicles in the United States last year and holds a U.S. lead over Toyota of nearly 700,000 so far this year. Globally, GM in 2007 remained the world's largest automaker, selling 9,369,524 vehicles worldwide -- about 3,000 more than Toyota.

Ford outsold Honda by about 850,000 and Nissan by more than 1.3 million vehicles in the United States last year.

Chrysler sold more vehicles here than Nissan and Hyundai combined in 2007 and so far this year.


More here: http://www.freep.com/article/20081205/COL14/812050400/?imw=Y

[Sherman A1]

1. Puts things into perspective a bit, eh?

Particularly liked the explanation of the $70.00 per hour wages.....

[hughee99]

2. #8 - It's a "loan" not a "bailout."

If it is true that they already build high quality fuel efficient cars that people want (including hybrids) and that a lot of people are buying, and yet they still managed to get themselves this F'd up, I see no reason why they would all of the sudden become profitable if we just cut them a check. I'm not necessarily against giving them the money, but lets call this what it is.

[Phred42]

3. so obvious - why the hell didn't they incllude that?

:banghead:

[BeatleBoot]

5. Let's Call it What It Is

A LOAN.

What part of a loan don't you understand?

It's going to get paid back.

Just like Lee Iacocca did in '79.

And he paid it back early.

Not making hybrids didn't "F" them up. Raw material costs and the freezing up of credit put them in this situation.

It's obvious you never worked in the industry.

And it's obvious you don't know what you are talking about.

[hughee99]

6. The part I don't understand is how we are supposed to get our money back...

If the big three can't turn a profit given all of this good news about how good there cars are, how much people want them, and how much they are buying them, then they're not going to make a profit with an additional 10 billion, 20 billion or 50 billion dollars. If the company can't make money doing what they're doing, they will NEVER pay back the loan, just like MILLIONS of homeowners are doing right now.

All these fixes that people are discussing (shifting product lines, etc) makes it sound like the big 3 were not adjusting to the market, but if these myths are to be believed, then these companies are already doing exactly what is being suggested, and they're still losing money at it.

Is it raw material costs and freezing credit that have made them CONSISTENTLY unprofitable for the last 4 years?

It's always disappointing to see the "never worked in... obviously don't know what your talking about" chestnut, it usually means that someone disagrees with me but isn't willing (or able) to put the time and effort in to make an actual argument.

[BeatleBoot]

8. No, the part you don't understand

is the Automotive Industry and its cost drivers.

Welcome to your Chestnut.

For starters let's talk about Raw Material costs.

What has happened to the price of Thermal Polyurethane (TPU) in the last 10 years - let alone steel?

How about High Crystalline Polypropylene (HCPP)? Why did it go up in cost? Or Glass Filled Polypropylene?

Any clue?

Do you even understand how they are a part of an automobile? In what shape or form?


Let's talk about the business case and financial model.

Do you understand the capital requirements in this industry? The millions/billions of dollars that it takes to "adjust to the market" in this industry?

Do you know what the payback period is after those millions/billions of dollars are invested in plant and equipment. It takes years - like 5 to 10 years to make up for the money invested to build a car.

Revenue isn't generated until product moves and that isn't until years after those big dollar investments. And I skipped over the Research & Development, Prototype phase, et cetera.

And that isn't just the OEM's experiencing this cycle - it's every auto supplier with their share of millions of dollars of investment - going through the same business cycle.

[hughee99]

9. And this is why

The big three have been consistently unprofitable over the last few years while foreign automakers, using the same materials, have managed to turn a profit?

The board of directors of the domestic auto industry seem to be quite happy with the current management. The SAME management, more or less, that got them into this current fix. Will this influx of cash make them better able to understand the market or gain stronger footholds in emerging markets? Will this improve their profit margin per vehicle sold or will it just enable them to better able to withstand continued losses?

Regardless of the R&D they put into the car, if they can't deliver cars comparable to what's on the market at competitive prices, they won't sell enough of them to recover the start-up costs, and if they have to cut their sales prices (reducing their profit margin) to be competitive, they won't achieve long-term sustainability.

[BeatleBoot]

10. I rest my case

You have no clue.

Sorry, but that's the bottom line on this.

I'm done interacting with retards who think they understand the industry.


Bye-bye-moron.

[hughee99]

11. Well you got me there...

My inability to understand why material costs and obstacles from R&D to profitability are essentially the same for all companies, yet the big three haven't seemed able to turn a profit where other companies have, exposed me as the retard that I am. You did, however present a very compelling case as to why simply pumping money into these companies will result in their profitability and will enable them to actually pay back the "loan". :sarcasm:

It works out well, because I'm actually done interacting with someone who think they know how to make an argument. Just remember, the secret to winning an argument is to call someone a retard and/or moron and end the discussion, but then, you already know that.

[BeatleBoot]

13. 1979

Lee Iacocca.

Chrysler.

It's all been done before.

I was there.

How about you?

[hughee99]

17. Ah, so your argument is that

the last time is was done, we got the money back, so that will naturally happen again. I won't argue with that logic.

[Idealism]

15. Health Care + Legacy Costs

Honda/Toyota don't have legacy costs, Japans' government supplies the pensions.
Honda/Toyota don't pay health care costs, Japans'government provides universal health coverage.

Less overhead= Higher profits. Simple, no?

And if you think foreign automakers are doing just fine you should read more

Automakers in Europe also look for bailout


Chinese Auto Industry Presses Beijing for Bailout

[BeatleBoot]

18. I would let it go

He/She doesn't understand that each OEM doesn't face the same cost structure.

Most don't understand the supplier relationship either. I have found people think that a transmission supplier can "adapt" and start making plastic trimplates or chrome PRNDL trimplates/cowls at a drop of a hat.

No idea of the capital investment. No clue of the industry.

[Idealism]

19. I tried my best

:(

[BeatleBoot]

23. Yes you did!

:yourock:

[hughee99]

20. Yes, I agree.

And while the current market is hurting ALL automakers, most have not been turning in negative numbers for years. Before the credit crunch and the market really went downhill, the big three were still having trouble making a profit.

As far as legacy costs and health car goes, does giving them X amount of money today make any of those issues just go away? I'm not suggesting there's nothing the government can do to help them, I'm just skeptical that cutting them a check is going to actually fix the problems.

[Idealism]

22. Ford has been undergoing structural changes for 2 years

These things don't happen overnight. When Mulally was given the CEO job, Ford hadn't had a profitable quarter in two years. He changed that, but then realized that the company needed to adapt. Since then he had a plan that called for restructuring and a return to profitability in late 2008. Well, the economy has been slowly deteriorating until it exploded halfway through 2008. Is it the Big Three's fault that no one is buying cars now? Is it because nobody wants 'junky' US made cars? Here's some interesting info:

Myth No. 1: Nobody buys their vehicles
Reality: General Motors Corp., Ford Motor Co. and Chrysler LLC sold 8.5 million vehicles in the United States last year and millions more around the world. GM outsold Toyota by about 1.2 million vehicles in the United States last year and holds a U.S. lead over Toyota of nearly 700,000 so far this year. Globally, GM in 2007 remained the world's largest automaker, selling 9,369,524 vehicles worldwide -- about 3,000 more than Toyota.

Ford outsold Honda by about 850,000 and Nissan by more than 1.3 million vehicles in the United States last year.

Chrysler sold more vehicles here than Nissan and Hyundai combined in 2007 and so far this year.

Myth No. 2: They build unreliable junk
Reality: The creaky, leaky vehicles of the 1980s and '90s are long gone. Consumer Reports recently found that "Ford's reliability is now on par with good Japanese automakers."

The independent J.D. Power Initial Quality Study scored Buick, Cadillac, Chevrolet, Ford, GMC, Mercury, Pontiac and Lincoln brands' overall quality as high as or higher than that of Acura, Audi, BMW, Honda, Nissan, Scion, Volkswagen and Volvo.

J.D. Power rated the Chevrolet Malibu the highest-quality midsize sedan. Both the Malibu and Ford Fusion scored better than the Honda Accord and Toyota Camry.

Myth No. 3: They build gas-guzzlers
Reality: All of the Detroit Three build midsize sedans that the Environmental Protection Agency rates at 29-33 miles per gallon on the highway.

The most fuel-efficient Chevrolet Malibu gets 33 m.p.g. on the highway, 2 m.p.g. better than the best Honda Accord. The most fuel-efficient Ford Focus has the same highway fuel economy ratings as the most efficient Toyota Corolla. The most fuel-efficient Chevrolet Cobalt has the same city fuel economy and better highway fuel economy than the most efficient non-hybrid Honda Civic.

A recent study by Edmunds.com found that the Chevrolet Aveo subcompact is the least expensive car to buy and operate.

http://www.freep.com/apps/pbcs.dll/article?AID=2008812050400

[hughee99]

26. I'm not sure if you noticed, but this

this same link is in the OP, and I read already, and my argument is assuming that all of this is accurate information. I'm NOT suggesting that the big three makes shitty cars, that they don't make fuel efficient cars, or that they don't sell a lot of cars. My question is that if all this is true, why have they been consistently unprofitable for many years (even before Mulally took over)?

While they may be attempting to correct the problem, they will still have the same issues with legacy costs and health care. Unless their changes will enable them to do things much more efficiently than other automakers, in the end, they will still have these issues to contend with. They've been selling a lot of cars with "employee pricing deals" and things like that. It moves a lot of cars, but their profit margin doesn't seem sufficient to cover the other issues that come up (retooling for different materials being one such thing). My concern is that, even after the retooling is done, they will still not be able to make a sufficient profit to ensure long term sustainability. I don't see how a temporary influx of money (that will have to be paid back later) fixes this problem.

[Idealism]

27. The technology for hybrids still are expensive

Toyota still doesn't turn a profit selling a Prius due to the high cost of the newer technology. What is incredible about that statement is that Toyota (as do all Japanese automakers) receive government subsidies from Japan to build cars, and additional subsidies to build hybrids-- yet they still lose a couple thousand dollars per Prius they sell. When you take into consideration trade barriers to China and Japan (the worlds 2nd and 3rd biggest market for auto's), lack of government subsidies, legacy costs, healthcare, and higher wages than the slave labor you see at foreign factories, and you can see why profit margins are weaker with the Big Three

[hughee99]

28. I 100% agree...

but the big three are still competing in this market. Yes, it sucks and they are at a significant disadvantage, with regards to this, through no fault of their own. An influx of cash does not make this issue go away, though.

Despite what some here may believe, I'm not trying to bash the US auto industry. They have serious problems, some not of their making. We soon have an administration coming in that may be willing and able to help them. I'd like to see a serious, long term look taken at these issues, and policies put in place to remedy them (maybe national heath care to start). What I don't want to see is the government throw money at the problem to make it temporarily seem to go away only to have to be dealt with again perhaps under a less friendly administration.

[Idealism]

29. Thats why this is a bridge loan

It is meant to sustain them until Obama gets in and changes the archaic system, health care first hopefully.

[hughee99]

31. But if it's a bridge until

national health care actually gets done AND implemented as just one of the things that needs to happen, isn't it possible that it's a bridge to nowhere (sorry, couldn't help myself)? It's no slam dunk that it's going to get done soon, or at all.

[Idealism]

34. It isn't until health care per se

But obviously that would help them immensely. Its more of a bridge till they can restructure their companies, because I rather have to pay a little more in taxes throughout my life than to say my unwillingless to sacrifice for my fellow man meant plunging this country into the next Great Depression. Some say it might happen anyways, but if thats the case I rather try and fail then to never try to save their jobs at all.

[amandabeech]

32. Take a look at the 2007 UAW contract.

As the OP states, new hires only make $14 an hour to start with much lower benefits than then current workers.

After the Big 3 make payments into into the VEBA benefit trust, they will be done with any health care obligations to retired workers.

Ford is currently trying to standardize models worldwide as much as possible which will save them oodles of money and give us some of their great small cars from Europe. I saw the photos at the Ford dealership when I bought a gently used Taurus in October. Once they start sending stuff to the dealers, they're committed. Also, there's a snappy Focus cabriolet! Ford also offers full hybrids which really save on the gas.

GM is a bit late to the party, but its trying to get rid of some lines and really downsize another. They'll bring out the Volt, which really is a new design for a pluggable hybrid. If gas prices are high, I think that it will sell. I think that GM is at much more risk than Ford, and Chris Dodd may be right about Rick Wagoner, but I think there's a lot worth salvaging.

I'm ready to take a risk here to save 3-4 million jobs at the start of what could be a real economic jolt, with conditions. It could be a rocky few years, I think that there's a chance that most of it will be paid back.

Now if we could get conditions, streamlining and new management for the financial firms that have received oodles of dough and loans, maybe we'd get somewhere.

[amandabeech]

30. Ford turned a profit in 2008 Q1. n/t

[Idealism]

33. Yes, and?

I didn't say they didn't. In 2006, thanks to Mulally cutting costs (all while improving quality, according to Consumer Trends reports) they turned their first profitable quarter in 2 years. Two differant events :)

[amandabeech]

35. And the bit of information that I offered shows that Mulally actually succeeded

until the economy went south.

I think that fact bolsters your post.

[TahitiNut]

25. Didn't you hear? Everyone's an expert in automobiles as soon as they get ...

... their first drivers license. Nevermind that they haven't the foggiest idea how supply chain management works in the automotive industry. Nevermind that most would have a hard time changing their own oil ... or even an air filter. Then there's parts and aftermarket stuff ... thousands of small businesses.

A drivers license. Instant expert.

On the other hand, it's OK to have total ignorance of economics and the financial industry. So, let's not even ask questions about them.

[Vinnie From Indy]

4. I am sick of hearing about how BAD US Vehicles are - it ain't true!

There is a major effort by some to kill the UAW and take as much as possible from retirees. While I agree that retirees should expect some changes, they deserve not to get screwed.

[bemildred]

7. So why is their management so shitty?

We know the workers make good cars, why are they broke?

[BeatleBoot]

12. Neither is the reason

Neither Labor nor Management.

It's not a question of Management versus Labor.

Management made oil prices go through the roof?

Why would they want that. It makes no sense.

And I am not talking about Gas Prices. I am talking about resin prices (raw material for plastic Instrument Panels, Door Trim, etc - all based from Oil). That is what hurt them the most.

That - and demand was cut short because now no one can get a car loan.

[DainBramaged]

14. You're doing OK, sorry the morans can't keep up.

:yourock:


That resin stuffs, is that like what they make my lawn chairs outta? How come does is so cheaps?:rofl:

[BeatleBoot]

21. DB

Thanks for the encouragement.

It's tough trying to give everyone a CAR101 primer when they never worked in the auto industry.

Damn.

You're welcome to shadow me and jump in once in a while!

:silly:

[DainBramaged]

24. I would love to shadow you. I have been struggling alone

on DU (except for about a dozen GREAT people, some in this thread) holding back the tide of Domestic haters. Who are probably serial masturbaters.

[Idealism]

16. Yep, which is what I was trying to shed light on

here.
[br />The CEO's arent to blame really, and at least Mulally has done a superb job at Ford in just two years