Fortune and CNN Money try to analyze Big 3, fail

[Labcoatguy]

From CNN money, originally found on Fark

The gist of it: American companies have higher costs, therefore they're disadvantaged.

Gist of what would've been a (more) massive rant from me: It's not size of the costs that are the problem, but the (lack of) size of the income. These people give accountants and analysts a shit name by being so blind to the fact that there are two ends to the $ deal, and it ain't just costs, sunshine. There's income to consider. How do you get income? Product. Let me say that again. Product, and the reputation that it engenders. Say what you will about Big 3 bashers, but sometimes their supporters need to quit their whining and at the very least stop making those tired "costs are so high" excuses. If the cars aren't WORTH to sell what they cost to make, the costs aren't the problem. Even low-cost-to-make cars and carmakers will die if they're crap. Exhibit A: Yugo. Mods, do your thing if this thread is redundant, but the repetition of "our costs suck whine whine" is really getting on my nerves.

[BerserkerCatSplat]

So they present you with facts that state the big 3 have higher per-car costs due in large part to things that have little or nothing to do with car production, and your argument is that you know better and that the real reason is that nobody's buying their cars?

Ford and GM are between a rock and a hard place with health care. Either they take the $1000 or so loss per car, or they tell their employees "too bad, so sad" and look like monsters.

[thedguy]

That is only part of their problem. The fact that people only bought anything from GM last year because of employee pricing deals says it all.

If they had asked the public what cars they wanted, rather than say "here's what you get" they wouldn't be bitching about health care costs (so much) now.

Perhaps the demise of the big 3 will at least bring more to light the issue's with the cost of health care in this country.

[Labcoatguy]

Originally Posted by BerserkerCatSplat

So they present you with facts that state the big 3 have higher per-car costs due in large part to things that have little or nothing to do with car production, and your argument is that you know better and that the real reason is that nobody's buying their cars?

Ford and GM are between a rock and a hard place with health care. Either they take the $1000 or so loss per car, or they tell their employees "too bad, so sad" and look like monsters.

Well, I think (in my not-yet-professional economist way) of spending on labor as an investment: they put more into it, ie healthcare, pension, jobs bank to keep the labor pool reliable and on-call, but in return they should be getting more out of it, ie better product and in the end better sales. Somewhere along the line, they stopped getting that return on investment that they (presumably) were getting at some point. If they don't want to get rid of their pricey labor, and it doesn't look like they can short of massive structural change, they should focus on product and make their labor worth it. In short, get rid of that $1000 or so loss per car and avoid looking like monsters. Yeah, easier said than done , but it's a thought.

[Samir]

The biggest problem is product.

Now that the Big 3 are perceived to be at the bottom of the quality chain, they have to penetrate markets they once owned and price accordingly to earn some trust back. This is what Honda, Toyota, Hyundai, Kia all did - priced so low you could not ignore them, some people took a risk, cars worked out, word spread, and now all of them are more or less respectable, and Toyota & Honda can even charge premiums on some vehicles.

[Narcolepsy]

Yeah I agree. Circumstances, labor, etc may DISADVANTAGE them, but at the end of the day the product is going to make or break them. A smash hit would make up for costs, and even if your labor is 5p an hour it doesn't make a diference if you can't sell.

What worrying is that Toyota is setting up a Just-In-Time product chain that will virtually eliminate inventories and will save massive costs. That said Toyota has a lot of American labor employed with industry matching benefits and they do fine.

[0497]

For the best ongoing analysis of the Big 3 see: http://www.freep.com/apps/pbcs.dll/s...ory=BUSINESS01

(It's from Detroit)

[No Boss]

Originally Posted by Narcolepsy

What worrying is that Toyota is setting up a Just-In-Time product chain that will virtually eliminate inventories and will save massive costs. That said Toyota has a lot of American labor employed with industry matching benefits and they do fine.

Exactly. Their business system is a business student's dream.

[MPowered]

Originally Posted by Narcolepsy

What worrying is that Toyota is setting up a Just-In-Time product chain that will virtually eliminate inventories and will save massive costs. That said Toyota has a lot of American labor employed with industry matching benefits and they do fine.

Toyota doesn't use unionized labor in the States, unlike Ford or GM, so they're benefits cost is much less than the domestic car makers. Even in difficult times like the present, the UAW is against giving up anything. I've heard of people who have been on Ford's pension program longer than they've worked for the automaker. That's gotta hurt real bad. These contracts were drawn up back in the days when GM/Ford/Chrysler had no real competition and American car buyers generally felt a responsibility to buy American. Those days are long gone (not that an American car today is really American).

But truth be told, the majority of domestic car workers are employed in the factories, and we know Americans can put together a fine car (Accord, Camry, BMW's), so it comes down to design and engineering. Instead of these news outlets always showing assembly line workers, they should show the corporate execs who dump wretched excuses for a car onto the American public and expect them to buy it because of huge discounts and a sense of patriotism. I also believe that it all comes down to product.

[Cobol74]

Originally Posted by BimmerFan

But truth be told, the majority of domestic car workers are employed in the factories, and we know Americans can put together a fine car (Accord, Camry, BMW's), so it comes down to design and engineering. Instead of these news outlets always showing assembly line workers, they should show the corporate execs who dump wretched excuses for a car onto the American public and expect them to buy it because of huge discounts and a sense of patriotism. I also believe that it all comes down to product.

Substitute British for American and you've got Austin/Rover 10 years ago - let this be a warning to one and all.

[thedguy]

Originally Posted by Cobol74

Substitute British for American and you've got Austin/Rover 10 years ago - let this be a warning to one and all.

I've been saying that for ages now. If the UAW/GM/Ford/DCx are smart they will look at the British car industry.

What worrying is that Toyota is setting up a Just-In-Time product chain that will virtually eliminate inventories and will save massive costs.

What exactly is that?

[Cobol74]

Just in Time (JIT) is a technique in which the materials for any given production live arrive from the supplier and are immediately sent to the production line rather than going into inventory and storage for issue to the line upon request. This means that you have your components on site for the minimal amount of time before the value is added by the assembly function and then the product at the end is immediately delivered to the next process or if it is the final line to the dealer. If you are very smart and Toyota is, you can make the cars to order in the correct sequence as the parts arrive at the line they are fitted for what ever options are needed on a particular individual car within a model range. By not holding parts inventories and finished part stores you do not need the space, or the employees or the management processes thus saving a packet. You push the inventory holding as far up the supply line as you possibly can as this has the least value added. I hope my non professional appraisal at least gives a flavour of the technique.

Probably better is this reference : http://en.wikipedia.org/wiki/Just_In...%28business%29

[liberal noob]

http://www.thetruthaboutcars.com/?cat=76 Chrysler Group Suicide Watch
http://www.thetruthaboutcars.com/?cat=55 Ford Death Watch
http://www.thetruthaboutcars.com/?cat=45 GM Death Watch

[epp_b]

Wow, you know your in it pretty badly when two highly respected financial analysts can't figure out what's wrong with your company

[UMass]

Eh,
Putting profit above everything.
Getting squeezed in the balls by UAW.
Taking profits instead of back in the product and R&D.
Always looking at the short term with no long term plan.

[thedguy]

Everyone always blames the UAW (they are partly at fault) but the execs could consider a slight pay cut as well...