By on February 21, 2007

x05co_ft049ar222.jpgA recent post questioned the relative power of engineers and MBA’s in the automotive industry. A quick scan of corporate rosters reveals that the biz brains control most companies. The hierarchy makes sense; automaking is a business. Yes, but– whether their MBA's came from Harvard, Yale, or Vinny’s School of Business and Mortuary Services in Hoboken, the “suits” should know that too much unsold inventory is a bad thing. As a corollary, continuing production as unsold inventory piles up is a very bad thing. As in fatal.

Last year, Tommy LaSorda’s mob over at Chrysler put the theory to the test. At one time, the guys stuffed Chrysler’s “sales bank” with 100K excess vehicles. And there they sat, waiting for the dealers to catch up and cough up. After drastic production cutbacks and “if you’re breathing you’re approved” financing offers, dealers managed to whittle that number down to something a little less, um, dangerous.

The holiday break certainly helped; the two week shut down cut off the unwanted flow at the knees. As the sun rose on the New Year, Chrysler’s supply was closer to the industry’s Maginot Line: 60 days. The carmaker claimed a 51-day supply of 300's, a 68-day supply of Jeep Libertys and a not entirely horrendous 110-day supply of gas-guzzling Dodge Rams.

When production started again, inventory levels rose with tidal inevitability. In January, Chrysler averaged 14 sales per dealer. Dodge dealers dealt 28 sales apiece, and Jeep dealers averaged 13 sales per store.

The Chrysler Group then added an estimated 152K new cars to their inventory. And so, by the first of February, Chrysler/Dodge dealers sheltered a 78-day supply of 300’s, a 98-day supply of Libertys and a 111-day supply  of Rams.

Meanwhile, GM dealers are also choking on product. As of February first, GM’s “Like Always” brand (a.k.a. Saturn) had a 230-day supply of Ions (which is only 29K units, but there you go). GMC dealers were sitting on 20K or 211 day’s worth of Yukon XL’s, a 98% increase from January’s 113-day supply. 

And the hits just keep on not happening. In January, Buick dealers averaged just four new car sales per store. No wonder they have a 170-day supply of LaCrosses and a 116-day supply of Lucernes.

Ford can’t afford to laugh at their cross-town rivals. Mercury dealers only managed to move six cars apiece in January, staring down the barrel of 7K unsold Montegos (enough to last 147 days). Ford stores averaged just 35 sales each last month (mostly trucks), with 24K post-pre-Taurus Five Hundreds (a 169-day supply) going nowhere slowly. 

In a declining market with hundreds of available models, Toyota is the only transplant that seems immune to the temper of the times; they’ve got low supplies of, well, everything and an industry leading 126 sales per dealer.

Meanwhile, Honda holds a three-month supply of Elements and Ridgelines. Nissan can’t shift enough quirky Quests (144 days), Frontiers (122 days) and Maximas (113 days).

Even so, thanks to hot-selling Fits (25-day supply) and CR-Vs (19-day supply), Honda stores are cranking out 87 sales per dealer. While Nissan thanks its lucky Altima (51 days) and Versa (52 days) for helping dealers achieve 68 sales per month.

Mitsubishi? Not so good. The automaker started February with 3400 Eclipse Spyders (a 275-day supply). Relatively speaking, the Dodge-built Raider pickup is a hit. At the end of December, Mitsu had a 165-day supply. By the start of February, inventory had dwindled to 149 days. Of course, that’s still more than double the industry benchmark…

While manufacturers are quick to blame excess winter inventory on seasonal fluctuations, here’s the bottom line: unions.

Common sense says that when sales drop, you cut production. Unfortunately, the automakers’ contracts with the United Auto Workers (UAW) mandate that they must continue to pay their employees full whack even if The Big 2.5 cut back or stop production.

They’re caught in a classic Catch-22. Should they pay workers to do (and produce) nothing, or keep the lines running in hopes they might sell a few more vehicles?  Either way they’re screwed.

Rather than force a showdown with the UAW, automakers are going hey diddle diddle, straight up the middle. They’re paying the workers a big pile of cash up front to go away forever. Market share may be lost forever, but hey, they're gonna hit something and that’s the way it goes.

Even with the buyouts, supply continues to outstrip demand, leading to drastic deals. Buyers looking for bargains wait for the desperation sales and the cars’ reputations suffer accordingly. Brands become synonymous with “cheap”– regardless of product quality. Sales fall further as most consumers turn to undiscounted brands, figuring they must have higher quality. (There’s your perception gap.) And the production lines keep moving.

One way or another, it’s a death spiral that has to end. 

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129 Comments on “Breaking the Law: Automaking’s Supply and Demand Dilemma...”


  • avatar
    suohtil

    Wow, you mean it isn’t because the domestics are the dumbest guys on the planet that they over produce? You mean there is a (legit) reason? I.E. contracts.

    Wow, and like me, I can’t just not pay my mortgage one day because I think my mortgage contract isn’t right for me today, the domestics have to keep going.

    And Toyota and Honda have 0.5 UAW factories between them in the U.S.

    It is all starting make sense *now* (that is, to anyone living under a rock).

  • avatar
    vitek

    According to today’s e-version of the Dee-troit News Ford and GM have over $3000 in labor costs for each vehicle (apparently including health benefits for both active and retired UAW members). The way the pundits have it, the new union contract (old one up 9/14/07) will still have a jobs bank and e.g. Ford will have an incredibly hard time asking for a 20% wage rollback. With the large difference in labor cost between the 2.5 and the transplants, its clear the 2.5 have to decontent their vehicles to match the price points at which their competitors operate. Even nice looking door knobs etc. are too costly when you have to find a way to bring the cost down to cover an extra $2000 in wage and legacy cost. With a militant union, the only way to void legacy costs is to file…

  • avatar
    starlightmica

    Decontenting via General Chrysler could combine the worst of both worlds: hard ugly plastics, fake Sebring aluminum, fixed headrests in the rear seat, and no grip handles above the doors. Methinks this whole “bulwark against the furriners” line of thinking is an huge ego trip for Rick and Lutz, one that’s too big even for Ghosn.

    Attention MBA’s: product also matters, just look at what’s languishing. Looks like Buick is edging towards the grave as we speak, Enclave’s just a speed bump along the way.

  • avatar
    Adrian Imonti

    Excess inventories are a symptom of the real problems: Poor product development/planning, and inflexible production lines.

    First, they design vehicles that people don’t want, and then their inflexible production methods commit them to building too many of them. Even when they come up with a bad idea (or three), they stick with it relentlessly so that a shallow pit is dug into a deep grave.

    Successful automakers such as Toyota avoid these problems with flexible lines and better product development, matched with branding and marketing that suits the underlying products. They don’t hit home runs every time, but they run on enough cylinders often enough that the mistakes are eclipsed by the winners.

    Shutting down production lines would slow the bleeding, but it doesn’t offer a long-term business plan. Companies don’t generate profits with idle production lines, they create them by using those factories to build stuff that we want to buy. If I wanted something called a Lucerne, I’d head to Safeway or to Switzerland, not a Buick dealer.

  • avatar
    windswords

    Excellent article Frank. One observation: in the beginning you mention a recent post questioning the relative power of engineers and MBA’s in the automotive hierarchy. We tend to focus on this in our discussions about the auto biz. How many posts have we seen about bean counters vs product engineers? And the matra “it’s about the product”. We talk about the unions too but this article at least for Detroit crystallizes what the main problem is – overbuilding because it will cost too much to not build. And it does – in strict accounting terms. What is not realized is the long term damage done to brand as perceptions about value and quality rise becuasde of the oversupply and firesale prices of these vehicles.

    I can’t say why Mitsu and Nissan have oversupply since thier US plants are not union. Does anyone know what the labor agreements are in Japan and Korea vis-a-vie being able to idle plants due to over supply? Do they have to still pay their workers?

  • avatar
    TeeKay

    "In January, Buick dealers averaged just four new car sales per store. " FOUR sales a month per store? My cousin sold 8 cars last Sunday…but they're Toyotas. Methinks it's time for the General to dump this entire line altogether. Surely, GM can get more from this worthless brand by selling whatever rights it has in the side "holes" to Maserati. Afterall, the Italians will probably pay premium just to avoid being associated with junk.

  • avatar
    suohtil

    A couple problems with Adrian Imonti’s statements…

    They design vehicles that people don’t want? Last full year of numbers you could still multiple the total U.S. units GM sold by the percent of retail sales and the number is right around and possibly just above Toyota still. What you are stating is a myth and just not try.

    Second, the sticking with bad ideas relentlessly goes back to contracts. Unless GM wants to *spend the money* (while in huge debt already) to design/plan a total second vehicle for each assembly line, it takes time to go to whole ‘nother vehicle anytime there is a problem.

    Over simplification is a great thing, isn’t it?

    BTW, anyone who would pick say an Avalon (with all its problems) over a Lucerne is crazy.

    The only reason a company like Toyota would pass even Honda so fast is PR. Both have top Japanese engineering and manufacturing but one is gang busters… and one (gee, the same one) is waving the flag (not their own) in ever commercial, etc.

  • avatar
    TeeKay

    “I can’t say why Mitsu and Nissan have oversupply since thier US plants are not union.”

    Windswords, therein lies the problem. It’s not only the unions, but the products as well. If you make good products, people will buy them, regardless if they’re expensive for made by unions.

  • avatar
    tms1999

    Legacy costs, overcapacity, inflexible labor contract. There you have it.

    It’s not going to get any better for cars built in the US. Wait, I just had an idea. Let’s have the US based production wither wither away, close production little by little, cut workers out by natural attrition. Accelerate it a little bit with buyouts.

    Then let’s have out friendly neighbours build cars for us. It’s not like we don’t already have plants there. Up North: no legacy cost. Down south: no legacy, health care, union or anything to get in the way. Not to mention cheap labor.

    So it’ll take a while, it will get worse before it gets better, and it certainly will not be an outspoken policy from the manufacturers, but, you know, we’ll call it a trend.

    And that’s without even mentioning overseas where labor cost is really really low, and workers do not easily complain. Cough*LNJ-3.4V6*cough*China.

  • avatar
    tsofting

    “One way or another, it’s a death spiral that has to end.” What about “- has NO end”?

    I agree with everything you say, Frank, but consider this too: Building up inventory is a very short term way of keeping a seemingly healthy bottom line (not that there has been a healthy bottom line in Detroit in recent memory). Of course it kills your liquidity, of course it kills your ability to sell your inventory without a pile of cash on the hood, of course it is bad in nearly every way you look at it, but heck, those problems won’t hit us until next month!

    I remember an article 20 or 30 years ago (in Fortune?) where one of Detroit’s finest (suits) ridiculed the bottom line of the Japanese. He said something to the effect that “our shareholders would never accept a bottom line like that”. So, once more, while the Detroit suits were busy propping up their bottom line for the end of THIS month, the Japanese were in it for the long term, thinking about their bottom lines 10 or 20 years down the road. No points given for telling which way was right and which way was the not-so-right one.

  • avatar
    Luther

    Where is Gordon Gecko when you need him…..

    Seriously, Diamler looking for about $7B for Chrysler. The assets (including unsold autos) have to be worth much more than that. Anybody else think $7B is a laughably low price for Chrysler? Its like a HUD home price.

  • avatar

    Excess inventories are a symptom of the real problems: Poor product development/planning, and inflexible production lines

    The domestics have been slow to embrace flexible production facilities because they have a number of older plants. These plants were designed to build only one or two different cars and they can’t be adapted to flexible production techniques easily. The manufacturers can’t afford to rebuild or scrap them, so they just keep turning out the same vehicles instead of being able to shift production to meet demand for specific models. The transplants, on the other hand, are building new facilites and setting them up for flexible production from the start.

    Methinks it’s time for the General to dump this entire POS line [Buick] altogether. Surely, GM can get more from this worthless brand by selling whatever rights it has in the side “holes” to Maserati.

    The Buick brand is going great guns in China. In 2006 they actually sold more Buicks there than they did in the US. Even if Buick were to disappear from the American market there’s no way they’d kill it completely.

  • avatar
    maxo

    Even without unions it can also be tough to keep your produciton flexible enough to meet demand. There are lots of supplier and inventory factors to keep in mind, and even non-union works don’t like being sent home to not work and not get payed. Even Toyota and their more flexible factories would have problems if one day everyone realized how ugly the Camry is and began to not buy them.

    Edit: Yeah I guess Frank explained this better while I was typing

  • avatar
    suohtil

    TeeKay,

    But if GM has just over a million vehicles on the lots and Toyota just over 300K right now (and those signify a build up at any given time) and GM sells 1.5 million (maybe only 1.2 million this year) more units than Toyota then it shows how not having control of the numbers (the UAW does indirectly) makes a huge difference. I.E. if GM could just reduce by 1.2 million units to match Toyota numbers then there wouldn’t be 700K difference in product on the lots.

    Again, simple math, GM has 700K more units on lot and sells 1.2 million more. If GM made vehicles no one wanted they should have more than 1.2 million (the difference in sales) vehicles on the lot to be said that they have vehicles people don’t want.

    And fleet, I love the fleet argument. Just about everyone on this site won’t buy a vehicle GM over fleets yet it is said to be an advantage of why they sell more than Toyota. Two thnigs, are any of these fleeted vehicles not necessary and just charity from Verizon and My Plumber, etc? No, they are necessary vehicles and mission critical to many companies. Second, fleet isn’t just a numbers builder it is a numbers killer too for retail buyers (when they see overly fleeted vehicle they don’t want it).

    So the facts are as they are, GM sells many more vehicles than Toyota ini the U.S. and probably will for the next few years at least so all this “nobody wants” crap is ridiculous.

  • avatar
    M1EK

    They design vehicles that people don’t want? Last full year of numbers you could still multiple the total U.S. units GM sold by the percent of retail sales and the number is right around and possibly just above Toyota still. What you are stating is a myth and just not try.

    Yes, vehicles people don’t want. Outside the Rust Belt, where people have non-objective reasons for buying American, you simply don’t see American cars very often anymore; and when you do, you know they got it at a fire-sale with bad credit.

  • avatar
    Eric_Stepans

    Wow, Mercury dealers *averaged* 6 cars sold each in January. That means at least some of them sold less than 6 cars. They must be getting killed in ‘flooring’ costs.

    I’m beginning to think that the Big 2.3768 (the number right of the decimal keeps going down for some reason…:-D..) have gone past an ‘inflection point’ where they simply can’t downsize production and labor costs fast enough to get ahead of the demand curve.

    Maybe if they had started radically cutting 2,3 or 5 years ago, they might have had a chance. But it looks like at least one of the Detroiters is going to crash land on Mount Chapter 11.

  • avatar

    while the Detroit suits were busy propping up their bottom line for the end of THIS month, the Japanese were in it for the long term, thinking about their bottom lines 10 or 20 years down the road.

    Jim Press, President of Toyota Motor North America, once stated “In our company, there are two planning processes, short-term and long-term. Short term means in our lifetime.” I doubt there are many other companies that could make that statement.

  • avatar
    alanp

    The obvious solution would be to have the contracted workers spend MORE time per car raising quality and thereby making a better product. This improved product should be sold at the same price as a car with less man hours in it, raising demand.

    Yes, I know it doesn’t work that easily, but it’s the only solution that results in vehicles than might sell.

  • avatar

    There’s another “short-term” Toyota perspective.

    At the San Antonio Tundra plant, their parts suppliers are set up just off the assembly line.
    As they begin assembling a Tundra, an order goes to Avanzar that builds the seats. You can walk back and forth between the assembly line as the truck is taking shape, and the people of Avanzar who are building the seats.
    Takes them 85 minutes, and the seats are ready, built from scratch, to spec’s. They are ready just in time to be slotted into the car.
    Avanzar owns the seat up until the moment it is placed in the truck.

    BTW – great article in the NYT about Toyota. Worth reading before it goes behind the pay-per-read wall:

    http://www.nytimes.com/2007/02/18/magazine/18Toyota.t.html?em&ex=1172206800&en=a1b5ac3c8b0241a3&ei=5070

  • avatar
    allen5h

    suohtil wrote: So the facts are as they are, GM sells many more vehicles than Toyota ini the U.S. and probably will for the next few years at least so all this “nobody wants” crap is ridiculous.

    Ok, you are right. If “nobody wants” then their sales would be zero.

    FWIW, here are two people who “do not want”.

    I can say I do not want anything that GM builds. This is based on my previous experience as a GM customer. I am now a Honda customer. My brother in FL does not want anything that Ford builds. This is based on his previous experience as a Ford customer. He is now a Toyota customer.

    So that is two.

    Add to this list the Ford customers who had their vehicles spontaneously combust. Also, add the Ford customers who had to replace triton aluminum heads ($3,000) for spitting spark plugs. It is safe to say these customers are gone forever.

    *********************************************
    Many people in recent years used their homes as ATMs and HELOCed to buy toys, including gas guzzling SUVs and trucks. House builders have traditionally been big buyers of trucks. These sales (demand) of trucks are now gone since RE is tanking big time.

  • avatar
    SherbornSean

    Frank,
    I think you are taking the numbers a tad too literally. I am fine with looking at inventory by division, and if it is significantly greater than 60, there is obviously a problem.

    But looking at it by model, and highlighting the high inventory levels of niche vehicles take things too far. Vehicles like the Raider will always look like they have high inventory levels vs. sales because the dealer needs to have a few in stock just to give consumers some choice.

    If you are going to look at inventory by model, I suggest you stick to ones that sell at least 60K per annum. You certainly made your point with the Ram inventory levels.

  • avatar
    tones03

    Allen5h

    Add to this a Toyota customer that had engine sludge or a dodge customer that his wheels fell off or a honda customer that his hybrid shutoff in rush hour traffic, if you are gonna mention 1 mention them all or dont mention any of them.

  • avatar
    Glenn A.

    When GM, Ford and Chrysler flame out, crash and burn, there are going to be major problems for car buyers and owners.

    The actual capacity of Toyota, Nissan, Honda, Hyundai, Kia, Volkswagen, Subaru, Suzuki, GMDaewoo (part owned by SAIC and distributed by Suzuki in the US), etc. is not going to be enough to satisfy the demand in the US/Canada (despite a reduced overall sales picture due to the recession caused by the failure of GM, Ford and Chrysler!)

    This will (potentially) cause car prices to go up (see graph above), allowing the Chinese to come in (selling cars at higher prices) which will make equilibrium again.

    Except the US will be without a huge portion of once good paying jobs.

    The lesson learned in future history classes will be – the greed of the companies in the early 20th century brought forth unions to fight the corporations, and the greed of the unions in the latter half of the 20th century and early 21st, brought the same companies down. That is, GM, Ford and Chrysler.

  • avatar
    shabster

    This is a well written editorial.

    It’s clear, to the point and insightful.

    I wish I had the talent to have written this piece.

    Thanks.

  • avatar
    allen5h

    Point well taken Tones03. Every car manufacturer has blundered miserably at one time or another.

    Early production Ridgelines that leak water from the firewall, brand new Honda pilots with failed timing belts, Honda 4 cyl rear engine seals that leak oil, defective Honda auto trannies with 6 cyls, Honda oil filter gasket fiascos that have led to fires, and Chrysler brakes that incinerate on their previous gen 300’s.

    Glenn A: Any chance of history repeating itself? Walmart in the 21st Century, same as the D2.5 in the 20th? Just say’n.

  • avatar
    starlightmica

    tones03:

    I know of two people affected by those Toyota problems, both of which affected far less than 1% of recalled vehicles. My brother’s 04 Prius shut down and had to be transported to a dealer to have its computer firmware upgraded. He still loves it.

    My wife’s ex-boss had a 1st gen Sienna with engine sludge. They initially gave her a very hard time, shortly afterwards they started replacing engines free of charge or compensating everyone who changed their oil in the past year. She now drives a 2nd gen Sienna.

  • avatar
    Luther

    The lesson learned in future history classes will be – the greed of the companies in the early 20th century brought forth unions to fight the corporations, and the greed of the unions in the latter half of the 20th century and early 21st, brought the same companies down. That is, GM, Ford and Chrysler.

    Actually it is the greed of customers that kill off the laggards/fraudsters/hucksters. Greed is good. 3 cheers for Internet research.

    I’m beginning to think that the Big 2.3768 (the number right of the decimal keeps going down for some reason…:-D..)

    I am using 2.75 now since I think it is a better than 50/50 chance that an American investor (with more dollars than sence) will buy Chrysler. Chrysler will be relisted on an American Exchange (Pink Sheets?).

  • avatar
    suohtil

    Glenn A.,

    I like how the consumer (supply and DEMAND) is totally out of the blame for our job losses and for several reasons that is too bad (that they aren’t blamed).

    I don’t see why corporations get blamed for greed but the consumer doesn’t. I don’t hear of too many people stopping from buying a product because the labor advantage was unfair and that, in a supply and demand scenario, would stop the companies from importing say Chinese made products. They are going to turn automobiles into the same $20 DVD players you see on the shelves. An almost throw away product. As long as I can get 2, maybe 3 years out of it then throw it away because it only cost $6000 then I am happy. So what if we 1) lose jobs 2) have even more full land fills and 3) other factory pollution, oh and 4) aren’t smart bombs smart because of all the electronics and software? Gee, lets help those who hate us learn how to better destroy us. Again, it is the companies going there with their products but the DEMANDer can so no and therefore supply would have to change to meet the changed demand.

  • avatar
    shabster

    With Ford’s marketshare dropping close to DCX’s, shouldn’t it now read: The Big 1.9786?

  • avatar
    suohtil

    3) I meant more factory pollution in our sky in which we are all living under since China doesn’t seem to be nearly as strict.

  • avatar

    Breaking news:

    Vinny’s School of Business and Mortuary Services in Hoboken has moved a few miles down the turnpike to…

    Union, NJ!!…..sorry couldn’t help myself….

  • avatar
    tones03

    startlightmica

    it all depends on the person IMO, my dad had the transfer case go on his Chevy van at 37000 miles, leaving him stranded in pensylvania and he had to pay for it out of his pocket because it was out of warranty. When he got home he called GM and complained, they refunded him all but $100 because if they refunded the entire cost he would not get a warranty on the part and if he pays the $100 he gets x amount of years underwarranty on it. He will buy another GM for sure.

    If the company takes care of you I think people are more proned to go back to them, if they say F.U. then most likely not. That is why I will never buy a Chrysler product.

  • avatar
    William C Montgomery

    Anecdotally, I observed first hand another reason why the domestics are having a hard time managing their inventory. On Monday I visited a Toyota dealership on a major interstate during the heavily trafficked early evening. The showroom was packed and abuzz – like a grocery store during peak hours.

    A short time later I crossed the freeway to a Chevrolet/Subaru dealership that had about the same number of cars on the lot. The showroom was as quiet as a morgue. During my hour there I only saw only one other customer.

    Toyota’s dealership was Mardi Gras and GM’s was a wake. The Toyota employees were relatively youthful and animated. The wizened GM staff were frumpy, coffee stained, and reeked of cigarettes.

  • avatar
    tones03

    William C

    I wouldnt say that is a GM thing, I would think that would be a dealer issue. I doubt GM sends out broadcasts saying to be a bunch of bums while Toyota says act like you are still in college. I may be wrong tho, I know the GM, Ford and Honda dealerships here all seem to act the same and be the same.

  • avatar
    Cowbell

    I don’t mean to join William too far off topic, but I couldn’t agree more about the atmposhere a dealership and the age of the sales force influencing the buying experience. My wife and I were considering a Mariner hybrid (Hurrah HOV exception) but the World War II vet salesmen (that’s not an age related assumption, he actually had some WWII pins on his tie and lapel from his unit) was not at all up to selling a hybrid.

  • avatar
    skor

    Yes, but– whether their MBA came from Harvard, Yale, or Vinny’s School of Business and Mortuary Services in Hoboken,

    You’d be hard pressed to find anyone named “Vinny” living in Hoboken today. The native blue-collar types have been pushed out by Manhattan yuppies.

    In 1974 my father was thinking about buying a 5 unit building on Park Ave in Hoboken. Asking price $40K. I saw a real estate ad a couple of years ago advertising units in said building. The newly renovated units were going for $500K each. Do the math.

  • avatar
    tones03

    I think I could go to almsot any dealership and walk in and know more about the car they are selling then they do, I have done it many times, all makes and models.

    The salesmen are never as knowledgable as they should be and I think most dont care enough to learn more about the product they are selling.

  • avatar
    Glenn A.

    suohtil:

    Glenn A.,

    I like how the consumer (supply and DEMAND) is totally out of the blame for our job losses and for several reasons that is too bad (that they aren’t blamed).

    I don’t see why corporations get blamed for greed but the consumer doesn’t. I don’t hear of too many people stopping from buying a product because the labor advantage was unfair and that, in a supply and demand scenario, would stop the companies from importing say Chinese made products. They are going to turn automobiles into the same $20 DVD players you see on the shelves. An almost throw away product. As long as I can get 2, maybe 3 years out of it then throw it away because it only cost $6000 then I am happy. So what if we 1) lose jobs 2) have even more full land fills and 3) other factory pollution, oh and 4) aren’t smart bombs smart because of all the electronics and software? Gee, lets help those who hate us learn how to better destroy us. Again, it is the companies going there with their products but the DEMANDer can so no and therefore supply would have to change to meet the changed demand.

    Don’t kill the messenger for the message. I never wrote anyplace that I wanted any of this stuff to happen. It is just how I think things are going to go down.

  • avatar
    Glenn A.

    By the way, re: my comments above about a capacity crisis if/when GM, Ford and Chrysler go under? I did a bit of math work from a world cars book (2005-2006) and deduced quickly enough that even if “just” GM tanks, we’re in for some production capacity issues; if “only” Chrysler or Ford tanks, then it “might” not be such a big issue, for short-term pricing and supply shortages.

    But if GM, Ford AND Chrysler tank, well, there is not enough excess capacity for building U.S specification cars left in the world to accomodate the market, even taking into account a fairly dramatic drop in sales volumes (which would be inevitable due to the loss of GM, Ford and Chrysler jobs and supplier jobs and the inevitable recession from same).

  • avatar
    Adrian Imonti

    suohtil: I don’t see why corporations get blamed for greed but the consumer doesn’t.

    Customers are not “greedy” by definition. The customer is always right — consumers are free to spend their money as they choose. Customer service is a one-way street, the consumer does not owe a business anything.

    The Big 2.5 face the same dilemma confronted by every other company that is out of touch with its consumers: They make stuff that the consumers don’t want, which means that they incur expenses without the revenues to match. As the commentary implies, if you build something that people don’t want, the solution does not lie in building more of them.

    Businesses that don’t serve customer needs don’t stay in business for very long. If Apple made i8Tracks instead of iPods, and limited its iTunes selections to Lawrence Welk ballads, they would be suffering a much different fate they they are today. Consider the Malibu, Five Hundred and the like as belonging in the 8-track category.

  • avatar
    quasimondo

    Jim Press, President of Toyota Motor North America, once stated “In our company, there are two planning processes, short-term and long-term. Short term means in our lifetime.” I doubt there are many other companies that could make that statement.

    That conflicts with calls for the 2.5 to act more nimbly. If you stretch your short term planning out as long as they do, you have to be dead on with your planning. One miss and you could find yourself in the same boat as the 2.5, hedging your bets on the wrong deck with no way to change course to adjust.

    Anecdotally, I observed first hand another reason why the domestics are having a hard time managing their inventory. On Monday I visited a Toyota dealership on a major interstate during the heavily trafficked early evening. The showroom was packed and abuzz – like a grocery store during peak hours.

    A short time later I crossed the freeway to a Chevrolet/Subaru dealership that had about the same number of cars on the lot. The showroom was as quiet as a morgue. During my hour there I only saw only one other customer.

    Toyota’s dealership was Mardi Gras and GM’s was a wake. The Toyota employees were relatively youthful and animated. The wizened GM staff were frumpy, coffee stained, and reeked of cigarettes.

    If that’s all there is to making these cars sell, the Saturn dealerships would be struggling to keep their cars on the lot and not have 230 days’ worth of Ion’s.

  • avatar
    NickR

    “Buick dealers averaged just four new car sales per store…Mercury dealers only managed to move six cars apiece in January”

    What the hell do these salesmen live on? Their commission income must be abysmal.

  • avatar
    shaker

    I can’t see the Gov’t letting any of the Big 2.5 go into the crapper; the effect on the economy would be significant, since the auto industry represents a large portion of domestic manufacturing (other than military contractors). The way these guys are running their business seems to reflect the attitude that a bailout is a likely thing, as the domino effect of an auto industry collapse could ruin a lot of 401(k)’s…

  • avatar
    NoneMoreBlack

    Glenn A.:

    I have no idea what “suohtil” is on about, but I do have a couple counterpoints for your suppositions.

    It may or may not be the case that the entire world’s capacity with the current capital stock(or whatever levels happen to be extant at the time of this hypothetical catastrophic failure) will be insufficient to equal in the short run the fall of production that would occur in the event of the simultaneous and total obliteration of the Big 3. I am fairly certain that every auto manufacturer on earth is not currently running 24 hour shifts at plants packed to the gills with employees and equipment, but since I have no proof, I will allow that.

    I would also point out that spontaneous combustion on the scale of companies like these, let alone 3 of them simultaneously, is extremely rare except in times of egregious corporate misconduct such as Enron, but that is beside the point I am now making.

    The point is, yes, a supply side shock will have the short run effect of reducing quantity supplied, which through price rationing will place an upward pressure on prices until a new equilibrium is reached; this is a shift inward of the supply curve. However, in the long run, as you at least appeared to astutely observe, the higher prices will raise the revenues available to auto manufacturers. This will stimulate them to increase production as well as entries into the market, lowering prices as volume of sales increase (movement along the demand curve). The long run supply curve, the locus of short run equilibria, reflects this effect (as well as the effect of improved technology) in that it tends to be downward sloping.

    I’m not clear on what exactly this has to do with China. At current prices, the auto market is already extremely attractive to China, as evidenced by the massive expansion of capital investment their and increasingly frequent forays into auto shows and the like on the part of Chinese auto makers. Higher prices will certainly increase this incentive, but I see no reason to believe that it will “allow the Chinese to come in” any more than they are currently able to. The fact of the matters is they are simply years behind the established players in the market in more ways than one, and their endeavors to join those players will certainly and eventually succeed given the high productivity of capital in their labor abundant market, regardless of the existence of the Big 3.

    Now, I won’t get into the neoclassical argument with your assertion that “the US will be without a huge portion of once good paying jobs,” I simply wanted to explore the bases and ramifications of your discourse, which I felt were sparse and myriad respectively, a relationship I endeavor to reverse in my own writing.

  • avatar
    Luther

    I don’t see why corporations get blamed for greed but the consumer doesn’t.

    That is because we are all consumers. It would be, um, masochistic to blame ourselves for anything. A corporation is nothing more than a bunch of us consumers busting our butts to produce something for all to consume. Blaming corporations for being “evil” is sooo Hollywood/Dumobrat/Ignorant. I *hate* customers. I dream of life without customers (Just after dreaming of Jill Wagner) and wake up happy.

    An almost throw away product. As long as I can get 2, maybe 3 years out of it then throw it away because it only cost $6000 then I am happy.

    Sounds like a Chevy Aveo… Wouldnt that be great! Talk about an improvement to all our standard of living! Are you listening Porsche?

    have even more full land fills

    As CSN(Y?) says “We are stardust” or Kansas “Everything is dust in the wind”. Everything is dirt including Styrofoam and Spotted Owls. When a woman calls me dirt, I cant argue.

    I live near a huge Autopark and every dealer is overflowing including Toyota… Odd.

  • avatar
    Johnson

    Great article Frank.

    So the facts are as they are, GM sells many more vehicles than Toyota ini the U.S. and probably will for the next few years at least so all this “nobody wants” crap is ridiculous.

    Your logic is flawed. How can one really tell if Joe Blow bought that GM vehicle because he actually wanted the vehicle based on it’s own merits, or that he decided to buy it because of the huge discount he got on it? It could be he wanted the discount more than the vehicle itself.

    Also, in the Midwest, Toyota and Honda dealers are very scarce. Some people have *no choice* but to get a GM vehicle because the nearest Toyota dealer is just too far.

    Ever checked GM’s marketshare in California? It’s miniscule, and it certainly supports the idea that people in California don’t want GM cars. Maybe some of their trucks and SUVs.

    An overwhelming percentage of GM’s sales come from full size trucks and fullsize SUVs. As for cars, the only GM cars that sell in any significant numbers are fleet queens.

    Still not getting the message? It seems pretty clear that retail customers simply don’t want GM cars in any significant numbers, and fleet buyers continue to buy GM cars because they’re almost given away; that’s how cheap the fleet cars are priced.

    Heck, I’d buy any GM or Ford model, if it was brand new and “given away” to me for only 10 – 12K. Many local dealers in certain areas are actually selling Silverados for 13K.

    That conflicts with calls for the 2.5 to act more nimbly. If you stretch your short term planning out as long as they do, you have to be dead on with your planning. One miss and you could find yourself in the same boat as the 2.5, hedging your bets on the wrong deck with no way to change course to adjust.

    Wrong. That’s a very simplistic way of interpreting Toyota’s statements. Toyota’s planning and thinking is extremely well rounded, and covers so many factors and variables. If one part of their planning was to fail, it would not affect them all that much, because all the other parts of the planning would be well-rounded.

    Detroit automakers’ thinking is famous for being short-term “day by day” sort of thinking, that often tends to be narrow minded, ignorant, and naive. Detroit automakers are also famous for relying too much on one segment, or the “latest craze” in the market; they are known to put all their eggs in one basket, so to speak.

    Toyota’s planning encompasses many segments and different markets, and Toyota never bets on any one segment, or any one model. Toyota’s short term thinking is very specific and equates to thinking years ahead. Toyota’s longer term thinking, in terms of decades and lifetimes is much more broad, and holistic.

    Thinking decades ahead; you can’t really say that the Detroit automakers are known to do this.

  • avatar
    Lumbergh21

    The obvious solution would be to have the contracted workers spend MORE time per car raising quality and thereby making a better product. This improved product should be sold at the same price as a car with less man hours in it, raising demand.

    Yes, I know it doesn’t work that easily, but it’s the only solution that results in vehicles than might sell.

    alanp:

    The problem with this argument is your basic assumption that the workers will produce a better built car if given more time. Not necessarily true. They may just spend more time resting. Even if they spent this extra time driving that bolt or rivet more precisely, etc., they would still be using the same components as before, and that is where a lot of the quality problems arise.

  • avatar
    nino

    I think I could go to almsot any dealership and walk in and know more about the car they are selling then they do, I have done it many times, all makes and models.

    As have I.

    The difference is that at many of the domestic dealerships, I get called a wiseguy (and worse), while at the Honda dealership (the ones I mostly go into) don’t insult my intelligence and when they don’t know something, they go out of their way to find out.

  • avatar
    Bob Peters

    Apparently, the Big 2.5 haven’t learned about JIT (Just In Time.)

    My local Chrysler/Dodge/Jeep dealer’s lot is overflowing with unsold inventory. They may have to start renting space from the neighboring dealerships.

  • avatar
    suohtil

    Glenn A,

    I agree about being the messenger to wanting to not be confused with a desire of the message. I surely don’t want throw away cars though my comment about needing them for 2-3 years was taken out of context by someone else so I just want to be clear about that. Throw away cars will happen once the Chinese take over the market (or even when U.S., German and Japanese companies are still the brands and even owned by these countries but all vehicles are made in China i.e. when Chinese manufacturing takes over the car markets).

  • avatar
    suohtil

    I guess Bob Peters didn’ read the article. They can know about JIT all they want but if you have to pay people no matter what then 99 out of 100 times you are going to just produce anyway. Taking a chance you can make $1 a vehicle (on average) is better than knowing you will lose money if you have your people idle.

  • avatar
    hltguy

    The sales and inventory numbers in the excellent article are astounding. The few Buicks and Mercury products being sold each month are probably at steep discounts or with large incentives attached, which makes the horrible numbers even worse, and that shadow looming overhead is $3 a gallon fuel. 23 months ago I leased two Saturns, a Vue and an ION BOTH for $199.00 per month (not each, but both) with 15,000 lease miles per year for each. Next month the lease is up on both, I have received numerous solicitations from GM to get another GM vehicle (several months ago they sent me a letter they would pay the leases off early if I would purchase a new GM vehicle), then they add rebates, 0% interest on their 2007 vehicles etc, smacks not of good marketing but desperation. I can just imagine what a two year old ION and Vue will sale for, if there are 270 day supply of new IONs hanging around. The 2.5 are in such serious trouble, and there will not be government bailouts this time, it is an entirely different world. What, the government is going to say we are going to give Ford, GM and DC financial help, as the 2.5 are moving jobs out of the country, and not give breaks to those companies who built new factories in this country and are employing tens of thousands of americans? Talk about a political mess that would be. Ford’s product line is moribund, and now the rebates have already started on the Edge, wait a few months and those incentives on that model will be across the board. I hope the UFW members have taken the time and effort to retrain themselves so they can make a living in a new industry, as the fat lady is warming up regarding Detroit.

  • avatar
    Lumbergh21

    Weren’t American auto manufacturers famous for throw away cars up through the 70’s? Maybe Suohtil should take a look at the manufacturing “quality” of a 60’s Mustang or a 70’s Vega. The market, mainly through the availability of better built cars from outside car makers, has driven all car manufacturers to make better built cars. I can’t see consumers going back the other way. Sure there will be a market niche for a cheap disposable car. In the past it has been filled by emerging (and sometimes failing) car makers like Yugo, Kia, and Hyundai. I expect China to start as Kia or Hyundai did by bringing a no frills cheap car that people who are in the used car market but wish they could afford a new car segment will buy-was that a long enough description of a segment :-). People have become accustomed to cars that last for ten or more years with few problems; they will not accept throw away cars like throw away CD players.

  • avatar
    suohtil

    NoneMoreBlack,

    Are you Adam Smith reincarnated? Your writing style is very close to his ;)

    Anyway, the reasons China can have a better run if GM and/or Ford are gone are several…

    Even if it only took Toyota, Honda and the rest 1 year to make up for just the 4.1 million vehicles sold in the U.S. by GM that is 1 year of all kinds of things happening. Are the Japanese, Germans and Koreans going to buy every dealership up even if there is already one of each already in the autopark just to block the newcomers? Maybe, but is it gauranteed? I don’t know. Also, if prices go up because supply is down and demand even the same then it would be a low cost maker that would surely have some type of advantage even for a short time. Hyundai’s were jokes when they first came to the U.S. but they filled a low price need probably because it was pre-dotcom boom and pre-housing boom and that is what many had to buy. If GM and/or Ford went out of business tomorrow then millions of U.S. jobs would be gone (counting direct employees, hourly employees of those companies and then dealerships and suppliers). That would create another demand for lower priced cars again (because that is what the masses could afford).

    Bottom line, major economic hit and fall of the U.S. companies opens room and raises demand for cheap vehicles. The Chinese could fill both needs better than anyone. I don’t think even Hyundai and Kia had as much input from world class automakers prior to entry as any given Chinese company (i.e. they could get better faster) thanks to the Communist Chinese gov’t forcing partnerships in China.

    Of course there is so much more to be said about the whole thing.

  • avatar
    suohtil

    Lumbergh21,

    I was writing a response to NoneMoreBlack and didn’t see your comments until afterwards, btw.

    I believe Americans will get used to throw away cars. The rich won’t but the average American who lost their middle class job and can’t get a lower paying job because of illegals taking those will keep that going.

    What, the government is going to say we are going to give Ford, GM and DC financial help, as the 2.5 are moving jobs out of the country, and not give breaks to those companies who built new factories in this country and are employing tens of thousands of americans?

    Why not? If my one son has a learning disability am I going to pay a little more for him to get tutoring or am I going to worry about paying the same amount to all my children even if the others are at least average or above? Why gaurantee the disposal of hundreds of thousands of jobs just to make suppliers of tens of thousands of jobs happy? Plus they do get government incentives from the states and because GM and Ford have been here longer they don’t get those incentives. One could ask should GM and Ford be compensated for all the funds the Japanese and Germans have received in incentives to build here when our companies didn’t get those originally (because Americans didn’t beg for jobs back in the day or whatever the reason).

    To make it a “fair” game like you are implying we would need to do would be to simply tell the Japanese and Germans that, “You pay as much taxes (business and real estate) and supply as many jobs as they did over 100 years and then we can talk what is fair”. Of course we are way to wimpy to do that as a country (our politicians).

  • avatar

    How can one profitably run a dealership on eight sales a month? I guess live off of used car sales and servicing?

  • avatar
    suohtil

    What, the government is going to say we are going to give Ford, GM and DC financial help, as the 2.5 are moving jobs out of the country, and not give breaks to those companies who built new factories in this country and are employing tens of thousands of americans?

    And just a little more to that statement… This is really troubling that you would think this in the manner you do. I mean there are a SIGNIFICANT amount of U.S. assembled cars by the American companies (especially GM). I would think more so than even Toyota.

    Cobalt
    Malibu (2008 looks good)
    Corvette,
    most Silverados
    Colorado
    Tahoe
    G6 & G6 hard top convertible
    Solstice
    Sky
    Aura
    Outlook
    Lucerne
    H2
    H3
    STS
    CTS
    DTS
    SRX

    And that is not including the most blatant badge engineering jobs and all outgoing vehicles (Trailblazer/Envoy etc.).

    Between my last post and this one I think it is absolutely clear how our government could be so (pseudo-quote you) “unfair”.

  • avatar

    SherbornSean: I think you are taking the numbers a tad too literally. I am fine with looking at inventory by division, and if it is significantly greater than 60, there is obviously a problem. But looking at it by model, and highlighting the high inventory levels of niche vehicles take things too far. Well, I never considered the Lucerne, LaCrosse, or Five Hundred as "niche vehicles" but anyway… Here are the aggregate figures at the corporate level: General Motors – 107-day supply Ford Motor Co – 93-day supply DaimlerChrysler – 77-day supply American Honda – 62-day supply Toyota Motor Sales- 53-day supply And by division: Saturn – 153 Buick – 132 GMC Truck -126 Saab – 114 Pontiac -104 Chevrolet – 99 Ford Division – 98 Mitsubishi – 94 Mercury – 82 Nissan Division – 79 Dodge – 77 Chrysler Division – 77 Lincoln – 76 Honda Division – 62 Toyota Division – 58 Lexus – 19 Still doesn't look too good very many of them.

  • avatar

    Dave:
    How can one profitably run a dealership on eight sales a month? I guess live off of used car sales and servicing?

    Those (and the parts department) are a large part of what keeps most dealers afloat, but don’t forget that many dealers also sell several different brands, so every little bit helps.

  • avatar
    tones03

    nino:

    Sounds like a dealership problem. I have had a toyota dealership question me on something I said about the Avalon but I also have gotten questioned about stuff on the CTS. They question me or insult me on something I know is true, I walk out, IMO you cant lump GM dealerships cocky salesmen insulting you with the rest of their problems. If you walked out and didnt buy the vehicle because of that you must not have wanted the vehicle that bad or were just looking for a reason NOT to buy it.

  • avatar
    starlightmica

    Well, I never considered the Lucerne, LaCrosse, or Five Hundred as “niche vehicles” but anyway…

    Frank, neither did I, until you subtract fleet sales….

  • avatar
    Luther

    I believe Americans will get used to throw away cars.

    Almost half of the new cars on the roads are leased. One might consider leasing as throw away.

  • avatar
    hltguy

    Suohtil: The 2.5 have had massive goverment assistance for decades, shall we mention the tax breaks on every porrible type of cost they plow into their financials? The breaks on fuel milage standards (trucks etc, excluded from the standars), NAFTA which help clear the way for Ford et. al. to build outside the country. The years where anti-pollution standards were relaxed or delayed at the behest of the american automobile companies? The state tax breaks across the country Ford, GM and other domestics received through the years, the massive purchase of domestic vehicles by government agencies, the list goes on and on. Fact is, despite all the assistance they received from the public sector and the millions of vehicles sold, they squandered their riches and that does not lend itself to any sympathy. A lack of proper planning on their and their union's part does shall not represent a crises for me, or higher taxes. There are few jobs in this country that will allow full pay to an employee not working. The american taxpayer gets shafted continuously now (on average 40% of our wages go to taxes), why should we be in the mood to bail out an industry and its unionized workers who have been committing joint suicide for years? What politician south of the Mason-Dixon line is going to support a bailout for Michigan based companies when tens of thousands of jobs in his/her state in the same industry are not getting the same benefit? This is a different world from Iococca going with his tin cup to Congress in the late 1970's, there is NAFTA, the WTO and other rules to play by now, not to mention a public sick of greedy, unethical, inefficient corporations. Even if the remote should happen and the government issues a "bailout", how much would it take, $10 billion, $20 billion, $30 billion? That even is not enough, Ford's debt alone is more than that. A government bailout, IMO, is not going to happen, and even if it did, it is way too little to late. As you mentioned in your e-mail about all the models the domestics manufacture, all those different models are one of the reasons they are in the predicament they are in, they have taken a shotgun approach to making a selling cars. I hate to see it also, but the truth is truth, the glory days are over, and it is not a question if they are going out of business, but when, and they only have to look in the mirror to find the reason.

  • avatar
    Luther

    The salesmen are never as knowledgable as they should be and I think most dont care enough to learn more about the product they are selling.

    Thanks to Internet price competition, the Salesmen dont make much money selling new cars. Asking a Salesman about the car they are selling is like asking the girl at the window of a McDonalds drive-thru what is in the Special Sauce.

  • avatar
    SherbornSean

    Frank,
    I agree that Lucerne, Lacrosse and 500 are not niche vehicles, which is why I proposed the 60K floor for annual sales, which I believe these vehicles exceed. They had better!

    Thanks for posting the figures by division. There are obviously some big incentives coming from Ford and GM in the near future, or else idled assembly lines. But Chrysler doesn’t look bad in comparison. My guess is that they are taking the place of GM and Ford in fleet sales.

    I’m surprised Saturn is so bad. Probably they filled the pipeline with Ion and Vue inventory as they close those assembly lines so dealers have product to sell. If that inventory is Outlooks and Auras, then the division is toast!

  • avatar
    suohtil

    hltguy,

    Not sure what you mean by porrible type of cost? Meaning things they wrote off over the years? If so (just guessing until I get it clarified) then these are things every company could have done I would assume. Anyway, I can’t answer until I better know what you mean on that.

    NAFTA which help clear the way for Ford et. al. to build outside the country.

    My guess is that if only GM and Ford were pusing for that then it wouldn’t have happened. Toyota makes their Tacomas in Baja California, Mexico and Honda makes Accords and other things that supplement U.S. production. It has helped VW too probably (don’t/didn’t they make a lot in Mexico recently?).

    I was going to attempt to go through each sub-point but it would take too long. But I will state this… Each Advantage you gave was at the time 5 fold or 10 fold payed back to the country and it is that extra fold that I think it is worth paying back now if needed. This means, how could you put a price on war wins because of their products, the amount of vehicles they could supply when no one else in the world could (i.e. should we have waited several decades until the Japanese could reliably build millions of cars for sale in the U.S. the amount needed to keep America moving and booming), even the size of their vehicles (American families were larger back in the day, who built cars large enough to support this need?).

    You can’t put a price on their contributions and I believe at any given time, as I’ve stated before, they gave back more in # of wheels put on the streets, size of vehicles (not every company made haulers back in the day), etc. Sorry, I am trying to type fast.

    Now, they can easily support as many jobs as the Japanese (i.e. they could pick up any slack if Toyota and Honda decided America wasn’t for them) and build as many vehicles. That is a fact. So the Japanese aren’t really doing anything GM and Ford can’t but for several decades GM and Ford were doing things for this country that others couldn’t. And the paybacks you meantioned at each level where nothing in the priceless (unmatched) things they gave us.

  • avatar
    Lumbergh21

    Ford’s product line is moribund, and now the rebates have already started on the Edge, wait a few months and those incentives on that model will be across the board.
    I got a call from a Ford dealership letting me knwo that they were offering 0% on all Mustangs. I can’t imagine that they are having trouble moving Mustangs, but maybe they are. If so, what are they selling in sufficient quantities? F-Series trucks?

  • avatar
    Dave M.

    Wow! I didn’t realize Buick and Mercury dealers had such a low per-dealer sales rate. Imagine being a salesman there? That said, I’d much prefer a Montego over a LaCrosse anyday.

    The dealer I last dealt with in ’01 is a combo Lincoln-Mercury-Isuzu dealership – talk about rolling snake-eyes! I remember walking their lot, looking over the sea of new vehicles (back when there was a Cougar, Sable, Rodeo, Villager, etc – cars that at least sold something…). The last few years the back lot has been pretty bare, but last week I noticed a couple hundred vehicles lined up like old times…..except they were Toyotas, because the dealer down the street ran out of room….

    wow, what a slap in the face….

  • avatar
    hltguy

    suohtil: I meant to write "possible" not "porrible" my misspell. I understand your comments, but everything good those corporations have done in the past has been amply rewarded by loyal customers (who got bad service, bad products etc. for years.), tax breaks, delayed polution and fuel milage standards, large purchases of their goods by taxpayers etc.. It was their own mismanagement, union greed and poor planning that got them in this mess. This country cannot afford to keep paying for the positive things they did in the past. We all want to help senior citizens, as they did great things in our history, but Medicare and Social Security are going broke. I am 51 years old, own american cars (as I previously stated, two business leased Saturns for $199.00 per month for both!) and have been working for 35 years, and own my own businesses. If my businesses get into financial problems, I do not expect nor would I receive a government bailout, though for many years I have employed many people and paid lots of taxes. GM, Ford etc, were amply reqrded for their past contributions, they must now face the fact this mess is of their own creation. Regarding the Mustang incentives, yes, they are offering zero percent, have been offering rebates. If you know someone who can get you an X plan price, and parlay it with a rebate and low interest, then you can cut a sweet bargain on a Ford (just don't expect much on future resale or trade in). Ford's own website as of the past two days had huge rebates and zero percent interest on 2006 models (Explorer for example). Imagine buying a 2006 model now, as it is nearly a two model year old vehicle already and has already lost 30plus % of its value before you even sign the contract. As I say, patriotism is one thing, sound business decisions are another.

  • avatar

    I can’t imagine that they are having trouble moving Mustangs, but maybe they are. If so, what are they selling in sufficient quantities? F-Series trucks?

    Ford has a 118-day inventory of Mustang. Yes, it’s their trucks that are keeping their sales completely out of the toilet

    The dealer I last dealt with in ‘01 is a combo Lincoln-Mercury-Isuzu dealership

    Yeow! Is it still in operation? If so, someone may want to stop by to make sure the sales people haven’t turned suicidal. Of coursre, Mercury’s 82-day supply doesn’t look so bad next to Isuzu’s – 205 days!

  • avatar
    suohtil

    hltguy,

    We are just going to disagree. Of course, paying them back forever isn’t the solution but I think it is still reasonable to help out now. Especially if GM’s two mode hybrid and hydrogen fuel vehicles are as good as I think they will be (at least as good as what Toyota has very soon).

    Asians are taught to take care of their elders but we are less into that. Not that GM and Ford should be considered “elder” in the negative sense because like I said, I think they still have contributions to make. Somethings like OnStar I think are outstanding product. People talk about GM being years behind in hybrids but two things to that. First, GM will be viable in that arena very soon and two, for Safety OnStar is a great product. No one gives Toyota hell for being behind in that. Personally I think OnStar is as great a system as a hybrid (hard to compare apples to oranges but I would easily say that OnStar will be the defacto standard for what it is longer than Toyota’s hybrid system will be, maybe just on usefulness to me is what I am getting at). Yet no one seems to put much weight on that feature like if Toyota or Honda created something really standing out.

    Another thing towards achievements, I really thought that the EV-1 was really cool but didn’t understand why it did get the props it did with things like the RAV4 electic. Then I saw the facts (at least printed on an EV site and I believe them to be correct). The EV-1 actually had horsepower rating which were acceptable to a modern car of the time. Something like 137hp compared to 66 hp in the RAV4. An SUV with 66 vs a two seater with 137. It became clear that if Li-Ion was used in the same application (weight reduction) that vehicle as is would be tremendous (possibly be everything the Insight wasn’t). Anyway, these are the types of things that show me GM has not totally sat on their tales for years. They try. Maybe with a little more time and perception change they could be great again IMO.

  • avatar
    Johnson

    Ford has a 118-day inventory of Mustang. Yes, it’s their trucks that are keeping their sales completely out of the toilet

    Their trucks, which are seeing lower sales, and are about to take a bigger hit from the new GM trucks and the new Tundra.

  • avatar
    hltguy

    suohtil: We will respectfully disagree. I also do not believe the asians take better care of the elderly, this country has spent trillions of dollars of social security, housing, and healthcare for senior citizens and continues to do so. Fact is, the Social Security, Medicare/Medicaid systems are going to insolvent, Medicare going first, probably by 2018. People like me and many others like me who have workd for decades and paid into that systems will never see any benefit from it. By I am off topic here. It is indeed true GM/Ford/Chrysler are in the bad shape they are, but we cannot bail out the inefficient and mismanaged entities anymore (the federal government already has a corner on inefficiency and waste). Agree, On-Star is nice, but is that the best a company the size of GM can come up with? Where were the hybrids years ago from them? The part of California I reside has had fuel prices go up over 30 cents a gallon in the past month, and I bet its going up all over the U.S., that is very bad news for the 2.5. So it goes.

  • avatar
    kjc117

    Mistubishi’s Normal IL. plant is union thanks to Chrylser.
    Nissan just bought out some of their Tenn. employees.

    Why do you guys call them 2.5? Chyrsler is not a American company they are controlled and owned by the Germans. It’s the shrinking 2 whom is the .5?

  • avatar
    NickR

    hltguy is getting a car for less than I spend for my Blackberry. A car for less than a glorified cell phone? Yes, I’d say that constitutes ‘giving them away’.

  • avatar
    nweaver

    Element supply is probably synthetically high:

    Remember, the Element and the CR-V are made at the same plants, and tehse are effectively single lot-number plants (can shift on almost a car-by-car basis). With the new CR-V coming out and being tooled up, Honda probably took all those slots and made Elements, knowing they’d build up the supply and then shift over to the CR-V.

  • avatar
    chanman

    whoa whoa whoa…. Lexus is at an average of 19 days???

  • avatar
    NoneMoreBlack

    suohtil:

    Being compared to Adam Smith is a pretty big compliment where I come from, so thanks are certainly in order.

    As far as your argument is concerned however, I cannot be so beneficent. First, as I already pointed out above, a sudden and complete annihilation of GM, Ford, and DCX, whether together or separate is, in my opinion at least, EXTREMELY unlikely. Almost no company of any mass ever suddenly winks out of existence, firing all its employees and liquidating all its capital. It is much more likely if anything that one or all of them will gradually dwindle in size, as has been occurring, until it has lost enough of its market power to be realistically absorbed by another manufacturer. This, however, is mere speculation on either of our parts, and not really of a strictly economic nature, but more of a financial one.

    What is economic, however, is your analysis of the effects of such a shock. Firstly, whether or not there is sufficient excess capacity to meet the void left by those companies is relatively irrelevant. As I said, supply will fall, creating incentives to enter the market, supply will rise, prices will again begin to fall as they have on the aggregate since the industrial revolution.

    Secondly, auto manufacturers do not own dealerships in the US; it is illegal here, as it is a form of vertically integrated monopoly, like the Carnegie steel empire of a century ago. Certainly, a fair number of them would likely go out of business, but many dealerships are diversified in what they sell, and this would simply drive them to begin dealing in the cars that are produced to meet the hole in the market.

    Thirdly, I’m not even entirely clear what your argument is concerning Hyundai and Chinese manufacturers. A “low cost” manufacturer will always have an advantage compared to a high cost manufacturer, if they are producing a competitive product. Ceterus paribus, low costs are better. Higher prices here will certainly make entering the market more alluring, but it is already plenty attractive given their low labor costs, and they are already beginning the process of competing on the Big 3’s home turf.

    Fourthly, I think your estimate of the effect on the US labor market of those three companies disappearing down the rabbit hole is completely unrealistic. Based on a rough wikistimate, the Big 3 employ just less than 1 million people worldwide, counting DCX as best one can. I’m not going to bother to try and figure out how many of these are actually in the US, but I would be extremely surprised to find that it’s more than half that figure. Even assuming some huge number of secondary and tertiary firms such as dealerships and suppliers going out of business, 1 million freshly unemployed workers would be an extreme. This is essentially the balls out, worst case scenario as far as I can determine.

    According to the St. Louis Federal Reserve, the average size of the US 16yo+ workforce in 2006 was about 151 million workers. So, we would be looking at an instantaneous .75% increase in unemployment. Don’t like my estimate of the number of unemployed workers? Double it if you like, it’s still only 1.5% Hardly the impetus of an economy wide crisis. Large, notable, more than we have seen in a long time, but this is not going to have a noticeable effect on GDP or median incomes. The small car market is going to remain essentially unchanged.

    Finally, your assertion that Chinese auto makers are somehow more responsive to market signals as a result of the influence of foreign manufacturers is certainly intriguing, and would make a very interesting topic for a paper for the Journal of Economic Development or some such. As such, it is hardly something that can be assumed without any evidence. I think the relative scarcity of capital in China would limit their short-run ability to increase production, while the long run would depend on their local manufacturers attracting sufficient investment.

    As something of an aside, I am confused by this notion you have of “room” in the auto market; there is no finite limit to the quantity of anything that can be sold in any market. You will notice the horizontal axis of the graph at the beginning of the article; quantity is infinitely adjustable, given the movement of prices. As manufacturers leave or enter the market, the supply curve shifts inward or outward, and the effect on the volume of transactions depends on the price elasticity of demand.

  • avatar

    I agree that we shouldn’t be rushing to bail out the 2.5 with government subsidies because of concerns over supply if they cease to exist. The only scenario where this would even be a problem, as NoneMoreBlack mentioned, is if all three disappeared simultaneously. If anything the elimination of one of the domestics from the game would probably benefit (and maybe save) the survivors, assuming they could capitalize on the increased demand.

    Besides, what kind of precedent would we set by bailing out GM? That a company doesn’t have to worry about strategic mistakes as long as they’re “large” enough? The last thing we need is another Amtrak.

  • avatar
    Johnson

    whoa whoa whoa…. Lexus is at an average of 19 days???

    Almost shocking, isn’t it. Models like the GS350, IS350, and LS460 are in very short supply, it seems. According to Power Information Network, the LS460 is sitting on dealer lots an average of only 8 days.

  • avatar
    Rastus

    Just ask yourself one question:

    What kind of “management team” would invest in production plant/facilities/equipment/human_resources only to produce more tampons than the world needs?

    And furthermore, what kind of “management team” would LOCK themselves into the above “agreement”, with no recourse for adjustment?

    Oh well…I guess the world just can’t get enough tampons!!!

  • avatar
    cheezeweggie

    With so many MBA’s running our companies, why is US manufacturing going down the toilet ?

  • avatar
    Robert Schwartz

    So how are the 2.5 going to be hurt by a UAW strike?

  • avatar
    hltguy

    NickR: Kinda sad isn’t it, I actually got two cars for $199.00 per month for both (of course with taxes, it come to $215.00 per month) and 15,000 lease miles per year for each. Then GM offers not long ago to pay off the leases early for me, and a rebate and zero percent interest on new Saturns if I would turn the lease vehicles in. I was wondering how GM could possibly make any money on such offers?, the answer is apparently they do not. So the two vehicles cost my company about $7 a day (and that is a business tax deduction). By the way, the local Saturn dealer has so many new cars for sale, they have a dirt lot next to their dealership that is completely stacked with new cars. Oh, I also should mention on the two cars for $199.00 deal, each came with one of On-Star service at no charge.

  • avatar
    hltguy

    Is it true the the story about the Buick car salesman who went to work as the Maytag repairment so he would have something to do during the day?

  • avatar
    TreyV

    25 day inventory of Fit’s? No wonder my friend literally couldn’t find one around Philly to test drive.

  • avatar
    Giltibo

    Yes indeed. The CR-V and the Element are made on the same line, as well as some Civic Sedans. Two hot sellers make up for the tepid one. The East Liberty plant works at full capacity. The Element was designed as a niche vehicle and that’s what it’s been all along.

    The North American have to learn:
    a) To create and assemble vehicles people really want.
    b) Manage their output (Not let the offer outstrip the demand as much as they’ve done in the last couple years)
    c) To limit sales that have a bad effect of the perceived value of the vehicle. (Manage fleet sales)
    d) Find a way to manage the number of dealers (Too many at this time)
    e) Improve the flexibility of their assembly plants.

    Take as example Honda’s HCM2 plant in Alliston: now it builds Pilots, Ridgelines and Acuras MDXes. For the next generation, the whole Pilot production will be made at HAM in Alabama. HCM2 will then build… Civic Sedans along with the aforementioned MDXes and Ridgelines. F-L-E-X-I-B-I-L-I T-Y. (With the success of the CR-V – now assembled at the East Liberty, Ohio plant – Honda had to find a place to build more Civic Sedans somewhere else.)

    f) Did I mention “design and build cars that people actually want to buy”?

  • avatar
    suohtil

    First, as I already pointed out above, a sudden and complete annihilation of GM, Ford, and DCX, whether together or separate is, in my opinion at least, EXTREMELY unlikely. Almost no company of any mass ever suddenly winks out of existence, firing all its employees and liquidating all its capital.

    Maybe there is no precedence but here is the deal. It wouldn’t be “suddenly”. GM is more than $300 Billion in debt. I don’t think that is sudden. But I think more importantly is that American cars, to many people, are the same (or at least mentioned together often). This means that if 1 of them goes out of business it will be assumed the others are just as scary so why by a vehicle from them and get caught without a warranty. Consumer Reports has mentioned in the passed things generically about “American cars” and “Japanese cars”. Plus they use many of the same suppliers. And lending institutions are only human and if GM went out of business you don’t think that lenders would be extremely weary of lending Ford? Plus they all have the UAW which ties their fate together even more. Plus, if one went out of business and moved all production to China (bankruptcy helps get out of union contracts) the other two would see this as an easy way out if it even began to work for the bankrupt one. There are many reasons why a perfect storm could form (or purposely be formed to get out of things). Not only that, there is speculation that GM is looking into getting Chrysler. If that could happen (companies have been sold for $1 to get out of having the burden) then it is essentially making it very easy for the companies to tend to the “all at once” theory. Actually, the “all at once” theory might only have to be a year apart, of course no two or three entities (of the corporate species) will die minutes of one another. But close is close enough.

    What is economic, however, is your analysis of the effects of such a shock. Firstly, whether or not there is sufficient excess capacity to meet the void left by those companies is relatively irrelevant. As I said, supply will fall, creating incentives to enter the market, supply will rise, prices will again begin to fall as they have on the aggregate since the industrial revolution.

    Hmm. Supply falls and stated almost as if magically and instantaneously the void is filled and supply will rise. That is in a vacuum, a perfect world that it is that easy. If we were talking iPods I’d agree with you. But Toyota advancing its production from a little over a million to about 2.5 million now (this growth over several years) has shown their reliability to suffer (sludge engines as an example). I.E. in a perfect world autos just get built and decently quick. In the real world all kinds of trouble occur. Like Toyota’s vehicle failure rate is 25% or more because it tried to make double the vehicles it did the year before. Not every company wants to just grow. Like Honda for instance, they were ahead of Toyota at one point and they could have gone gang-busters like Toyota (only 1.5 million Hondas sold in the U.S. last year to Toyota’s 2.6 million). Honda didn’t want to risk lower quality. So, not all companies can and will grow fast as you think. Again, Apple makes 14million iPods is one thing, no one makes near 14million vehicles in the world in one year. It isn’t easy.

    Secondly, auto manufacturers do not own dealerships in the US; it is illegal here, as it is a form of vertically integrated monopoly, like the Carnegie steel empire of a century ago. Certainly, a fair number of them would likely go out of business, but many dealerships are diversified in what they sell, and this would simply drive them to begin dealing in the cars that are produced to meet the hole in the market.

    Yes, a fair (very fair) number would go out of business. Is Toyota going to risk GM’s mistakes by allowing the 3 closest (to existing Toyota dealers) GM dealers to then be Toyota dealers? Actually, Toyota might, they are arrogant and do things GM does all the time (I’m convinced it is just to show how their perception allows them privileges that the domestics don’t get). But for the most part there are autoparks and it isn’t just easy for a dealer to get a dealership right next to an existing one of the same. My point is that, yes, a very “fair” amount, as you put it, of dealerships will be gone.

    Thirdly, I’m not even entirely clear what your argument is concerning Hyundai and Chinese manufacturers. A “low cost” manufacturer will always have an advantage compared to a high cost manufacturer, if they are producing a competitive product. Ceterus paribus, low costs are better. Higher prices here will certainly make entering the market more alluring, but it is already plenty attractive given their low labor costs, and they are already beginning the process of competing on the Big 3’s home turf.

    You just said it. Normally it is the case that the advantage is with a cheap manufacturer which *produces a competitive product*. I’m saying that a “non-competitive” product becomes competitive in a case such that an industry has a major loss of supply. I.E. unless Toyota and Honda quickly decontent their vehicles or start importing from China (which they could easily do since they don’t have unions in the U.S.) Chinese cars, no matter what the quality, will be purchased even if today (with GM and Ford around) those same purchasers wouldn’t have dreamed of buying a cheap (materials) and poor assembled vehicle. This is for two reasons. Many lose their jobs and that is all they can afford and also the “good” company’s cars go up in price because less good car companies around and so the newer less quality Chinese cars appear to be the most affordable even for those who can afford a moderately priced car. I.E. maybe prices here go up on some (popular) cars like in Europe where a Corolla would then cost $25K base or something.

    Fourthly, I think your estimate of the effect on the US labor market of those three companies disappearing down the rabbit hole is completely unrealistic. Based on a rough wikistimate, the Big 3 employ just less than 1 million people worldwide, counting DCX as best one can. I’m not going to bother to try and figure out how many of these are actually in the US, but I would be extremely surprised to find that it’s more than half that figure. Even assuming some huge number of secondary and tertiary firms such as dealerships and suppliers going out of business, 1 million freshly unemployed workers would be an extreme. This is essentially the balls out, worst case scenario as far as I can determine.

    Stupid government, they think a few more jobs are here because of the automotive industry: http://www.doleta.gov/BRG/Indprof/automotive_profile.cfm

    I.E. see the number, hint, search for “6.6” with your browser page search (no quotes). And just to remind you, as large as Toyota is, remember they have 32K direct U.S. employees and claims in their commercials to be responsible for 200K jobs in North America. That means that the American companies constitute a vast majority of the 6.6 mentioned in the link.

    Finally, your assertion that Chinese auto makers are somehow more responsive to market signals as a result of the influence of foreign manufacturers is certainly intriguing, and would make a very interesting topic for a paper for the Journal of Economic Development or some such. As such, it is hardly something that can be assumed without any evidence. I think the relative scarcity of capital in China would limit their short-run ability to increase production, while the long run would depend on their local manufacturers attracting sufficient investment.

    What evidence do you need other than it is a law that every foreign company must partner with a Chinese company to build there. And GM has one of the most advanced hybrid systems on the planet in their transit buses and they have contracted with SAIC to build these (sharing of the technology is inevitable) in China. Also, the Chinese work with every electronics manufacturer in the world (like all iPods are made in China) and major subsystems of an automobile are electronic subsystems. It is a fact that the world is teaching China how to build. Absolute fact. And how to run factories. If you believe the hype about Toyota and their manufacturing system then you must also understand that it is being employed with direct partnership of at least one Chinese company in China and the Koreans never had that advantage that I have heard about (the world’s most profitable and soon most productive auto company holding their hand somewhere in the world). Believe me this is a fact.

    As something of an aside, I am confused by this notion you have of “room” in the auto market; there is no finite limit to the quantity of anything that can be sold in any market. You will notice the horizontal axis of the graph at the beginning of the article; quantity is infinitely adjustable, given the movement of prices. As manufacturers leave or enter the market, the supply curve shifts inward or outward, and the effect on the volume of transactions depends on the price elasticity of demand.

    It just means that if there are 15 million Americans ready to buy autos the year GM goes out of business (and these customers really want or need a vehicle) they are most likely still want to buy a vehicle (except for the fact that many will not be able to afford like they thought because of their job loss – maybe that is what you mean) and so GM going out of business doesn’t in itself stop them from wanting/needing so there is room (the hole to fill) for others who would not be given a chance before because they might not have been good enough to consider before or they just didn’t make the move before and now they see the window of opportunity.

  • avatar
    suohtil

    hltguy,

    You are killing me. You are trying to tell me on one hand that GM and Ford have received so much for their service and I am saying they have given so much back, so much so as to deserve a little help and you act like that is out of the question and you are telling us all how GM is basically giving you two automobiles ($7 a day and tax write off is basically giving you two automobiles). This would not happen from Toyota or Honda with or without GM around right now. Wow, some people are hard, extremely hard to please.

  • avatar
    suohtil

    NoneMoreBlack,

    Think of a single automobile as the complication of many (hundred(s) of iPods maybe) and then multiple that by 15+ million sold in the U.S. alone and then don’t forget Canada too (i.e. the two places U.S. built cars from U.S. manufacturers go). That is some serious numbers.

  • avatar
    hltguy

    The point is GM handed over two new cars to my company for the equivalent of $7 a day BECAUSE of the mismanagment of their company. The only reason that such a deal was considered was they had way too much inventory (poor planning and ridiculous labor contracts) and had to get rid of the product fast. Do you really believe if GM were handed some sort of government bailout they would become more efficient and make better business decisions? If they were managed properly, I would not get two new cars for 7 bucks a day, nor would they have debt of biblical proportions and nor would there be any talk of a government handout. I profoundly disagree that any sort of government handout should occur based on the all the supposed good GM has done for America in the past. How is any handout going to foster a corporate climate within GM to make them more competitive?. Don't you think if the government stepped in tomorrow and promised to pay half or more of the legacy costs of GM that the UAW would see that as an opportunity to force higher wages in contract talks? and the stupidity (based on the history of their labor "negotiations") of GM management would hand it over to the unions. I run hospital emergency rooms and urgent cares for a living and because of federal rules must treat everyone who walks in the door, whether they pay me or not and therefore give away boatloads of free care every year. Yet, I make my payroll and do not carry heavy debt, and certainly am not looking for a handout. It is a pathetic scenario that the once mighty GM, Ford etc, who were arrogant, cavalier bullies when they controlled the market should in some way be considered for sympathy or a handout. They are big boys, let them either make a stand and make sound business decisions or go the way of many former corporations, to the dust bin of history. Unfortunately, one or more of the 2.5 will probably go BK and stick all the vendors with massive piles of unpaid bills driving them out of business. Remember for every good GM et. al has done in the past they have served up a Pinto, Vega, Cavalier, Citation, Cimmaron, Chevette, Aerostar, Windstar etc. etc. on a trusting public knowing in many cases the product was seriously flawed and dangerous (roll over vehicles, exploding gas tanks, gas tanks in trucks on the side, trucks that catch fire even when turned off, etc.) How many people lost money when the product's resale was crap. How many customers were treated like dirt from the dealerships and factory representatives? The 2.5 has reaped what the are getting, a wisened up populous and some real competition. Isn't that what free enterprise is supposed to be about? Like I said I drive the GM product because they have essentially given them to me. Sorry if I took advantage of the poor management of tha company.

  • avatar
    factotum

    No auto (or any company for that matter) should be bailed out by the taxpayers as long as any of their executives receives compensation (salary, stocks, perks, etc.) in excess of $250K. If your company needs a bailout, it means it’s failed and failure doesn’t warrant million dollar compensation packages.

  • avatar
    Luther

    No auto (or any company for that matter) should be bailed out by the taxpayers

    No exceptions. If I choose not to buy/trade for a product that any company produces, they have no right to get the Gov’t to steal my property. “Buy my product or I will have the Gov’t steal your property” is threatening violence against me. The idea of Taxpayer bailout is pure violence.

    And furthermore, what kind of “management team” would LOCK themselves into the above “agreement”, with no recourse for adjustment?

    A Management team, that by threat of violence (aka law), does not have a viable choice. Imagine negotiating an agreement when the other party is holding a Gov’t gun (law) to your head.

  • avatar
    dwford

    “Ford has a 118 day supply of Mustangs” – it’s called building up inventory for Spring.

    The 500 sold poorly last month because there were no incentives on it.

    The F series sold poorly because Ford is running out of 07 Super Duties, and the 08s aren’t here yet

    Here is the buyer’s mentality for the Domestics: I had a customer yesterday that wants to spec out a special order 08 Super Duty. This truck won’t even be built until June. After I spec’d it out, he said ” give me your best price because I am going to shop around” Shop around???? These truck don’t even exist anywhere in the country yet, where is he gonna go? Is there a Ford dealer that is going to special order a diesel F350 dually for $100 over invoice?! No one is that desperate. Then he complained there wasn’t 0% financing or rebates.

  • avatar
    suohtil

    The point is GM handed over two new cars to my company for the equivalent of $7 a day BECAUSE of the mismanagment of their company. The only reason that such a deal was considered was they had way too much inventory (poor planning and ridiculous labor contracts) and had to get rid of the product fast.

    But they could have gone the route of just paying the workers to do nothing and without too much product you would not have received your $7 vehicles. The current management could hardly be blamed for all of GM’s problems, they just haven’t been there long enough and these problems started many years ago, they are just inherited. So, they did have two choices (pay people to do nothing or end up giving you $7 vehicles and that is what they did).

    Do you really believe if GM were handed some sort of government bailout they would become more efficient and make better business decisions? If they were managed properly, I would not get two new cars for 7 bucks a day, nor would they have debt of biblical proportions and nor would there be any talk of a government handout.

    Again, this situation was not created by Lutz or Wagoner so my answer is that I don’t know (because I can’t see the future) if it will make them more efficient but it may just give the guys who are capable of a more manageable turn around to do it. If the whole GM situation started with these guys in the positions they are in now then I would agree that giving them a bunch of money is a mistake.

    I profoundly disagree that any sort of government handout should occur based on the all the supposed good GM has done for America in the past. How is any handout going to foster a corporate climate within GM to make them more competitive?. Don’t you think if the government stepped in tomorrow and promised to pay half or more of the legacy costs of GM that the UAW would see that as an opportunity to force higher wages in contract talks? and the stupidity (based on the history of their labor “negotiations”) of GM management would hand it over to the unions.

    I do agree that the UAW would have to be controlled as part of the bailout. I.E. government telling them, “you will do such and such as part of the bailout”. I do think they can be stupid sometimes. But I do think they are the only reason cars aren’t all from China that are sold here now.

    I run hospital emergency rooms and urgent cares for a living and because of federal rules must treat everyone who walks in the door, whether they pay me or not and therefore give away boatloads of free care every year. Yet, I make my payroll and do not carry heavy debt, and certainly am not looking for a handout.

    Yeah, but it would be nice if GM and Ford could get whatever they ask for on the sales they do make. I.E. people like me who do have insurance or the money to pay have no idea of the costs of my emergency room visit up front and so you could literally charge me (my insurance company ultimately) whatever you wanted within reason to make up for the costs you lose and I would NEVER no the difference. I mean, how often do emergency room procedures go down in price? Does everyone get charged the same for same services rendered? Is the price you charge those who are insured inflated to pay for those who aren’t insured? That last one is key. GM and Ford would have a hard time pulling the off getting full price (inflated at that) for someone else to make up for your $7 purchase. But anyway, emergency rooms save money also by not being perfect. My dad had the flu and at 75 years old it could have been bad. The emergency room had him out front for about 6-8 hours at least. Same thing when my two year old was dehydrated of couple years ago. The point is you don’t need to build enough rooms or hire enough staff to see *everyone* right away, you are saving costs by “not doing it right”. When people are to wait on an airplane for 6-8 people are pissed. But wait in an emergency room for 6-8 can be the norm. And this is for people who are sick waiting this long. Give me a break. Yes, you are cost cutting as bad as any company. Sorry, I shouldn’t assume, I’m sure everyone who comes to you is looked at within 2 minutes and cured in 5 minutes with no misdiagnosis.

    Unfortunately, one or more of the 2.5 will probably go BK and stick all the vendors with massive piles of unpaid bills driving them out of business. Remember for every good GM et. al has done in the past they have served up a Pinto, Vega, Cavalier, Citation, Cimmaron, Chevette, Aerostar, Windstar etc. etc. on a trusting public knowing in many cases the product was seriously flawed and dangerous (roll over vehicles, exploding gas tanks, gas tanks in trucks on the side, trucks that catch fire even when turned off, etc.)

    Yeah, well those Vegas were because of the Japanese deatch traps (please any day of the week and twice on Sunday take your family and put them in a 1970’s Japanese car and go for a spin in a crash test). One of the supposed exploding gas tanks was so not exploding that the news agency made it explode to prove their point. Anyway, Japanese have been leaving the small car market everytime they enter it. What does that mean? Corolla is no longer their small car, it grew so much there is room for Echo (oh yeah, that is gone) and now Yaris. These vehicles grew because it took decades for them to finally get small cars safe and decent enough for Americans to want when there weren’t lines at the pump. There are probably still more Tahoes sold than Yaris.

    How many people lost money when the product’s resale was crap. How many customers were treated like dirt from the dealerships and factory representatives? The 2.5 has reaped what the are getting, a wisened up populous and some real competition. Isn’t that what free enterprise is supposed to be about?

    Apparently you never here of the sludge stories and in general where Toyota and Honda dealerships will tell the customer basically they are crazy or imagining things since the “problem” they thought they had with their vehicle did exist because “it is a Toyota and they don’t have problems”. Just wait until the market declines and it gets tight for all automakers, the nice Japanese won’t be making a MAJORITY profits from America one day and we see how they treat Americans at that point.

    Sorry you are so bitter.

  • avatar
    guma

    Again, this situation was not created by Lutz or Wagoner so my answer is that I don’t know (because I can’t see the future) if it will make them more efficient but it may just give the guys who are capable of a more manageable turn around to do it.

    Gotta love the corporate America mentality, where no one is ever resposible for anything.

    The likes of Lutz and Wagoner make me sick. All the grunts suffer while those who are truly responsible for the failure get golden parachutes.

    Why do people even defend these clowns?

  • avatar
    SS3

    allen5h said:

    Well, if it was as simple as that then Accord V6 owners with bad transmissions wouldn’t buy a Honda again, and Toyota owners with slug fouled engines wouldn’t buy another Toyota. No, it’s more than that.

    It has also got to be related to how the manufacturers treat customers with problems. My friend had an Accord that was nothing but trouble, but ask her how she liked it and she would say “great, love it”. It perfomed well AND Honda took car of all the problems without ANY fuss. No trying to download warranty costs to the customer.

  • avatar
    suohtil

    Why do people even defend these clowns?

    I don’t mean to defend them per se but I am will to realistically think (unlike some I guess) that these guys did not cause the ALL problems with GM. Impossible. And with the fact that the situation is so complicated I am not willing to judge the current leadership until at least a little more time. I.E. you are taking my unblame for now (and benefit of the doubt that they may still make a difference) for defence (bording praise). I stated “the guys who are capable”, I didn’t state it was these guys in now, may or may not be, but if they are left to die then it is a gaurantee that the “capable” guys (future leaders if necessary) will not have a chance.

  • avatar
    suohtil

    NoneMoreBlack,

    Rereading some, you tell us how China is getting capital investment and then you turn around and state: “I think the relative scarcity of capital in China would limit their short-run ability to increase production, while the long run would depend on their local manufacturers attracting sufficient investment.”

    Here is a quote that may change your mind about “scarcity of capital in China” limiting ability to increase production:

    “There was a capital spending boom in China last year that caused her consumption of copper, aluminum, iron ore, and other raw materials to rise to levels exceeding America’s.”

    The quote is from here: http://www.findarticles.com/p/articles/mi_m2633/is_4_18/ai_n8685187

  • avatar
    Groovdog

    >

    This is true of EVERY plant in the U.S. Within last week been in a GM plant, a Mercedes plant, and a Hyundai plant. All the same. Toyota is not unique, its call JIT.

    On DSO calcs, everyone knows DSO calcs on Jan sales are horrible for everyone. Why? Because January is the worst absolute sales month. For example GM has like 90+ days of GMT-900 SUVs on the lot for Jan using Jan sales. Use 12 month trailing sales and it is low 60s. This calc also bloats the Japanese but it hits the domestics harder.

    On GM vs Toyota inventory, GM has 4x the dealers so you should expect ballpark 4x the inventory. Until this changes you are never going to see GM near Toyota levels. It might get modestly better but GM will never be at Toyota levels until 1/2 the dealer base goes away (which it will).

  • avatar
    hltguy

    Suohtil: It is true the current regime at GM did not create all the problems, but please tell me what major positive steps they have taken to correct the problems? Hasn't the book value of the company continued to diminish under their leadership? Are they not further in debt? Do they not have greater inventories than a few years ago? Where are the hybrids? The list goes on and on. If present management is so good, why are their retirement packages guaranteed even if the company goes BK? Excuse me, the Ford family has controlled Ford forever, who approved the hiring of all the CEO's, such as Nassar and then Bill Ford putting himself in charge. The Board of Directors have been there awhile, what have they been doing? The fact is if present management wants the glory on any positive news, and expects to make the stupendouly large bucks for their services, they are entitled to take the heat when the company is floundering, as the 2.5 are. A quick economic lesson on ER's, the problem (at least in California and some other states) is the demand for services outstrips supplies and yes we can charge what we wish but are limited in the reimbursements we receive from things such as "usual and customary" reimbursement levels from insurance companies, Medicare low reimbursement levels, the state Medicaid horrible bad reimbursement levels, thousands of patients who lie about their identity and simply not pay or refuse to pay and the huge number of undocumented aliens who use the ER's out here as free clinics. Are the car manufacturers forced by law to give away their products, such as we in the ER business, I think not. Why be in the ER field? someone has to do it or there would be massive casualties everyday in this country. So because demand outstrips supply, the waits to be treated are long. The problems with the autmorobile companies, they have created more supply than demand, and thus they are paying a big price. The U.S. autpmobile companies have never shown a great talent to being able to compete. They rode high on the hog when it was just three of four of them, but now that there is global competition, they are sniveling that they need help (like running to the President George W a few months ago) or crying they need help from all the legacy costs. As Govenor Ahnold would say out here, what girlie men. You are correct, the Japanese and Korean auto makers are not perfect, the have had problem vehicles, but aparently they have built up the goodwill to withstand the problems and their sales keep increasing. Unfortunately, the 2.5 squandered their goodwill with the public and that is probably never going to come back on a large scale. You know I really do hate to see American companies flounder, but we must face the fact they created this mess, and either they fix it soon or shut the lights out.

  • avatar
    hltguy

    dwford: No, the 118 day of Mustangs indicates sales have slowed (in fact Mustang sales are going down, and have been for awahile) the fact is there are just too many of them. If it were just a matter of gearing up inventory for spring. why did recently Ford put $3,000.00 rebates on Mustangs out here in CA? Let’s face it, the domestics started all the rebate stuff back in the 70’s and have indoctrinated an entire generations or more of people to expect the rebtaes, zero interest etc. Despite the assertions of the manageemtn of the 2.5 they are going to cut back on the incentives, they are not going to be able to. Regarding the F series trucks, sales are WAY down, Ford sales on those vehicles have sunk by hundreds of thousands in the past few years. Don’t expect any turnaround there, more competition now and fuel prices are going back up.

  • avatar
    suohtil

    The U.S. autpmobile companies have never shown a great talent to being able to compete. They rode high on the hog when it was just three of four of them, but now that there is global competition, they are sniveling that they need help

    Come on, never? The reason there were only 3 or 4 U.S. companies is because there were hundreds at one time in America (mostly American but still) and the bad ones were taken in or died. One can’t confuse mostly U.S. competition as not competing. We made the best for the cost for nearly 100 years. That is why American tanks built by American car companies were better than the German’s. Sure complex is “better” to some but so are other attributes. To say we never competed and act like there were only 3-4 car companies at a given time really sells them short. Very sad. There were hundreds and with innovations that today are still celebrated. Ford’s assembly line and Olds’ assembly line just to name a couple huge advantages which show American uber competetive products in the past.

    BTW, the light hybrid VUE is on the road and the full hybrids are coming this year (Tahoe) and to further answer the question, the hybrids are here in transit bus form. They are here. Unlike Nissan’s (no it is Toyota’s whole system) or the Korean’s or the German’s all of which are NOT here.

    but please tell me what major positive steps they have taken to correct the problems?

    How about getting concessions from the UAW that DCX was trying to get later in the game? How about getting interiors better. Developing a 6-speed (GM and Ford together). Putting a 100K powertrain warranty on. Going back and making all Certified Used from 2002 and up have a better warranty. GM IS selling less to fleet by the hundreds of thousand to have better resale on the retailed vehicles. Making the 2010 Fuel Cell mark a hard mark. Come on. Things are going on. Let’s not act like nothing is happening.

  • avatar
    NoneMoreBlack

    suohtil: I will make one more attempt at this but, with all due respect, you are not demonstrating a clear understanding of my arguments, and yours are almost without exception either analytically flawed or based on pure speculation.

    You have changed to saying that if one of the Big 3 disappears, a supply shock, this will in turn shock demand for the other “American” manufacturers. Frankly, I don’t know if this is true, and unless you can point to an academic paper that calculated some kind of cross elasticity of demand between vehicles of a certain nationality, I don’t see how you can assert it.

    Lending institutions have enormous staffs of people much more intelligent and better educated than either of us working 60 hour weeks and getting paid large salaries in order to attempt to predict what the future holds in the financial world. Whether GM is bankrupt or not, they will know exactly how much they would like to lend to Ford, based on the merits of Ford and Ford alone.

    My point about companies disappearing is one which I think you are missing. I am not saying that one or more of them might not file for bankruptcy at any moment, and as you point out, this would not be too surprising in GM’s case. There is, however, an enormous difference between bankruptcy and annihilation; bankruptcy does not instantaneously send employees out the door, send capital stocks to be recycled, and erase their name from the ledgers. It is a means (albeit extreme) of consolidating liabilities and restructuring. Delphi has been in bankruptcy since 2005; most of its employees are still working, most of its plants are staying open, and there has been no parts’ supply crisis. My point is that even if/when they do file for bankruptcy, there will continue to be new GM vehicles for quite some time. AMC, felled by issues similar to those facing GM today, managed to continue producing vehicles right up until, not its spontaneous disappearance from the face of the globe, but its acquisition by another company (meaning little or no actual loss in world capacity)

    You’re right; it is almost as if by magic that supply rises and fills the void. The very Adam Smith you yourself mentioned named this phenomenon; the Invisible Hand. Referring to the diagram (which, unfortunately, has apparently filed for bankruptcy itself). Yes, Toyota may have had struggles or what have you in raising its production to this level. But, it has only had the incentive of current prices to do so, meaning it can only build so many more plants and add so many more workers at a profit to expand its production. A sudden shock to the market contracting supply will place a large upward pressure on prices in the short run (and short run versus long run phenomena is one of the most fundamental concepts in economics). These high prices will make increasing production very attractive for all current players in the market, and make entering the market very attractive to others. If Honda was too worried about quality issues at previous prices, they will probably be glad to produce a potentially shoddier product at the new high prices, because it would be too expensive NOT to (the opportunity cost; the most fundamental concept in economics).

    I won’t argue the minutiae of how many auto dealers will go out of business, as this is 100% speculation on both of our parts.

    I think you are again missing the point of what I mean by a competitive product. There is no car so bad that it cannot, at ANY price, be sold (look at the Yugo). The question is whether it can be sold at a price which reaps a profit to its manufacturer. Since Chinese manufacturers are already trying extremely hard to enter the US market, I would say that at current prices, it is likely possible for them to bring a competitive product (at SOME price point) to market at a profit; otherwise, they would not be trying. The Chinese are just as capitalistically inclined as anybody out there, perhaps another sign of the failed legacy of communism. Ergo, rising prices will, again, increase their incentive and perhaps hurry their entry, but it is obviously to me at least that their entry is inevitable, regardless of GM.

    I see little correlation between reality and your argument concerning the effects on the labor market of this shock. I will simply assert that 6.6 million people will not, no matter what occurs to those three companies, be out of a job, let alone in any permanent sense. If I read that link correctly, that number includes mechanics, after market suppliers, dealers, and everything in between; basically any and all jobs dealing directly with cars. Thus, it is far more than those directly impacted by the manufacturers (as well as including those employed here by other manufacturers).

    But here is my more important counterpoint; even IF, that being an enormous if as I hope to have established, some large fraction of this hypothetical 6.6 million becomes unemployed relatively overnight, this will not have a lasting measurable impact on aggregate incomes in the US. They will not remain unemployed indefinitely. Most likely, other manufacturers will step in, buy up those plants, and turn them into Toyota or whomever workers. But the impact to demand for cheap cars will be minimal and short lasting.

    Again, I cannot simply “believe that it is a fact” that China is better than everybody else at manufacturing activity. Their primary advantage today is labor abundance, and little else. You will find some information about some peer-reviewed economic journal articles which determined to what extend FDI and other foreign factors influence manufacturing productivity in China; what I am saying here is that what you are saying is not just a logical argument or somehow common sense. It is something which can only be determined by scrupulous analysis of data and thorough understanding of the economic factors at work. Also, at its most basic level, I don’t see how this is even important. Is there something wrong with China becoming a presence in the US (and world) auto market?

    Finally, you are still not seeing the way in which the market is flexible. This “hole” in the market, of people who still want to buy cars that are not there, is an excess of demand; a disequilibrium that results in the extreme short run when the supply curve shifts inwards. Then, the market will move upward along the demand curve, prices rising and quantity falling, until everyone who is willing to buy a car at current prices can.

    Your iPod example is very revealing. Building cars is, in fact, no different from building iPods, or cell phones, or anything. A combination of factor inputs (capital, labor, land, intermediate goods) yields an output. That combination of inputs can be altered to yield different outputs. A car requires much greater factor inputs than an iPod, and fewer of them are made, but that is merely a question of scale.

    Here are a couple academic articles that you might find to be of interest if you can track them down:

    Market Opening and Transformation of China’s Car Industry
    Chai, Yu; Song, Hong
    China and World Economy, vol. 13, no. 1, January-February 2005, pp. 81-93

    Abstract – Based on a study of interactive learning and industrial growth, this paper explores the strategic adjustments and competitive advantages of both multinational corporations and indigenous firms in the auto industry after China’s WTO accession, and forecasts the development trend in this industry. The main conclusions are: (1) with trade and investment liberalization after China’s WTO accession, competitive advantages of transnational corporations have played an active role. Under this circumstance, indigenous firms depend heavily upon multinational corporations by establishing joint ventures and introducing new models. (2) As a result of strategic adjustment, China’s car industry will transform from an independent industry into a dependent one. (3) Under pressure from the competitive advantages of the dominant multinational corporations, infant industries and enterprises of developing countries need, for their development, more support from local government. In addition, one of the key factors in the future development of China’s car industry is the establishment of an interactive learning relationship between indigenous firms and multinational corporations.

    FDI, Trade, and Spillover Efficiency: Evidence from China’s Manufacturing Sector
    Chuang, Yih-Chyi; Hsu, Pi-Fum
    Applied Economics, vol. 36, no. 10, June 2004, pp. 1103-15

    Abstract – Using firm data from the 1995 Third Industrial Census of China, this paper finds that the presence of foreign ownership has a positive and significant effect on domestic firms’ productivity. Moreover, trading with more advanced countries helps China gain access to new technology and information, which improves its productivity and enables it to compete in international markets. It is found that China’s imports from OECD and the four Asian Tigers, and exports to OECD have positive effects on domestic firms’ productivity. By dividing industries into high-technology-gap and low-technology-gap groups, it is found that the spillover effects of FDI are larger for the low-technology-gap group than for the high-technology-gap group. However, the estimation results of the trade-induced technology spillover effect support the technology-gap learning theory and the significance of importing appropriate technology.

    I could email you a PDF of the second one, but they want you to buy their $350 journal for the first one; unfortunate, because it concentrates on the auto industry, although it isn’t actually peer reviewed.

  • avatar
    Rastus

    The Chinese already have a head start…and that head start comes from years upon years of hard work by the domestic 2.5.

    Yes, that is correct…the domestic 2.5 have steadfastly “conditioned” the American public into accepting the idea of a “disposable car”. The leap from purchasing a GM car which depreciates 30% the moment you drive it off the lot…to purchasing a Chinese-built Great Wall is not a huge one. It is so minor that once they (the Chinese) are here, I imaging it won’t take more than 4-5 years before they become mainstream.

    Will anyone out there in la-la land please raise their hand if they have ever purchased a Cimmaron, Cutlass Classic, Pinto, Cavalier, etc.

  • avatar
    suohtil

    Lending institutions have enormous staffs of people much more intelligent and better educated than either of us working 60 hour weeks and getting paid large salaries in order to attempt to predict what the future holds in the financial world. Whether GM is bankrupt or not, they will know exactly how much they would like to lend to Ford, based on the merits of Ford and Ford alone.

    Granted, that is the most off the cuff remark I made but I still think that HUMANS do hesitate if they have precedence to do so. Is it by chance the last American car companies could be so similar in their problems? Lenders will see that the UAW is part (maybe a significant part) of the cause of the problems and will see that if one falls that the risk is very high those left. GM is $300 billion (maybe more now) in debt. If GM goes bye-bye do you think the lenders would lend to allow Ford to go into $300 billion in debt if needed to turn around or will they think “GM flashback” and cut them off (maybe at after this current round of loans Ford received). So, I am totally off on this one and Ford will go $300 Billion in debt like GM and anyone will be willing to do it if they have the money to lend. OK, that’s fine.

    I understand the bankruptcy vs dissappearing act thing but with things like cameras and even Delphi it is totally different (things we can use as *recent* precedence of bankruptcy). First with cameras (like Polaroid for instance), people will try a Chinese made Polaroid camera because it may cost them a days wages or less. With Delphi, if GM were in a great spot like Toyota and didn’t once own Delphi (they were spun off) and the UAW so tightly envolved (i.e. you lay off all Delphi workers then we go on strike) it may have been a different story (i.e. Delphi could easily ceased to exist with the right couple of things not being in place). But I think cars, costing so much, and word of American car company bankruptcy and “great” Japanese car companies being our savior that GM would be a tiny shell of the 4.1 million vehicles it sold here. OK, so in bankruptcy they sell 1 million and so we lose 3.1 million vehicles made/sold here, that is still significant. I think you are basing a lot of your analysis in a vacuum. Not that I know 100% the future but I do think there is very much possibility in what I think could happen.

    Anyway, you have trust issues if GM declares bunkruptcy. People need to trust GM to make a dependable vehicle and warranty it while bankrupt. I think with the price of cars it really hits harder (the trust thing) because I’ll throw away my $100 Polaroid (from bankrupt starting over Polaroid) and never buy one again if it fails but for tens of thousands of dollars am I going to take a chance on a GM product while they go through bankruptcy? NO.

    You’re right; it is almost as if by magic that supply rises and fills the void. The very Adam Smith you yourself mentioned named this phenomenon; the Invisible Hand. Referring to the diagram (which, unfortunately, has apparently filed for bankruptcy itself). Yes, Toyota may have had struggles or what have you in raising its production to this level. But, it has only had the incentive of current prices to do so, meaning it can only build so many more plants and add so many more workers at a profit to expand its production. A sudden shock to the market contracting supply will place a large upward pressure on prices in the short run (and short run versus long run phenomena is one of the most fundamental concepts in economics). These high prices will make increasing production very attractive for all current players in the market, and make entering the market very attractive to others. If Honda was too worried about quality issues at previous prices, they will probably be glad to produce a potentially shoddier product at the new high prices, because it would be too expensive NOT to (the opportunity cost; the most fundamental concept in economics).

    Automobiles are so much more complex than Adam Smith or anyone from the 1700’s could imagine. So of course the “invisible hand” makes sense like “spontaneous generation” but the fact is that to meet the demand if GM were to go (and especially Ford also) it will take time. That is the part I am saying “magically” about. Sure, over time EVERYTHING “works out” but in the intermediate it is way too unstable and unpredictable (though it shouldn’t stop us from debating it of course). But will the “works out” part be such that the U.S. is a third world nation economically (not just because of GM and Ford but with them gone and others, anyone can see U.S. manufacturing is suffering, maybe you don’t but I sure see it) with a perfect storm in part with the total decline of GM and Ford. That is the part I am weary of, I want my children to have a chance at a decent life and they shouldn’t have to go take a job away from the extended family to have to live that decent life. Whole ‘nother story but anyway… Yes, over time it all works out with supply and demand but how long and who will be the supplier and where will they be making the supplies, etc. Those are the things I am worried about. Adam Smith didn’t care about those variables, just that they happened as they happened.

    I think you are again missing the point of what I mean by a competitive product. There is no car so bad that it cannot, at ANY price, be sold (look at the Yugo). The question is whether it can be sold at a price which reaps a profit to its manufacturer. Since Chinese manufacturers are already trying extremely hard to enter the US market, I would say that at current prices, it is likely possible for them to bring a competitive product (at SOME price point) to market at a profit; otherwise, they would not be trying. The Chinese are just as capitalistically inclined as anybody out there, perhaps another sign of the failed legacy of communism. Ergo, rising prices will, again, increase their incentive and perhaps hurry their entry, but it is obviously to me at least that their entry is inevitable, regardless of GM.

    Sure but looking long term, if they sell crap cars for even $4000 (talking a mid-size sedan) if possible and they are real bad like the Yugo, then look where the Yugo is now. Gone!!! The Chinese are not economically dirt poor as many believe (not saying you specifically here) and could if they wanted, get cars sold at some price here, now, no doubt. But the precedence is to get it more right than wrong because first impressions are important. But I don’t know that at Adam Smith’s time there were to many products (especially of the non real estate type) which would and could be bought by the average Joe which cost a years salary or more. I think this changes some of the equation.

    I see little correlation between reality and your argument concerning the effects on the labor market of this shock. I will simply assert that 6.6 million people will not, no matter what occurs to those three companies, be out of a job, let alone in any permanent sense. If I read that link correctly, that number includes mechanics, after market suppliers, dealers, and everything in between; basically any and all jobs dealing directly with cars. Thus, it is far more than those directly impacted by the manufacturers (as well as including those employed here by other manufacturers).

    I 100% agree that even if all U.S. car companies are gone then not all 6.6 million (and I actually think that is a bit high a number myself). But the “magic” is how long will some be out (of their sorts or at partial sorts) and what is the finally number for this undustry going to be (more specifically for the U.S., sorry to be a U.S. first guy, this is where I live).

    Actually, that is where I think we differ. I agree with more of of what you are stating than it might seem but I think you are taking the “worldly view” and I am thinking “U.S. domestic view”. Things will change and things will compensate but my problem and back to why GM and Ford should get bailouts IMO is for America and not for the “world view” economic supply and demand view you have to come true.

    Anyway, I must go for right now. I will come back and finish later…

  • avatar
    guma

    I don’t mean to defend them per se but I am will to realistically think (unlike some I guess) that these guys did not cause the ALL problems with GM. Impossible.

    True, but did anyone ever say that these guys caused ALL the problems?

    Anyways, what are they doing about it? Answer this: are they doing a good job?

    When Carlos Ghosn took over Nissan, he set up measurable metrics for turnaround and published them for all to see. At least he had balls. All I see from Lutz and Wagoner is typical corporate spin and BS.

  • avatar
    chanman

    Almost shocking, isn’t it. Models like the GS350, IS350, and LS460 are in very short supply, it seems. According to Power Information Network, the LS460 is sitting on dealer lots an average of only 8 days.

    That’s what I was wondering – given that there have to be some relatively slow sellers (some of those models like the SC have been around for a while), the new LS/ES/GS/IS from the last couple years must be getting sold almost as soon as they come in to pull the average days down that low.

  • avatar

    The fact is that you don’t need an interrogation of each customer. You need only to look at the numbers. One has to assume that the end user evaluated ALL variables and made their decision accordingly to most value.

    Actually, I have found most people don’t buy cars according to best value. They go by advertising, slick salesmen, image, notions they are being patriotic, “we’re a Ford family”, etc. A few I know, like myself, go by value. Overall, I think most buy the big 2.5 because of the patriotism or the “we’re a Ford family” mentality. Product quality has little to do with their decision.

    John

  • avatar
    Rastus

    John,

    With all due respect, I think you are making the public out to be idiots. However, I believe this is NOT the case whatsoever.

    The “Ford family” mentality may be alive and well in Peoria, but along the coasts (all three of them), I think you see that quality does matter.

    People work too hard for too little to just “stick” with one thing, while that one thing continually screws them in return. This is the gist of the problems the 2.5 are facing today. If there was a “root cause”, I would say it is poor decision-making of management which yields poor quality products.

    How can I say that? Well, I’m an ex-“GM man”. I don’t have any loyalty to them, specifically because they have demonstrated quite clearly they have no loyalty to me.

    One-sided loyalty is called a screw job.

  • avatar
    TeeKay

    suohtil,

    1. The current GM/Ford may not have “caused” all of the problems, but they certainly are not helping to slow the bleeding. Their job is to do so, and they’re getting paid hundreds of millions in salaries and retirement packages to do just that. They are not, so it’s their problem now.

    2. It’s not unreasonable to expect rebates when buying American – it’s pure economics. When I walk into a Ford dealer, I expect 0% financing, rebates, no down, invoice pricing. If not, I walk out and go to another Ford dealership and probably would get my demands.

    That’s high supply + low demand + shitty product = dirt cheap prices nobody wants.

    When I was looking for an M3, one dealer asked for $1000 above MSRP, another asked for $3000. After failing to get a better deal, I went back to the $1000-above-MSRP, only to realize that they have already sold out all of their M3 allocations. I had to sramble and look all around to even find a dealer that still had an allocation.

    That’s high demand + low supply + quality product = ridiculous prices that people still happily willing to pay

    Why should the taxpayers bail out American mega companies? The government is not going to step in and help bail me out when my business suffers or when I fail to pay my mortgage. The Ford dealership will not give me free oil changes just because I was nice enough to bail them out by paying for shitty Ford cars. The cops will not think twice about writing that speeding ticket just because I support our domestic manufacturers and drive a Ford.

    Enough with the appeal to patriotism and “buy American” BS. This is not the good-doers domestic manufacturing saints VS evil Japanese conglomerates and dirt-cheap Chinese opportunists. It’s just pure economics.

    I will puke if I ever see another GM/Chevy “This is our country” commercial, or hear about how we should help out poor Bill Ford and his poor kids to retain their billion-dollar lifestyle for another century.

  • avatar
    Johnson

    No. Actually your logic is flawed. The fact is that you don’t need an interrogation of each customer. You need only to look at the numbers. One has to assume that the end user evaluated ALL variables and made their decision accordingly to most value.

    Looking at the numbers is far too simplistic. If GM offered equal rebates and incentives compared with Toyota, do you really believe their sales numbers would stay the same? If GM’s pricing was in line equally with Toyota’s, do you think their sales numbers would be the same? If GM sold to fleets the same amount that Toyota does, do you actually believe their sales numbers would stay the same?

    On a side note, it’s laughable that people keep bringing up the notion that the American government “doesn’t care” about American automakers. Over the last several decades the American government has done plently to help Detroit automakers. Even now, the government is doing Detroit automakers a great service, because government agencies continue to buy large amounts of fleet vehicles from Detroit automakers; vehicles that retail consumers mostly ignore or simply don’t want to buy.

    GM’s sales numbers (along with Chrysler and Ford’s numbers) are propped up by a large amount of fleet sales, as well as a large amount of incentives/discounts being offered on many models.

    dwford, I admire your optimistic view on things, even if it strays from reality. Fact is, Mustang sales are down, and have been down for months. F150 annual sales for 2006 were down considerably, and continue to slide. The 500 has had poor sales for months now.

    That’s what I was wondering – given that there have to be some relatively slow sellers (some of those models like the SC have been around for a while), the new LS/ES/GS/IS from the last couple years must be getting sold almost as soon as they come in to pull the average days down that low.

    Quite true. The old, dated Lexus models aren’t selling all too well, although the GX470 continues to see decent sales, and the RX, despite it’s age, remains a very solid seller. All the new Lexus sedans are in short supply, save for the GS430 and possibly IS250. Apparently it’s damn near impossible to get your hands on a GS350 or IS350 in some areas, and most LS460s are already pre-sold before they even touch dealership ground.

  • avatar
    suohtil

    But here is my more important counterpoint; even IF, that being an enormous if as I hope to have established, some large fraction of this hypothetical 6.6 million becomes unemployed relatively overnight, this will not have a lasting measurable impact on aggregate incomes in the US. They will not remain unemployed indefinitely. Most likely, other manufacturers will step in, buy up those plants, and turn them into Toyota or whomever workers. But the impact to demand for cheap cars will be minimal and short lasting.

    Just my luck, I accuse you of a more worldly view and the next paragraph I read mentions jobs here… The problem is that Toyota has only half filled one GM factory (NUMMI joint venture with GM) and the rest of the GM and Ford close downs have not been filled with Japanese or German or Korean ownership (that I can think of off hand). So the precedence is not there. Sure, if GM and Ford are gone any “protecting” the turf that may have gone on would be mostly likely gone but with the Chinese possibly producing vehicles solely or mostly in China for the U.S. market (as opposed to buying shuttered plants) then it could force some or most of the Japanese to build in China as well. Just like a Philips electronic product is made in China (i.e. if that is where these things end up being made then most will go there even if it is a Dutch or Japanese company and it may be no different for cars). Oh yeah, no unions here either for the Japanese and I believe Germans and so what would stop them from moving all production to China if competition is underselling with that tactic?

    Again, I cannot simply “believe that it is a fact” that China is better than everybody else at manufacturing activity. Their primary advantage today is labor abundance, and little else. You will find some information about some peer-reviewed economic journal articles which determined to what extend FDI and other foreign factors influence manufacturing productivity in China; what I am saying here is that what you are saying is not just a logical argument or somehow common sense. It is something which can only be determined by scrupulous analysis of data and thorough understanding of the economic factors at work. Also, at its most basic level, I don’t see how this is even important. Is there something wrong with China becoming a presence in the US (and world) auto market?

    Wow, that is a good one. Packed full of stuff… First of all no one is stating that the Chinese *are* better manufacturers right now. Just that they are being hand fed knowledge from the world’s best. And so, like any human with access to the best “education”, as long as there isn’t some severe learning disability (which I think the Chinese in general are not inept people of course) then one has to think that there is an advantage not to be the best now but to be the best eventually and more quickly then past precedence. And again, my America first thinking (and if you are German or Japanese or whatever I am not going to fault you for “your-country” first thinking and many Japanese and Germans already do think like that btw), is not picking on the Chinese it is just looking out for American jobs.

    Finally, you are still not seeing the way in which the market is flexible. This “hole” in the market, of people who still want to buy cars that are not there, is an excess of demand; a disequilibrium that results in the extreme short run when the supply curve shifts inwards. Then, the market will move upward along the demand curve, prices rising and quantity falling, until everyone who is willing to buy a car at current prices can.

    I guess it is the minute details in how the market will be “flexible” that makes us look to disagree. You don’t care if the “flexibility” of the market is simply supply met by Chinese or Martians and I do.

    Your iPod example is very revealing. Building cars is, in fact, no different from building iPods, or cell phones, or anything. A combination of factor inputs (capital, labor, land, intermediate goods) yields an output. That combination of inputs can be altered to yield different outputs. A car requires much greater factor inputs than an iPod, and fewer of them are made, but that is merely a question of scale.

    Again, I think in a vacuum this is true. I could look at it several ways that I know you will disagree but here they are… take any arbitrary weight you can lift with no problem. Add an ounce. It is only an ounce. You can lift it. Now keep doing it. It’s just an ounce. Right, you can lift a billion pounds eventually with that mentality, correct? Wrong. But if building a single car takes up much more capital outlay and more land (physically larger item) and more intermediate product then building 800 billion of them (if that was the demand) is not as easy as building an iPod.

    The only way I can see these two things are being “equally” hard to build is if the iPod was in demand for 900 million a year and cars 15 million a year. Then you could say it takes the same land and the same capital outlay etc. Sorry, the complexity is more difficult and only in theory is it not.

    http://www.canonical.org/~kragen/tao-of-programming.html#book3 specifically read 3.4 – that joke is reality.

  • avatar
    hltguy

    TeeKay: Completely correct on your posting. We can discuss economic theories etc but the facts are:
    1) Toyota/Honda and the asians companies: building plants in the US and hiring people
    2) GM/Ford/Chysler: Closing plants, laying off people
    3) Toyota/Honda and the asian companies: Making profits
    4) The 2.5: Losing money faster than it can be printed
    5) Toyota/Honda and the asians companies: Execellent reputations and enormous customer goodwill
    6) The 2.5: Mediocre reputations and virtually littel goodwill
    7) Toyota and Honda and the asian companies: Sitting on piles of cash to invest
    8) The 2.5: Sitting on so much debt, if it were dollar bills and buried under Detroit, the mound would be so high, Detroit would be a ski resort
    9) Toyota/Honda and the asian companies: Constantly across the board rank high in product quality
    10) 2.5: Very spotty product quality
    11)Toyota/Honda and the asian companies: Getting top dollar for their products
    12) The 2.5: Having one continuous blue light special of rebates, zero percent interest plans, degrading of qualifing credit standards to buy one of their products, and now rebates on a product that has been on the market for two months (the “Edge”, was it so named because that is where Ford is? as in cliff?)

    Shall I continue? Your point is well taken about the GM ad “This is our country”, were they referring to the vehicles built in Mexico and the operations they are setting up overseas as quickly as they can?

    By the way, in an edition of the Los Angeles Times this week, in the car ads, new PT Cruisers are selling for under $10K, new Foci for under $10K and GM trucks for $13K.

  • avatar
    suohtil

    Gee hltguy,

    I would love for you to tell all your patients in the waiting area for 6-8 hours how you are superior to most and run your business so much better. I’m sure they would be a captive audience. Though you do have a captive audience on a site like this with your numbered list but most know it isn’t based in much reality.

    Btw, “and the asians companies” sure goes against the THEORY NoneMoreBlack has presented. You really want to imply that Isuzu and Mitsubishi are doing all the right moves? Anyway, NoneMoreBlack, let him have it and tell him that there is no such thing as perception and if there was it would never work such that one would think of a nation of auto builders as “one” or in the same way i.e. bunch them together.

    1) They are making most of their profit here and as you told me with why GM was so nice to you the reason they are building here and (not netting more jobs, though Americans refer to it as…) creating jobs is because GM and Ford are here and so the name of the game is building here. Looking bad by not building here is bad. So your excuse that GM isn’t good and they had to sell you $7 cars is the same as Honda and Toyota have to build here because of the rich auto history of cars being made here and it is expected, by all. But they still have not nearly met the number of jobs as GM alone. They take away + displace.

    2) All the closing and GM still has many times (probably 4 times) more U.S. employees as Toyota. Can you understand that?

    3) Yes, they are making profit and lots of it yet I don’t see 200K mile warranties to return the love. You know, one single market yields 50% – 70% of their worldly profits and not extra special love. Very telling.

    4) What was GM’s bottom line for 2006? was it losing money faster than it could be printed? I don’t think it was that bad. Were people in your ER waiting longer than it could be calculated? Probably. But improving the wait time is probably not a top priority right now.

    5) Enormous customer goodwill? That is so 1980’s “we are carving a stake in the market” days truth. There are thousands of examples of the “your car is OK, it is a Toyota Mr. Johnson” out there. The sludge: it is your fault you waited as long as our manual states to get an oil change.

    6) Yeah, yeah. $300 billion in debt and the goodwill is 100K mile warranties and activating longer warranties on older Certified Used cars.

    7) Piles to invest and still Toyota finds it necessary to share the cost of fuel cell development with the inept GM corporation. So much cash that neither company seems to think a 150K or more warranty would still leave them with mucho profit and happier customers (you know the happy happy joy joy goodwill they have). They spend their profuts on HondaJet and virtual parallel parking devices that will probably cause more fender benders than the NHTSA crash tests. To say it isn’t ready for production is an understatement.

    8) Yes, they are in debt. Sure kick them when they are down. Nice tactics from someone who “helps” others.

    9) Yup, that is the perception and that is how the surveys will play out. Bad engines or transmissions from the Japanese or not.

    10) Yup, more perception. Wait until Toyota is making/selling more vehicles in the U.S than GM. You will will see some real changes in opinion, I mean survey results.

    11) Yup, more perception fueling mindless purchases. That is why Honda didn’t want to grow like Toyota. Things will change when people see what high volume is doing to their 1980’s perception of Japanese vehicles.

    12) Yup, good to see it makes your day to describe these things. Heck, if that is what it takes, listing out problems of others, to make you feel better then who can stop you.

    You’re right, it is Toyota’s country, GM is wrong for using that song. Bad guys all of them over at GM.

  • avatar
    hltguy

    suohtil: it is what it is, if you compare saving lives (the ER) to building cars, that is your priority. You may downplay perception, but if John Q. Public thinks a business is lousy or not giving the vaue for the consumer’s dollar, he will go elsewhere, ask the airlines. If you believe customer goodwill is a thing of the past, read all the posts on thie site for the past serveal months of all the people who had horrible experiences with the 2.5 and will not buy one of their products again, and then factor that in dollars lost. You missed the point, it is true GM has more employess than Toyota and Honda, but GM is slashing and sending jobs out of the company, Toyota is adding jobs and building plants here. Your comment “Sure they are in debt, kick them when they are down” is laughable. How do you think they acquire so much debt?, it wasn’t the car buying public that caused it, it was STUPID MANAGEMENT! and a greedy union, and between the two have pretty much killed and cooked the golden goose. When GM, Ford, Chrysler were making big profits what did they do with all the money, oh that’s right, they built more large trucks and tanker sized SUV’s, while the competition was gearing up for more energy price jumps. Who made the decision to build land ships? uh, STUPID MANAGEMENT! Who made the decision to offer $6,000.00 rebates on the before mentioned SUV’s? Who made the decision to poo-poo the growing influence of Honda, Toyota Hyundai in the past, you guessed it. So please, stop apologizing for the horrible blunders of management and let’s don’t even get into their suicide dance with the UAW. The facts speak for themselves and the car buying public is much wiser than days gone by. And yes, if they keep wishing to hand me two new vehicles for 7 bucks a day, I will take them and not feel sorry for them, they created this mess.

  • avatar
    su ohtil

    Would this have been less obvious? LOL

  • avatar
    guma

    Yup, that is the perception… Yup, more perception… Yup, more perception…

    So only thing preventing GM from selling their cars w/o resorting to a firesale is perception, eh?

    Sounds like more of typical GM management BS. Put the blame on anyone but themselves. Just blame them ignorant customer perception!

    Again, I ask you: Do you think Lutz and Wagoner are doing good job? Simple yes or no question.

  • avatar
    Rastus

    Children, children…!!!

    Go upstairs, wash up and brush your teeth, put on your pj’s and come sit with Uncle Rastus by the fireplace, hear?

    You kids need to put aside all that Anger inside you!….it’ll eat yourself up alive!!!

    When you’re ready, come down…I have a wonderful story to tell of the “Golden Era” of the Automobile…and what a Doozie it is!! :=)

  • avatar

    With all due respect, I think you are making the public out to be idiots.

    Actually, I am making out the people I know who “buy American” for these reasons as idiots.

    John

  • avatar
    EJ

    hltguy:
    What’s the downpayment you paid on that lease deal?

  • avatar
    hltguy

    EJ: If memory serves me, I believe the down was approximately $1,800.00 for both cars total. What was interesting about the deal was that both cars came with 15,000 mile annual milage allowances, instead of the usual 12,000. The Vue was well equipped, moon roof, power everything, but with manual transmission. The ION was a base model, thought it did have a CD and A/C. This was a deal GM had going back in April 2004 and was advertised extensively. As I stated in a previous e-mail, GM and the dealer has repeatedly contacted me by phone or mail offering big incentives to get into new Saturns. I calculated one offer they made to me, paying off the lease early for me, plus a discount off sticker, plus a rebate, plus zero percent interest (to purchase a new vehicle) would have been worth in the neighborhood of $6,000.00 off a VUE, sticker priced in the mid 18's, basically a 33% reduction off sticker, now how can any auto manufacturer make money on that? And why should they even have put themselves in a position to make such offers? When my vehicles are turned in April, they will be late model vehicles competing against overstocked new vehicles of the same brand that are already barely priced above pre-owned models. Rastus: Which golden age of automobiles are you referring to?, please do not say the 70's that gave us the Vega, Pinto, Pacer, Matador, Citation and crappy GM diesel engines. What I know about perception is that I work around a lot of people who earn wide variances in income, from receptionists at $10-$12 per hour to physicians who make in the six figures. I note the cars being driven by these folks, and invariably the lower wage earner is driving an entry level foreign car, why? they perceive it will last longer than a Ford or Chevy, the high wage earner, for the most part, is driving a MBenz, or BMW or Lexus, or perhaps an SUV, likely to be a foreign SUV. There a few who drive an American SUV, or perhaps a Jeep. The middle wage earners are driving Hyundais, Toyotas, Hondas, and some domestics. But this is California, where the 2.5 have already lost the market.

  • avatar
    Glenn A.

    How about the “golden age” of the automobile, like in the 1950’s, when the average size of the American automobile went from a 115″ wheelbase, length of 196″, 6 cylinders and 103 horsepower and weighed in at 3095 pounds up (using Dodge as an example) to a huge, oversized gas guzzling, befinned, chromed, ill-handling, poorly made, rust-o-matic 1959 monstrosity with a shelf-life less long than the car payments (which stretched to as much as 3 years, whereas in 1950, it was no more than 18 months). The 1959 Dodge had a 122″ wheelbase, 217.4″ long (over 21″ longer in 9 years), had up to a 345 horsepower 383 V8, automatic, power steering, power (though highly inadequate drum) brakes, and with the typical V8 weighed no less than 3660 pounds.

    Mustn’t forget going from, approximately 20 mpg to about 13 mpg, either, in those 9 years, and the total lack of any pollution equipment. Despite the fact that I’ve read a 1955 issue of a Popular Science (or Popular Mechanics) in my dad’s collection, wherein the inventor of the catalytic convertor said that, for a few dollars, every car could eliminate 90% of it’s exhaust pollution (which didn’t happen until 1975).

    That “Golden era”?

  • avatar
    Glenn A.

    Oh yes, and speaking of good will, GM just “lost another one” (to use GMAC’s tag-line from their 2nd mortgage TV ads).

    My colleague at work was extremely happy with how a 2000 Saturn L-wagon helped save his wife’s life when a teen girl passed a semi on a 2-lane US highway behind someone else and could not move over in time – head on collision.

    So my pal went out and specifically looked for another Saturn. The one he bought just threw it’s (V6) cam belt and probably ruined the engine at 45,000 miles, out of warrantee. Saturn’s recommendation is to change the belt at 100,000 miles. Subsequent google searches found that there is current consideration of making GM do a huge recall due to cam chains and belts on these Saturns. The Saturn dealer offered him a 5% goodwill discount (then promptly raised the estimate 6%) and suggested he instead trade it on a new Saturn Vue. Oh yes, the Saturn dealer initially mis-diagnosed the car with bad gasoline, which they said would take $750 to replace the entire fuel system?! He kind of lost confidence in them when they came back and said it wasn’t that after all, but the cam belt.

    Another GM customer who will go to Honda or Toyota. He’s taking it to an independent shop. I said, keep the receipts so when and if there is a recall, he has some possible recourse for a refund (maybe or maybe not).

  • avatar
    geeber

    GlennA: I wouldn’t use a late 1950s Chrysler product to tar GM cars of that time. Mopars from 1957 on were notorious for poor build quality and early rust-out. And the public new it – look at the direction of Chrysler’s market share from 1957 to 1960.

    GM cars, on the other hand, were pretty good, and were veritable Lexuses compared to their Mopar counterparts (and 1957-58 Ford products). I’ve seen original examples of all of the Big Three’s work at various Carlisle events and the Hershey Antique Automobile Club of America (AACA) meet – GM vehicles were head-and-shoulders above all of the domestic competition from that era, although they were worse than GM cars built prior to 1957 and after 1960.

  • avatar
    hltguy

    Glenn A: I am not old enough to remember the cars of the 50’s and the problems they had, the era did produce some great music though. Your friend’s experience with Saturn certainly runs contrary to their supposed image of being very customer friendly. Another loss of goodwill story: one of my employees loved the looks of the SS Impala and purchased a new one last year, it has been nothing but problems. The same problem within the computer system has occured over 15 (yes 15!) times, and the dealer keeps changing parts but no resolution. GM has offered little or nothing to her, other than “bring it back we will replace the part”. Needless to say enough is enough, and she now has an attorney involved. One by one of these types of stories over the decades has added up to untold how many lost customers. Loss of goodwill indeed.

  • avatar
    Steven Lang

    Hmmm…. I once had a Toyota service rep tell me that I should pay $804 for the cost of having a particular problem diagnosed.

    After inquiring as to whether he had a full lobotomy, “Have you lost your mind??!!” I informed him that the cost of this bill would pale to the attorney fees they would encounter for engaging and fraud and not providing me with an estimate.

    I walked away, walked to the car where there was a spare key in one of the wheel wells, took off, and never looked back.

    I had the Camry for 12 years and 239k. It was a great car but I’ve also seen and bought plenty of domestic cars with well over 200k as well. By and large, the quality of a vehicle depends on how conservatively it is driven and how well it is maintained. Less wear and tear and diligent maintenance can even make the worst cars of today last well over 20 years.

    By the way, a lady down the street from me ended up waiting over a week for her Camry due to an electrical issue. She told me that the service center was standing room only each day she visited.

    Oh, and despite the $$$$ the dealer was still too cheap to provide their customers with chairs that had seatbacks.

    All I can say is, WOW!

  • avatar
    Glenn A.

    1950’s GM cars had many “issues” it wasn’t just Chrysler stuff, or Ford stuff. In fact, even Packard’s fine engineering reputation took a major nose-dive in 1955 with the (foolish) simultaneous new assembly plant (too cramped), new V8, new Torison Level, new Twin-Ultramatic (too weak for the V8) and restyle.

    GM automatic transmissions took a major quality nose-dive in the 1950’s, despite GM being (supposedly) the first to introduce same (in fact, that’s even a lie – Reo introduced a “self-shifter” in 1933, a full 5 years ahead of the other Lansing car manufacturer, GM’s Oldsmobile).

    The Chevrolet Turboglide (1957-1961) was an absolute POS, the “slim jim” 3 speed Roto-Hydramatics of the same era were even worse (if that were possible), even the supposedly bullet-proof original four speed Hydramatics had a lot of issues (the 2-3 or 3-2 shifts had two sets of planetary sets and bands, one upshifting and the other downshifting simultaneously – it never worked properly when slightly worn out, even though GM persisted from 1938-1964).

    As for all late 1950’s cars, quality was an oxymoron. They could nearly be “heard” rusting in the garage, in northern climates (with salted roads) or near the sea (salty air).

    As for current dealers that cannot even be bothered to put decent chairs in their waiting areas or treat people like absolute morons, well….. Some dealers are as moronic as can be and one has to wonder why the car manufacturers persist in allowing them to keep franchises.

  • avatar
    geeber

    GlennA: I didn’t say that GM cars of that time were without fault…but they were still head and shoulders above what Chrysler and Ford were offering, not to mention the imports. Vehicles must be viewed in the context of their era.

    Here are two indications of how the public viewed GM’s cars from that time, as compared to the competition:

    By 1961, the wholesale value of a 1957 Chevrolet was TWICE that of a comparable 1957 Plymouth.

    And 1958 Cadillacs did a much better job of holding on to their value when compared to their competitors from Lincoln and Chrysler (Imperial).

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