The Truth About Cars » Costs The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Mon, 28 Jul 2014 10:00:52 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » Costs A Month Before Talks, Automakers Tell Canadian Auto Workers To Forget About Wage Increases Thu, 07 Jun 2012 14:28:53 +0000

The Big Three sent letters to the Canadian Auto Workers union Wednesday, asking them to forgo a small wage increase as a means of keeping Canadian plants competitive.

The wage hike, known as the Cost of Living Adjustment (or COLA), and represents the first wage increase since 2007. Though it only adds 28 cents to the normal $32 an hour wage, the automakers warn that automatic wage increases like COLA could reduce the competitiveness of Canadian plants, and have suggested lump sum payments and a pay structure tied to company profits.

Talks between the CAW and the Big Three start in July, with some observers suggesting that the unions and the automakers have a long way to go before reaching any kind of common ground. The Big Three are looking to keep their fixed costs in check, with hourly labor costs representing one of the areas that automakers are seeking to keep under control. As a precondition for bailout money from the Ontario and Canadian federal governments, the CAW agreed to freeze COLA as well as their base wage rates until the end of the contract terms signed under the bailout period.

A letter to the CAW from Ford suggested that Canadian plants were operating at a $15 an hour disparity compared to the all-in hourly labor costs at U.S. plants, and a COLA increase would bring that gap to $30. A Chrysler rep said that their plants operated at a $10 disadvantage, while COLA would add another $4.80. CAW President Ken Lewenza dismissed the $30 disparity at Ford as “absolutely ridiculous”. A think tank cited by the Globe and Mail claims that Chrysler has the lowest labor costs in the U.S., at $52 while Ford’s are the highest at $58.

While the CAW has often decried a “race to the bottom” as far as wages go for Canadian workers, the CAW and Canadian plants are in a very weak position, with higher costs and a strong dollar making Canadian plants an increasingly unattractive proposition. With two-tier wages in the US offering automakers the chance to build cars at plants where workers are pay $14 an hour rather than $32, as well as being able to build them in the United States, taking a combative stance against the automakers may not get the CAW too far in accomplishing their goals. At this point, it seems as if Ontario needs the auto plants more than the OEMs need Ontario. A Member of Parliament for the Windsor, Ontario district that is home to many auto workers recently criticized the CAW’s policies as being unrealistic and in danger of sending manufacturing jobs back to America.



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Amid Record High Transaction Prices, Chrysler Cuts Prices On Key Models Tue, 16 Aug 2011 20:52:34 +0000 While Chrysler Group sends its Fiat 500 upmarket with Gucci special editions, its sending its Dodge, Chrysler and Ram brands downmarket with a lower prices, 90-days-same-as-cash deals and a variety of tie-ins. First up, the news [via Automotive News [sub]]that Chrysler is cutting the price on 200 and Dodge’s Avenger by $200, and the Dodge Journey by over $1,000 [UPDATE: plus,$3k off Grand Cherokee] is strange indeed. Chrysler’s sales, market share and transaction prices are up, while its incentives and fleet sales are down… and meanwhile, its key competitors are raising prices on increased material costs. Oh, and average transaction prices across the industry have been breaking records all year. With volume slow and prices (as well as costs) rising, Chrysler has no real reason to be lowering prices beyond hunting for volume that may or may not be there. At the expense, it must be added, of profitability. But if you look at Chrysler Group’s most recent maneuvers, it seems that lower prices might not an isolated move on market share. It seems that Chrysler Group is actually strategically positioning itself as the Wal-Mart automaker… literally.

Marissa Hunter, head of Ram brand advertising tells Automotive News [sub] that the truck brand would be expanding its “experiential advertising” to “thousands” of Wal-Mart stores later this year. But not, according to Hunter, because of similarities in pricing strategies.

We recognize the alignment between truck buyers, the hunting/fishing lifestyle and Wal-Mart. We are working on promotion that brings all three together.

Still, what one attribute is Wal-Mart known for? The quality that Frank Zappa identified as “cheepnis.” After all, there are plenty of other stores that connect with “the hunting/fishing lifestyle” that don’t carry Wal-Mart’s ultra-cheap, made-in-China, local business-destroying baggage. And alongside the lower prices, Chrysler Group’s rolling out another Wal-Mart style promotion: 90 days same as cash. Ultra-short-term spiffs like this show that Chrysler will fight GM every step of the way for subprime buyers.

In some respects, this positioning makes sense: Chrysler has to compete on something, and with a double-dip recession looming, why not price? The short answer: because Chrysler has worked too long and hard to rebuild its retail sales and pricing power to throw it all away by chasing low-profit volume. But with a tough 2011 sales target of 45% growth, Chrysler’s already turned to questionable tactics in search of more volume… and the Mopar Mob may now be reviving fears voiced earlier in the year about a price war in order to meet it.



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