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« Previous Entry | Main | Next Entry » Why Aren't the Big Three Automakers More Successful? Name:
Jim Orban
Question/Comment: The Big Three seem to be successful in the rest of the world yet not here. Is it the fault of our government regulations, the costs associated with labor agreements here, or what? Paul Solman: I sent your question to one of the foremost experts on the auto industry: David Cole of the Center for Automotive Research. Here's his answer to the two of us: I wish the answer were simple but here a couple of things. Legacy costs associated with an older workforce and retirees and dependents have resulted in about a $1,500 higher cost than international competitors for many years, The credit crisis is the 500 pound gorilla now since people can't buy cars and trucks. With the high fixed cost of manufacturing you cannot take cost out as quickly as the market has fallen (depression level sales) which translates into huge losses for all of the auto companies. The rapid increase in gasoline prices last spring resulted in a sudden market shift from more profitable products to less profitable ones. This was a 100 pound gorilla. Quality, productivity, product and manufacturing technology and labor costs (excluding legacy costs) are close to on par with the internationals. Too many dealers is also an issue. It is better to have fewer, more profitable dealers since they are the face of the company to the consumer. No company is without fault in this but the real challenge that they have all had is accurately forecasting the future and making decisions that are different than would have been required if they had guessed properly. Editor's Note: Michigan Public Radio has some great resources on the auto industry's crisis, including personal stories from the auto workers themselves. Find them here. -- Posted December 12, 2008 | Comments (3) | Permalink
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Paul Solman did not answer the question.
Ford and GM make excellent cars in Europe and countries such as Australia. The cars they make in the U.S.are of poor design, poor quality with poor quality interiors and most are gas guzzling trucks.
why would Americans not want to buy a Honda or Toyota higher quality better designed vehicle however nationalistic they might be.
It's clear to me that the atmosphere of greed and disconcern for the consumer has caused the rift amongst Americans and US auto makers. At the consumer level the salesman was only concerned about getting you closed and out of the showroom before the car fell apart. The salesman got his commission and that was it. It seems the practice of close and get out is biting the industry in the backside. The product they were selling was inferior and the consumers responded with a sales trend towards the foreign makes. They more than met us half way by moving production here to the US and employing American citizens. In essance it was a foreign designed automobile assembled in America. In order for our automobiles to be sold in foreign countries they have to be assemble and retrofitted to much tougher foreign specifications. Our quality wasn't good enough for the Japanese. Every major foreign nameplate has a design studio here in America. Often the Honda, Toyota's and Mazda's are designed here by American staff and is approved by the foreign board of the major manufacturer. The automobiles we are driving are in essance American cars built to foreign, much tougher standards. In fact many Ford's have the underpinnings or chassis of the Mazda 6. Ford's Escape Hybrid is a licensed technology from Toyota. Ford also has a Volvo underpinning for it's Taurus X and Flex. The last generation Linclon LS was in fact a Jaguar XK sedan. Many General Motors vehicles have the underpinnings of Saab as used on their Cobalt line. Saturns are Germany's Opel automobiles. The Pontiac Vibe is nothing more than a Toyota Matrix. Chevrolet's Aveo is nothing more than a Suzuki. Chrysler's successful 300 is nothing more than a last generation Mercedes E class sedan. The Crossfire was a last generation Mercedes small convertible sportscar. The last series Stratus were a Mitsubishi and Mercedes mix. The companies the big three have sold off were the underpinnings of foreign cars that were to be Americanised. By selling off these companies they will be forced to make something original from scratch which will require billions of dollars for tooling and a rush to developement. Can the US automakers do this alone? I believe Chrysler can become a boutique builder of funky interesting cars as they have been doing with their specials. General motors trump card is the Buick. Coveted and admired as an American Mercedes in China. Perhaps GM can continue as Chevrolet and Buick and keep Pontiac as a boutique vehicle line. What we need is a new car culture. I believe we need to build smaller commuter cars with smaller engines like the Fiat Topolino or 500 and the Volkswagen Polo or the Kei cars of Japan. These are small cars that could be driven with a small electric engine or a small internal combustion engine. I believe that smaller cars can be just as efficient as Public Transportation. The benefits are that you will always get a seat and you can control who you ride with and you don't expose yourself to the elements. Let's not have licensure for commuter cars with small engines. Let these smaller cars be the only choice of vehicle for those under 18 or 21. Let these vehicles not go any faster than 50 MPH. And let them be cheap. 2500.00 to 4000.00. Let insurance be optional. America is a big country with big distances to travel and I feel because we are so travel and car oriented we need a cost effective way to travel that allows us to be individuals. Small cheap cars built to Smart car standards can be done and can save the auto industry and provide satisfactory mobility for everybody.
David Hutchinson
ruffyy@gmail.com
Since the quality of cars has improved over the years they don't wear out as fast which would lower demand for replacements. The age of planned obsolescence to increase sales is over because people will just switch brands.