Can the US auto industry survive?

Given the overwhelming obligations the US auto makers have in pension contributions,
and given that neither Ford nor GM can seem to make a decent sedan,
and given that cars are the backbone of the auto industry,
and given that Ford & GM make good trucks with big gas-guzzling engines in an era of $3++ gallons of gas when people want economy cars,
and given that the Japanese & Germans can pop out new models of exciting CARS like popcorn while the US auto industry comes up with uber-bordom cars like the Ford 500 or the Buick LaCrosse,
then is it possible that our once dominant auto industry is already inside a body bag and we just don't realize it?

Bob
I've asked myself that question. It seems as if the only thing holding the GM and Ford boats up are their truck divisions . And it looks as if Toyota and nissan are going to be after that market . I doubt if GM ,or Ford is going to go away in the near term . But they may suffer the same fate as Chrysler . Not that Daimler controlling Chrysler is a bad thing . I Just don't feel real comfortable with some of our major manufacturers being controlled by off shore interest . John

I can see Ford making the change, but GM still has problems seeing the light at the end of the tunnel. They still have vast holdings in country clubs for the upper management and don't seem to give the creative design staff the ability to design a car that will sell. Pontiac had two that came to fruition only because they were too deeply involved in R & D to turn back when upper management learned about them. In both instances they tried to throttle back the design to make it just another ho hum vehicle. The two that I speak of are the GTO in the 1960's and the Fiero in the 1970's. Since then I don't think that there has been an original though left in the division. They have beat the creativeness out of the designers. Now, they can't do any more than just follow, when they once were the leader.
Ford on the other hand seems to be able to fix problems with the introduction of new cars and designs. I just don't believe that the American public sees the true quality of the Ford products and is brainwashed to believing that the imports are a better buy for the money. what many don't even know is that most assembled in the USA with imported parts.
I have no idea as to where Daimler Chrysler is going to wind up, since the quality of the Mercedes Benz automobile has been declining. They have had some winners with the Chrysler division, but they have been taking all the management decisions and independence away from the US staff and have been making many decisions at higher levels in Germany. Unfortunately, what is good for the automobile business in Germany isn't necessarily good for the automobile business in the US.

Junk, I think Ford is realistically in worse shape than GM is, although both are in a very sorry state. Chrylser is making some progress. But think about significant cars from the big 3 and what comes to mind? Chrylser 300 would lead the group. Ford's new iteration of the Mustang is a winner. Pontiac's new Solstice is certainly on the right track to attract the consumers who would otherwise opt for a Japanese or European import, but being only a 2 seater it has limited potential even if its image impact is high. But what self respecting 20-something, or 30-something wants to be seen driving a new Ford 500? Lincoln is losing its aging consumers and can't compete with Caddy. Cadillac is breathing some life into the brand but even they can't compete with the Europeans or Asians. What does Caddy really offer? 2 sedans (CTS and STS) and some Excalade SUVs, a mid-size SUV that looks like a station wagon and a hot little convertible that is not promoted properly. But seriously it only offers 2 sedans, I think in only a couple trim/performance levels. BMW offers 3, 5 & 7 series sedans in various trim levels. Audi offers 3 sedan series too. M-B offers about a dozen varients. Infiniti is not very strong, but it is gaining and Lexus whoops butt. Lincoln is on life support. Oldsmobile died. Plymouth is also dead. Mercury lacks a customer base and is only a warmed over Ford. Saturn lost its creativity. Last year Dodge did not even offer 1 car model; they had a station wagon and a bunch of trucks.

I think someone needs to call a "code blue" for the US auto industry.

I worked for Ford Aerospace for a bunch of years. From the late 70s through to 1991 when Ford sold the company. At first I got one company car (leased, not free, but still quite reasonable) and in later years I got two cars per year. We never opted for the big cars, we sayed with the small and middle sized cars. You could see the quality of the vehicles improve over time. I can remember getting a Fairmont sometime early on and it was a piece of junk. Later cars were equal in fit and finish as some of the later Hondas we've owned. Where they lost in comparison though was conveniences. My wife like the Ford Probe and we has several of those. They (Mazda/Ford) put that car together with a lot of nice touches that were missing in the Mustang I got. The Ford designed cars are now getting the convenience things like you see in my wife's Acura, extendable sun visors, decent vent systems for the heater/AC, electric seats, heated seats, easy to reach controls, remote trunk opening, variable speed windshield wipers, etc.

Since I "retired" (ha) and went into consulting, I rent a lot of cars. I rent so much I get upgraded a lot and hardly ever get a small car. I usually get Avis cars which means a lot of GM products. I find the GM products still feel cheap. I actually dread getting a Chevy Lumina, the little Malibu is a better car that the Lumina, but it's a little buzzy. Somehow the Japanese designed small cars don't have that buzzy feeling. Buicks aren't bad at all.

Sitting here typing this I realize what it about the american cars that bothers me. The cars I'm interested in are the smaller cars. The american mfrs still think small=cheap and don't devote the detail they should to the smaller cars. All the finery and nice touches go to the big cars. Ford gets it somewhat with their Taurus and it's replacement the 500. But GM doesn't even try in that size car that I can tell.

GM's Pontiac/Holden GTO is the most innovative thing I've seen come out of GM in recent years and the local Pontiac dealer has to special order evey one he sells. Sheesh, it looks like they try to discourage it's sales.

I sometimes wonder the same things about American cars as Bob comments about. I don't have much hope. It looks like Ford is trying and GM is out to lunch. I don't know it they'll make it though. Because of my fond memories of my Ford association, I'd like to see them pull through though and they just might make it because they have a CAR guy in charge. GM has business men in charge. As Henery Ford II, used to say, it's my name on the building--it does make a difference.

Dave

If you want to talk "discouraging special orders", think Mercedes. They want a $1500 window sticker premium if you choose to special order a car from Germany. This is over and above the basic cost of the vehicle. For this reason, you almost never hear of a "special order". I know of a very wealthy woman that always special ordered her Mercedes and sometimes it would take 2 or 3 tries before the car would come in built to her specification and each of those cars had the $1500 "special order" charge on the window sticker. I don't know if they rebated that to the dealer, but if not, then he didn't make much money on her purchases. Sure must be nice to be able to waste $1500 like that, but when you are spending $75,000, what is an extra $1500??????

Re: Can the US auto industry survive? Delphi Files Bankruptcy

Did anyone notice that GM's Delphi division filed for bankruptcy?

http://www.indystar.com/apps/pbcs.dll/article?AID=/20051030/BUSINESS/510300504/1003/BUSINESS

Could GM be next? Or will Ford fall first?

It isn't GM's division any longer. GM spun them off a few years ago and they were saddled with the bad deals that GM made with the unions and the retirement packages for the union workers. This is what killed them, not the auto industry itself. They were paying wages that were more than double the average of other workers in similar jobs with other companies. I don't believe that GM or Ford will falter. I believe that they will push the unions back to being more reasonable. If the unions don't give any ground, then I can see bigger problems than bankruptcy for either company.

Re: Can the US auto industry survive? Delphi Files Bankruptcy

B_Skurka said:

Could GM be next? Or will Ford fall first?

Click to expand...

GM and Delphi are this area's two largest employers.

GM's stability is the main question...
How long can GM hang on? They have lost over a billion dollars in each quarter so far this year... total losses year to date are over three billion dollars. Can that go on forever?

Not only do GM and Delphi employ thousands in this area, but all of their suppliers are located nearby too. How will each of these companies be ultimately affected?

Re: Can the US auto industry survive? DELPHI Bankruptcy

Delphi is also a big employer here in Indiana, although not in the part of Indiana I live in. I didn't realize GM spun them off.

Regardless what happens to them is very closely related to what happens to the industry as they are the largest supplier to the auto industry of electronic compents.

What happens to them is also something that the unions have to watch very closely because Delphi and the auto industry both lay some very heavy blame on the unions, and their demands for benefits, pensions, etc. The unions extrated some substantial benefits from both the auto and steel industries in the 1950's through the 1970's. The steel industry collapsed 30 years ago and is now reborn with triple the production while utilizing 1/3 of the employees. Is that what will happen to the American auto companies (Ford & GM) to allow them to survive?

On a world scale, Volkswagen is facing similar problems in Germany, but has plants scattered about both new and old Europe and is being very blunt with their labor unions that they will shift production to lower wage/benefit markets. The VW signature Wolfsburg facility is running well under capacity, while lower wage/benefit facilities in Slovakia and Portugal are ramping up production of cars at lower overall costs.

No question that Ford & GM have more problems than just their labor contracts. Neither can really design a car that truely excites the younger buyers so new buyers never develop the brand loyalty that buyers had developed in prior decades. I never hear of buyers being identified as a "Ford man" or "GM man" like used to be common 20, 30 or 40 years ago.

My dad was a GM man. He never owned a car while I was alive that was not a GM car. He bought cars every 3 or 4 years, always GM. I have owed Triumph, Mazda (pre-Ford), Volvo (pre-Ford), Volvo (Ford), Pontiac (GM), VW, Avanti, Plymouth, Jeep, Jeep (Chrysler), Jeep (Daimler-Chrysler) and probably another few. But I'm sure not all that brand loyal. If I am brand loyal it would be to Volvo and to Jeep as I've owned 4 or 5 of each of those.

But nothing the car companies are doing now is building the type of loyalty that they had in the past and that is hurting them. The labor contracts are also company killers.

Delphi was spun off in 1999, I believe. As someone else said (too lazy to look and see who), they were saddled with back-breaking pension and retiree health benefits. However, it was hoped at the time of the spinoff that because of their expertise, they would have an opportunity to make even more money by serving the entire industry, not just GM.

It didn't work. The high cost of their labor made it impossible for them to compete in the local marketplace. What is interesting is that according to a news report I read, Delphi International is doing just fine and is not part of the bankruptcy. Of course, they are paying offshore labor rates and don't have the retiree yoke around their neck.

What is even more interesting is that companies in the United States which do NOT have crippling labor-union contracts are able to compete, and their employees are able to make a living. That's correct; you've discovered a left-leaning person who does NOT support greedy labor unions. Unions have their place, and many of them provide a real service for their members. But, when they get shortsighted and make it impossible for a company to operate, they've gone too far.

There is another side to Delphi's problems, and that is the retiree situation. Delphi's CEO said in a speech that the US corporations are "...reaping the harvest of years of putting more and more of our country's social costs on the backs of private employers." Sounds like he'd like the Democrat agenda better.

Junkman said:

It isn't GM's division any longer. GM spun them off a few years ago and they were saddled with the bad deals that GM made with the unions and the retirement packages for the union workers. This is what killed them, not the auto industry itself. They were paying wages that were more than double the average of other workers in similar jobs with other companies. I don't believe that GM or Ford will falter. I believe that they will push the unions back to being more reasonable. If the unions don't give any ground, then I can see bigger problems than bankruptcy for either company.

Click to expand...

GM may still have to cough up a little for the Delphi pensions...

"GM received an SEC subpoena after it disclosed Oct. 9 that its pension liability for Delphi workers could be as high as $11 billion. Under terms of Delphi's separation from GM in 1999, the automaker may be liable for Delphi retiree pensions in the event the auto parts maker seeks bankruptcy protection."
http://www.detnews.com/2005/autosinsider/0510/27/C01-362809.htm

Here is some more bad news from the US auto industry!

For the month of October, as compared to the month of October last year, my trade magazines report the following: GM sales down 23%, Ford sales down 26%, Daimler Chrysler sales down 3%, Nissan down 13.3%, Toyota up 5.2%, Honda up 4.2%, Porsche down 14%, Land Rover up 40.2%, and BMW down 3.1%. Those manufacturers cover over 95% of all cars sold in the U.S.

Chew on that for a while and you will see that the auto industry did not have a good month last month. Since my business is directly related to the auto industry, our family is going back to eating soup 3 meals a day.

I wonder how the numbers for the year will play out, since GM & Ford had such huge gains in July and August with the employee sales incentive?

Doc said:

I wonder how the numbers for the year will play out, since GM & Ford had such huge gains in July and August with the employee sales incentive?

Click to expand...

I suspect the US industry will continue to slide.

We can't make a car that appeals to the younger car buyers. Until we can make something that can EFFECTIVELY compete with a Honda Civic then we will continue to see our manufacturers slide down the

Young buyers want it all, they want performance, economy, style and handling. They want to be able to personalize their cars and they want their cars to have a personality. What they buy, they will often continue to buy as they move up the auto scale. So as Civic buyers grow up they move to an Accord.

B_Skurka said:

I suspect the US industry will continue to slide.

We can't make a car that appeals to the younger car buyers. Until we can make something that can EFFECTIVELY compete with a Honda Civic then we will continue to see our manufacturers slide down the

Young buyers want it all, they want performance, economy, style and handling. They want to be able to personalize their cars and they want their cars to have a personality. What they buy, they will often continue to buy as they move up the auto scale. So as Civic buyers grow up they move to an Accord.

Click to expand...

That's why Toyota is gaining ground

Watch for them to exceed GM's production next year. They may very well be one of the big 3 soon enough.

Maybe Dargo can jump in on this again, but I think that Toyota has already passed GM/Ford in popularity in several states that have younger growing populations. In states with older populations and states without siginificant growth, I believe GM/Ford still have the advantage.

B_Skurka said:

Maybe Dargo can jump in on this again, but I think that Toyota has already passed GM/Ford in popularity in several states that have younger growing populations. In states with older populations and states without siginificant growth, I believe GM/Ford still have the advantage.

Click to expand...

Yes, that is true. As Bob knows, I personally like Honda vehicles more than Toyota vehicles, but Honda is about 10 years behind Toyota on their marketing in the U.S. market. If you recall, Honda has not had a pickup entry until this year. They didn't feel it was necessary to gain and hold market share. They are now just beginning to go after that segment. With the decades of experience Honda has building off road vehicles, can you imagine how well designed and well built their trucks will be?! If you take Toyota's truck line (and truck based lines; i.e. 4Runner, Sequoia etc.) out, Honda far outsells Toyota. However, Honda has realized that this truck thing is huge in the U.S.

Anyway, yes, the domestic manufacturers are going to have to pay attention to Toyota and Honda. There are still differences in the engineering and actual building of their vehicles as compared to the domestic manufacturers. If you look, you will see that the Toyota Tundra pickups and Sequoia SUV's are assembled just outside of Princeton, IN. This is only about 1/2 an hour from where I live. I have several friends that work there. One relative works there after moving back here from St. Louis and working at the Chrysler plant there. He tells me that 2/3's of the workers at the Chrysler plant would be fired from working at the Toyota plant because of their poor work habits. Even though there is certainly no union at the Toyota plant, he tells me that the work conditions and pay there are better; as long as you are willing to work and show up for work. I could fill 20 pages with stuff that he has told me that goes on at domestic assembly plants that is counter-productive and is not tolerated at the Toyota plant.

If you figure that domestic manufacturers have a rather large percentage of their workers who don't really care about their work, have poor work habits, and can't be fired because of the union, you can see where a lot of money is wasted. From what I hear and read, top management at domestic manufacturers are realizing that they have to get their work force in better order to survive. Let's face it, if you have assembly workers who can miss up to 10 days per month with various reasons with no worry about any trouble (sick day, personal day etc.), you have to employ almost one extra employee for every three or four employees to just make up for employees you know will be absent. That doesn't even count the bankrupting retirement benefits that the unions negotiated in the past for their workers. The wages for some people are rather out of line as well (besides the CEO's). Making over 100k a year for wiping off dashboards as a vehicle rolls off the line is a bit much.

I just pulled this off the Yahoo! News.

What I find a shame it that they didn't say anything about introducing new cars that can actually compete with the imports! Nothing positive in this little blurb of news for the auto industry. Just cost cutting measures. Where is the forward thinking that we need to see? How about a world car? Or a decent hybrid vehicle? Or an economical diesel? Sure they have plenty of SUVs and pick-ups, but very few decent cars. I'm sure they are still embarrassed by the Pontiac G6 and the warmed over Australian Holden imported as the "GTO" that looks like a 1998 Volvo C70 Coupe. How about making a decent American competitor to a Honda Accord?

Well, I suppose if I was as smart as I think I am (tense?) that G.W. wouldn't be the President who is going to be pardoned by the next President, so, keeping that in mind let me say there is no hope for American mass-manufacturers regardless of product. The world gets smaller every day. Every member of the spending public worldwide has the inate desire to obtain a bargain. If it looks like a duck, walks like a duck, quacks etc., and if the ducks are hanging literally side by side priced differently, which one is most often chosen?

Consumer vehicles:
Survival of GM and Ford will depend on profitable sales. They know this. They were doing well with more profitable larger vehicle sales until the fuel cost became a purchase factor. This also happened a few times in the recent past with the same precipitous decline in sales. They know that profitable sales are good business and get caught up in the bottom line mentality. They generally suck when it comes to the subject of history. When times are good is the best time to be seriously looking at something to sell when times go bad. They don't contribute to this practice. They concentrate on the bottom line. Poor business philosophy IMHO and doomed to great swings in profitability for a multitude of reasons.
Labor costs in the US are higher than in Asia. If you want to save labor costs you move assembly operations to less costly areas. It's inevitable and it's happening other places too.

Consumer appliances:
We demand bargains here also so this is another market being targeted in greater depth. Who presented their first market? American manufacturers seeking less costly skilled labor.

Consumer tools:
Yes, again America loses market share. Same reasons.

Tractors, my-oh-my tractors:
Until you get fairly large they are made chiefly offshore with the majority of attachments coming from overseas also.

My point:
Anything that has a large established American market and that has manual manufacturing and assembly labor required will, sooner or later, be a target for manufacturers who produce in an area with lower labor costs. As this trend continues we lose the skills learned over generations. One must look no farther than the machine tool industry. With very few exceptions the US machine tool industry has been decimated by European and Asian competitors who are damn good at what they do. Who uses them? American manufacturers in the US and foreign plants. Who presented the first market? American manufacturers looking for less costly skilled labor.

Get used to it:
THESE ARE THE GOOD OLD DAYS.
The US standard of living is in decline and will remain so as long as we remain non-competitive. There, I've said it, NON-COMPETITIVE.
As we endeavor to be competitive we move decent paying manufacturing and assembly labor jobs to countries with lower cost labor. Simply put, this drains money from our economy and allows skills to diminish. We are caught in a downward spiral of declining manufacturing opportunities in the US. It is accelerating and it can't be stopped.

We are ripe for the picking:
Although there are steps that can be taken by the government, there is no cure. We are our own enemy when we purchase a foreign product, hard not to, and simultaneously demand good returns on our US based investments.
Even when we have a product that the world flocks to our door to buy we move operations off shore to save costs and guess what happens next.
I was recently informed, and this may not be accurate since it is second hand, that FoMoCo is / was building a plant in Guandong Province, the clever foreign government was simultaneously building a duplicate plant, in every detail, a number of kilometers away. There are bigger problems ahead for the US. At some point we will no longer be the major supplier of war goods to the earth. What then?

Bottom line:
I'm gonna take a hand full of barbituates in attempt to cheer myself up some.
And I hope my US manufacturing related job won't have gone off to Mexico when I try to go back next week. I am completely convinced that I will not retire from a manufacturing related career. I have 15 years to go for full SS benefits. I'll probably end up selling government mandated insurance or something similar, if the government lasts that is. What was it Tommy Jefferson said?

All the best,
Martin

Whoa there cowboy!

I can understand your personal frustrations regarding your experiences with manufactured goods and manufacturing industry (I am a mechanical engineer in the manufacturing industry, so I see everything you mentioned), but to steal a quote from Samuel Clemens; "The stories of Americas death are greatly over exaggerated." I have had the opportunity to travel to Asia (China specifically) as well as Italy, German, France, England and Slovakia. I can tell you from first hand experience that the standard of living inthe US has quite a ways to go before it fall out of the same level as England, Italy, France and Germany.

Dave, I've been to those places too (with the exception of China) and tend to agree with you. But don't you also think that the US Auto industry will only survive if it can gets its design problems sorted out as well as its labor/manufacturing costs under control.

The US typically leads in design and innovation. But our auto industry lost sight of good car design decades ago. Sure we can make a pick up truck, or SUV, but there are lots of good Japanese & European SUVs and a few darn good Japanese pick ups. So we are losing our grip there. We can't build a good luxury car that can compete with BMW, Audi, Lexus or M-B for drivability. We can't build an mid-grade car that competes with the Honda Accord or VW Passat. And we sure don't have the entry level car market in our sights as first time car buyers are going for the excitement of the little rice burning street racers, while we trot out an updated Chevy Cavalier under the new name "Cobalt" And the young buyers YAWN & SNORE!

Well the barbies worked very nicely, washed 'em down with a bottle of 2 buck chuck merlot, worth every penny indeed, I'm fresh out of single malt.
I feel the US auto industry is capable of much more than what makes the production line. It simply suffers from poor leadership vision.
As an example, a few days ago I finished an SMD package design that allowed a lead (pronounced leed, silly bastards the english whose language we derived ours form) to be located at each corner of the device, that's a good thing since there are four corners and having a lead at each one promotes stability during the various pick and place routines encountered up to the time the solder paste is reflowed. This will also be available as an eight lead device, four along each side of the package, also a model of stability.
Not being the average fool, I envisioned the difficulty selling the need for a separate lead frame for the four lead in addition to the eight lead. The alternative is to use the same lead frame for both and trim away the unwanted leads. But this means one set of leads is at one corner and the other set along the sides a little more than halfway.
It makes for an ugly package just barely on the verge of instability. You know which one they chose to produce. It saved $8500 in tooling cost, a mere pittance in the big picture.
I failed to convince the V.P.'s the right direction to go in. Shame on me. I must do some work on my selling ability. Bigger shame on them for not knowing which way to go in the first place. I believe this is what happens to the US auto industry.
I have frequented establishments with salaried employees of Generous Motors and with their rent-a-pencil counterparts and believe me, we have solved the problems of the world. I have met few dummies in either camp. So why doesn't all that talent filter along to the production line. You tell me. My fear is that it's myopic management unable to offer dividends today and innovative products tomorrow because they have whiteled the staff down to 'Russian Army' level. Whenever I'm in the company of V.P's, and P's too for that matter, I usually have the feeling they are hoping to hang on a few more years 'til retirement.
I am completely convinced that Americans can lead (pronounced leed) in whatever field they so desire, heck, I consider myself American, we are just becoming so 'today's bottom line' oriented that it is smothering our future ability.
Answer me this, if your children, born today, were to follow in your exact footsteps, would they be able to enjoy the exact same lifestyle you did when they reach your current age? I've been researching this in my spare time and guess what? It's not recent news the steel mills have closed because of piss poor management, lack of government subsidies and foreign dumping.
We can't win by competing, we win by leading. What are we leading in? Certainly not automobiles, we're not even competing. No, the US auto industry cannot survive if it steers the same course. There are hard times ahead for US autoworkers. That was your question wasn't it Bob?

Ah, the power of alcohol.
All the best, this is all in jest,
Martin

graph tells the whole story

http://finance.yahoo.com/q/bc?s=GM&t=3m&l=on&z=m&q=l&c=tm

Yea, been watching my money fly right out that window....... Now, in all fairness, the last time the stock was in this possition I told myself that if it hit $6-even I'd buy more... Didnt do it because it got to $6.30 and within a week it was back to $11... Still kicking myself on that one.. So, would you guys buy more now? I hate stocks................

You are asking us? Go look HERE FOR ADVICE

B_Skurka said:

You are asking us? Go look HERE FOR ADVICE

Click to expand...

If I owned the stock and sold it, it would be a good time for you to buy.

In one of the biggest government and labor relations faux pax [sic] betrayal to the American worker and the economic stability of a nation, I'd say the body bag is so full the zipper won't shut.

As is usual it seems, in this case too, we have trained the student only to be beaten down by our disciples. Can you say Nippon?