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This Smells of Desperation
Sunday, January 07, 2007
This came in the mail the other day - maybe someone who knows the auto industry can comment on how this may differ from rebates that have been offered in the past.
If they're going to go to the trouble of sending a nice looking invitation, they really should offer more than $1,000, shouldn't they?
It was always weird how car salesmen would try to include factory rebates into the monthly payment they pitch to you - trying to keep you from negotiating a price then deducting the rebate.
Is it me, or does the idea of a $50,000 loan to buy a truck just sound kind of nuts?
We owned a 1993 Ford Explorer for about eight years (back before everyone had an SUV - Explorers actually look pretty puny out there on the road these days), but have no interest in an F-150. All American automobiles seem to start falling apart when the odometer approaches 100,000 miles - that's OK if you're one of the "perpetual payment" types that don't know the joy that can be derived from not having a monthly car payment.
For us long-term, buy-and-hold types, it's Japanese from here on out - others seem to have adopted this view as well.
ooo
This week's cartoon from The Economist:
11 comments:
Clearly, the domestic auto industry is in a desparate shape, and it is mostly their own fault.
Yet I am a little ambivalent about not even considering American cars. Cars are a huge component of our trade deficit, and if we as consumers don't even give American cars a chance we are screwing our own economy. Just an opinion.
P.S. I drove Japanese, American and European cars above 100k miles and was fortunate enough that none was falling apart.
Having tried Chev, Merc, Dodge, in the past, we gave up on American made autos in the mid 1990's. The last six vehicles we have purchased have been Toyota, Honda, or Nissan, including two for the kids' first cars. Only one has been a new car purchase.
We have no reservations about buying a used Japanese make vehicle with 50K to 100K miles on it. We know our chances of getting a reliable vehicle with few problems are so much better with the Japanese autos. It makes me sick and sad for my country, but I was tired of ending up stranded on the road side.
My wife and I are baby boomers. We have observed that while our parents generation (WWII) are passing from the scene, Detroit is losing our children's generation forever. I don't see anything changing soon.
Having seen the obsene pay package to US executives I feel proud when I buy Japanese cars and use it for 150K miles ...
I would be buying US cars when US executive pay package is not more than 25 times of the lowest paid worker ....
Apparently American cars are chic in China!
American auto makers are going to suffer the same fate as another great american institution... "THE MILK MAN".
All you guys who have "given up" on American made automobiles realize many of the Hondas, BMWs, Mercedes, Nissans and Toyotas you drive are actually manufactured by American workers in such obscure places as Tennessee, Alabama, and Missouri? Some of the engineering and design work also occurs in the U.S. And a sizeable percentage of their stock is owned by American individuals and institutional investors. About the only thing German or Japanese about them is where they have their coroporate headquarters located. Even the very top executives may not be of the nationality where the firms are headquartered (i.e., Brazilian born Carlos Ghosn is a top dog of France's Renault and Japan's Nissan).
Tim,
I'm with ya here. I will not purchase a Ford, GM, Chrysler, etc - an American car. They seem to fall apart at the most inopportune times. Like when you're driving through the desert. American cars may less expensive than their Toyota/Honda counterparts but there is a reason: lower quality. My toyota, that I bought in 1997, has 200K miles on it and I've replaced the battery and starter. Again - the battery and starter - that's it. Gee imagine that, a car that functions properly for many years and miles. Listen up Ford and GM! Oh and by the way, who the F'($ designed the Ford 500. That darn thing is Ugly. Oh and the rebates, it seems they would need to offer much much more in the way of a rebate to get people to buy their junk.
Anon 1059am,
You are right. What is broken is not Americans. It is the American system. It's funny how American labor can produce superior quality with foreign management. You can get better than GM quality at a discount by buying Hyundai or Kia now. I think the financing is the only thing getting people into GMs and Fords. The elites are getting away with murder, literally.
I personally gave up on American cars in the 1970s after my first car -- a Chevy Vega. In recent years I've bought Nissans made in Tennessee or Hondas made in Ohio. Even my Honda motorcycle is made in Ohio. I worked for a GM parts supplier for almost 15 years which gave me some insight into problems of the U.S. automotive industry. I'd like to blame it on the U.A.W., which has over the years has gotten unskilled labor pay and benefit packages worth some $75 hr. But that excess pales compared to executives -- especially GM executives. I was especially irked that none of them bought and drove GM automobiles. They mostly saw the product riding in the back seat of a hand-rebuilt and carefully maintained fleet car. If a major GM executive found himself stranded on the side of the road every few months (or weeks) there might have been some useful changes made.
Anyone can order their car from General Motors; the price includes $1,500 in social costs, according to the recent calculation that the president of the board provided to his employees. It would be more economical to head to the Hyundai dealership, since employees in Korea do not receive a comparable welfare supplement.
When every car in the Indy has a Honda motor, and every objective evaluation of reliability, performance and features shows that foreign brands are superior at the same price, a consumer could consider them to be a better value. But even if your Toyota is one of the 55% (significantly higher for Honda & Nissan) actually built in North America, it doesn't mean those workers are on the same playing field.
Economist Brian Bethune at financial analytic firm Global Insight points out that the average wage of jobs at a Japanese automaker in the U.S. is 30% lower than a similar job at one of the Big Three automakers. "So jobs are being created, but they are lower paying and that affects spending," says Bethune.[*]
Ford and GM are indeed desperate, since every day is spent trying to stave off the probably inevitable trip into bankruptcy. No time or money to modernize factories, raise efficiency, improve quality, or invest in research and design. Just paying the creditors and employees, past and present, preempts any possibility of profit. GM has about 130,000 current workers, around 300,000 retirees, and 1.1 million beneficiaries in its health care plan. Do you really think executive compensation is the major cause of its financial difficulties?
Here's the math. In 2004, GM says, its health-care costs were $1,528 a vehicle and pension costs $695. Total: $2,223. Toyota's comparable costs: $201 for health care (according to A.T. Kearney) and perhaps $50 for matching workers' 401(k) contributions (my estimate). GM refuses to provide legacy costs for its 2005 vehicles. But by my estimate, they were $1,850 for health care, $700 for pensions. Total: $2,550. (I'm using GM pension and health-care numbers and WardsAuto.com's vehicle-production stats.) Numbers Toyota gave me indicate its U.S. health-care cost stayed at about $200 a vehicle. And let's use the same, probably-too-high $50 for 401(k) costs.
This produces a horrendous $2,300 gap.[*]
So maybe someday you too will have the value of your labor judged to be excessive, and can have the benefit of foreign management to rectify the situation, with the enthusiastic approval of consumers, of course. Maybe, when you find yourself in your golden years with less security than a GM worker who started on the line 1951 had, you can console yourself with the knowledge that you got a great deal on a car that was shredded 20 years before. Inexpensive health care, pension, who needs (or more importantly, deserves) those things? The scene is even more grim for the airlines; did you ever see a ticket price differential that reflected the previously higher labor cost of the legacy carriers?
And if you think that opening quote is from some fat, lazy American only interested in preserving his cushy job, think again. Gabor Steingart was referring to his fellow Germans, far more enlightened and socially responsible than us selfish Americans, right?
The average shopper at Karstadt, Metro and Lidl is a downright globalization fanatic. He compares price and service and always goes for what's cheapest. In doing so, he destroys massive numbers of jobs in Europe -- including, eventually, his own.[*]
This is what race to the bottom means. Are you in?
Econoclast
Good site:
http://www.thetruthaboutcars.com/
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