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Dallas--With a European phase-out of the current automotive refrigerant, HFC-134a, scheduled to begin in 2011, the global auto industry has yet to decide on its replacement.
Dr. Stephen Andersen, architect of the R-12 phase-out in the late ’80s and now director of Strategic Climate Projects at the U.S. Environmental Protection Agency, hosted a meeting at the Hilton Anatole, site of the 2009 convention of the Mobile Air Conditioning Society Worldwide (MACSW), to discuss the commercialization of HFO-1234yf, one of the two leading contenders to be used as the replacement for HFC-134a.
You are joking right? GM has been losing money right and left for quite some time now -- I doubt that with the losses GM has incurred that they paid much in corporate taxes. When they actually had profits years ago they put their alleged profit back into the company by buying other auto companies so they wouldn't have a profit to pay taxes on. I hate to say it but so many are always whining about how the evil corporations pay no taxes, yet now I'm hearing the exact opposite from that post. Then you have a company like Exxon/Mobile who actually did contribute to Uncle Sam TONS in taxes -- but they are bashed by the media. Go figure.
Every vehicle requires at least $1 - $2 Billion each for development costs. Each new plant requires another $Billion to build it and tool it. Developing a network of dealers over the entire continent requires years and years. Marketing, distribution and sales all require additional $Billions.
You are telling me there can be no upstarts because giants like GM and Chrysler stand in the way!! Let them go under and there suddenly would be room for the upstarts.
Its all part of economic evoultion. A company starts small with clever, innovative ideas, hard workers, dedicated investors, savvy management. They succeed because they offer a product people want and are willing to work to obtain. The company profits and grows. They often buy up other upstarts or smaller, older successful companies and increase market share and gain more technology from those companies. Stockholders of all the companies are happy.
This goes on for while but slowly things start to decline. The workers get fat and lazy and Unionize so they have underserved, unchallenged security. The second and third generation owners don't have the talent of the founders. They accumulate market share from buyouts instead of making products with new, clever, innovative contents. Quality and moral goes down within the company, profits decrease, they can no longer attract the best and brightest management and developers and stockholders/investors are angry and dump them. They unravel because they can no longer manage something of that magnitude and collapse under their own weight. Then the cycle starts again. Bailouts have no positive effect.
30 years ago Honda was making lawnmowers, and Hyudnai was unknown, and Cooper mini was uninvented. Look at them now. There is only 1 company left that was a component of the original DOW 30. The biggest "barrier to entry" is the old, unprofitable, incompetant, lazy corporations that the government props up. Yep, after GM goes Toyota will grow, but Toyota is already showing early signs of decay. Hopefully they will be clever and realize their own problems and spin-off some companies.
Letting evolution occur and progress the industry forward instead of wallowing in stangation for the sake of politcal contributions helps only politicians. Sometimes a short term loss is necessary for a long term gain. That is something previous generations did and which led to our prosperity. We can't capitaize of the fruits of their labor forever. Bailouts are counterproductive. When GM goes under their resources go on the auction block for some upstarts for pennies on the dollar. That would be a big boon for upstarts - not a barrier.
My reference to 'their' money concerned the auto industry as a whole. The auto industry wrote this legislation together, the losers and winners together.
No I never said anything about GM and Chrysler standing in the way of a new company coming into the industry. What I implied was that no company at all would even think of entering the auto industry at this time due to the barriers to entry; i.e. the high cost of joining the club. No company or investor in their right mind would put out $20 Billion in upfront costs to join this industry - before they sold the first vehicle. Tiny upstarts like Tesla might in a very limited way but you will never see a brand new full line company join the current club. It's far too expensive and risky with low margins to boot.
The rest of your paragraphs are true in general if time was of no concern. But your original post advocated killing off GM and Chrysler with the theory that the effects would be minimal. You paragraphs above now envision a timeline of multiple years if not decades.
Its all part of economic evoultion. A company starts small with clever, innovative ideas, hard workers, dedicated investors, savvy management. They succeed because they offer a product people want and are willing to work to obtain. The company profits and grows. They often buy up other upstarts or smaller, older successful companies and increase market share and gain more technology from those companies. Stockholders of all the companies are happy
In the meanwhile the economy in the midwest has cratered while your theoretical innovative upstart ( who is today sitting on the sidelines somewhere ?? :surprise: waiting to join the club ) slowly develops new products, new processes, new workers, new dealers, new sales people and most importantly the trust of the buying public. This may take 10-20 years if Hyundai, Honda or Toyota are models. And...even if that were possible and some company is waiting to enter today, it wouldn't be with a full lineup, neither Hyundai nor Honda offers a full line up yet...and that's 20- 40 years after their entry.
In the meanwhile the economy in the midwest has cratered. Your words sound good but then reality raises its ugly head in the form of massive shortages of certain products, massive unemployment for years and decades, massive infusions of governmental aid to these depressed areas, massive absorbtions of pensions by the PBGC due to the demise of the companies. All of which you and I pay for.
Your hatred of the B2 and the UAW might be well founded ( I certainly as a seller of Toyota's have no need of additional competition ) but as an American I contend that their immediate death and disappearance would be too great a blow to all of us. Barriers to entry will keep out any new company from replacing the B2 for at least 20+ years. That's assuming that any company even wants to try to join the club by investing $20 Billion upfront.
The now largest auto maker in the World VW, does not offer a full line of vehicles. I think Toyota is feeling the pressure of trying to offer a vehicle in every segment. They would probably love to shed the Tundra about now. I look for Tata and Mahindra both to enter the US auto market in the next year. Zenn may be the first viable EV on the market here in the USA. I think there is a lot of room for start-ups without spending $billions. If the Feds don't regulate them into oblivion to save their lobbyist benefactors.
Funny you'd mention that, because my mechanic said the same thing on Saturday! He didn't know when it was coming, but he said that evidently, they found out that while R134A won't eat the ozone like R12 did, it does other fun stuff to our environment, so now it's on the gov't hit list.
Everything has positives and negatives! You just have to decide what set you're willing to take, with a chemical. All you have to do is start llooking at medical studies on any sort of food, pesticide, additive, or packaging. There are positives and negatives to just about everything.
Look at almost any topic - ethanol, windpower, tidal-power, refrigerants, pesticides, hybrid batteries ... and you'll see that many times proponents will expound the virtues; but ignore the negatives.
So we as a society go around-and-around debating why we can't use chemicals and pesticides, but somehow not accept the negatives; and we should all be able to get clean electricity to run our electric cars, but we don't want to run transmission lines or kill a few migrating birds.
Anyway C4C has minimal impact - but the creation of new vehicles is bad for the environment, no matter if they get 40 mpg.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
This barrier has been operative for many years, not just now. For example, when Henry Kaiser, the highly successful industrialist, ship-builder and god knows what else, decided to build a new car in America in the late 1940s, he held a big press conference to announce the "many millions" he was pouring into his new Kaiser car.
From the back of the room, a financial analyst yelled: "Give that man one chip!" (i.e., in the poker game).
It would not be unreasonable to say that trying to break into the auto industry today is like trying to compete with NASA to go to Mars. Actually Mars might be easier :P
If I want to become a retailer, all I have to do is 1) rent out an old grocery store,2) buy some stuff from the unclaimed freight yard or seconds/end-of-run units from a manufacturer, 3) get them delivered to my old grocery store, and 4) hang out a sign and take out some ads.
The entry into the automotive/truck market takes tens of billions of dollars of up front expenditures to set up factories, line up suppliers/dealers, develop a product, etc (as others have pointed out).
The two are oceans apart in terms of difficulty.
In short, all you'll see is shrinkage in one form or another.
the D3 is "too big to let fail but too big to resuscitate".
Something's gotta give here.
It takes *some* money, but a small company can make it work.
Shoot, go back 15 years ago. KIA was the new player on the block. Suddenly they appeared and started selling cars. And the first few were pretty good. They eventually got bought out by Hyundai(which helped Hyundai's quality go way up - so a net good result overall), but it's not like small companies can't make it work.
As a previous person said "There are no problems, only excuses"
Well, as everyone here seems to be an expert, why can't we come up with the $20 billion to get started in the business?
Anyone who is not independently wealthy should thank Wal-Mart for helping them live better.
With Kia it's a little less clear. The Optima should certainly start moving--and good thing, since some dealers apparently still have '08 models unsold. But the Forte and Soul--two likely candidates to benefit from C4C--are in very short supply, as is the Rondo.
Ford benefits from having a full line of viable vehicles, including the excellent new Fusion, but its two best C4C candidates are the outdated Focus and Ranger, both of which suffer somewhat in comparison to their similarly-incentivized competitors from Hyundai and Nissan. Ford will be the beneficiary of a lot of folks downsizing to a Category 1 multipurpose vehicle, as their strong lineup of Flex, Edge, and Escape could attract a lot of folks who are willing to clunk an old Explorer, etc.
What we don't know yet is how many C4C customers will opt for compact/midsize sedans vs. how many will opt for smaller "trucks." If more go for the former, expect Hyundai to be the biggest winner; if the latter, it's Ford.
And, if we get into smaller firms, there are hundreds, like Lotus, Ariel, and Saleen. Last I checked, these small (privately owned) companies are having zero problems selling every vehicle that they can.
But none of these manufacturers can claim even 1% of the U.S. market, nor are they really trying to.
There are none, apart maybe from the economic implications of letting D3 fail. And even on this, i disagree with Mr_Shiftright.
There is not a lot, if anything, that translates from the automotive world to the defense arena. I mean, it's not like you're going to tool up an aging D3 factory and it's workforce (to use the term loosely) to build an F-35.
Sure they still exist but they have never made any money and even with their early success in the US I doubt they will make money anytime soon.
Remember that--the next time the White House needs transportation. No more Presidential Limo (unless it's a Hyundai Genesis). No more black Suburbans for the Secret Service--all replaced by Sequoias or Armadas or Borregos, until trade relations with Japan or South Korea deteriorate and we can't get spare parts for them. Then we depend on India or China.
In these times, national security doesn't mean just protecting ourselves against other nations' armies. Maintaining strong domestic manufacturing (and not just automobile manufacturing, but many other items as well) is a national security matter, whether we want to think of it that way or not.
White House transportation and Suburbans for the tag-along SS team are a national security matter??? I think not :P :P
Mahindra and Tata and Zenn and Tesla are only niche players at best. Yes each of these might bring one or two vehicles to market but expecting any of these to replace the full lineups of Chrysler or GM is unrealistic.
However each of these vehicles still requires at least $1-$2 Billion in investments before the first vehicle is sold. Then each of these has to develop a nationwide dealership network and then do the marketing and sales functions.
Then they can begin selling ones and twos to a few 'hand-raisers'. Ditto Chery and the other Chinese makers. Are many Americans going to trust these newbies with the safety of their families at 80 mph on our Interstate System? Right off the bat? Never happen. Maybe in 10-15 years like Hyundai.
As for Saleen, Inc, they are now defunct as a corporation. Lotus sells very few cars in America. They only have maybe....oh...40-50 dealers nationwide. so figure a couple thousand cars a year in the US.
These are all bit players in a very big game.
CHINA -- if Chinese cars are anything like the quality of Chinese auto parts we are seeing, you don't want to drive one.
None of these new comers needed to spend $5-$20 Billion before selling their products on the shelves. If they did then they wouldn't have started.
On top of that you're talking about two different situations. Try to stay focused.
In your original post you advocated letting GM and Chrysler disappear and suddenly some nebulous group would step right in and fill the void left by the B2. Well that simply can't happen...barriers to entry.
Now you use the example of WalMart, KMart, Target coming in and replacing existing retailers with more efficient and lower priced models. This is the same as the steel industry in the 80s and 90s ( I was there ). The key difference is that Sears and Penny and Woolworth didn't all disappear on the same day or month. They were phased out by more efficient sellers.
Again ...barriers to entry. Sam Walton did not have to spend $5 to $20 Billion upfront. He began slowly and then took over.
And speaking of Hyundai, when they first came to the US market for 1986, it's not like they were an amateur upstart coming literally from nowhere. They dated back to 1947, and were (maybe still are?) Korea's largest conglomerate. They'd been building cars since the 1960's, and throughout the years, got a lot of their designs from Euro Fords, British Leyland, and Mitsubishi. So it's not like a bunch of guys decided to quit their desk jobs and start up a car company...it took Hyundai decades to get to where they are today!
Order of magnitude. Our Toyota, Honda, Acura, Chevy and Hyundai stores are all No 1 in their respective districts. Our C4C take-ins are 5-10 times larger than those at our Hyundai store and 20 times those at the Acura store.
It costs about $1 Billion to build a new plant.
Multiply by 6-10 completely new products from small cars to crossovers to trucks.
It costs hundreds of millions of dollars to do the marketing and sales for 6-10 completely new products throughout N America.
It costs hundreds of millions of dollars to do the training and set up for 1000+ dealers all over America.
$20 Billion in upfront costs is very very realistic.
Then they can begin to build vehicle No 1 and begin to build the trust of the buying public. To recover their upfront investments everyone of the 10 new products must begin to sell at least 100,000 units annually. NO WAY.
No, that's why I posted what I did - the numbers are already tabulated. They were announced on NPR's Marketplace yesterday afternoon. Toyota #1 globally in sales for Jan-June 2009, 3.56 million in volume. GM just behind, in the #2 position.
I would expect Toyota to benefit from C4C much more than GM, based on the initial trend, and much more than VW as it has such a small presence in the U.S.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
Here's the catch, though: fixing it will be even more difficult now that some of the transactions have been approved and others denied. IF EPA's revisions had taken place before the C4C law was signed, nobody would've worried about it. But there are real dollars at stake for perhaps thousands of transactions, and the results could sink some dealerships.
Lotus makes roughly 4000 Elise per year, so there are almost 30,000 of them now on the road worldwide. They might be small, but their costs are tiny. And, yes, you or I could go out and buy one today if we really wanted to. So it qualifies.
Saleen is gone, but during its 25 year run, it made about 10,000 total vehicles. Saleen never had a billion dollars to start doing what they did.
Mahindra, otoh, IS another Honda or Hyundai. They are massive in India and are doing serious damage to the domestic brands in farming(they've been selling tractors in the U.S. for a 15 years!). So like Honda, which was making bikes and lawnmowers and such(few cars in Japan as well) decided to enter the U.S. market, Mahindra is as well.
http://en.wikipedia.org/wiki/Mahindra_Tractors
Note the 85,000 tractors a year and even a NASCAR sponsorship.
http://en.wikipedia.org/wiki/Mahindra_Group
62.5 billion in revenue, ~300,000 employees worldwide. Founded in 1945.
They are going to storm into the U.S. market and crush a lot of the bigger older brands. They pride themselves on easy to fix and maintain designs as well as overbuilt rather than over-engineered. Combined with their targeting the small SUV and truck markets in the U.S, which have all but evaporated, it's easy to see how they are going to do well.
http://en.wikipedia.org/wiki/Tata_Group
Tata is the #1 company in India(Mahindra is #2!)
72.5 billion in revenue, 350,000 employees. Founded in 1868(!)
Just to give everyone an idea how much of a 5000lb gorilla Mahindra is...
**from wikipedia**
Mahindra & Mahindra grew from being a maker of army vehicles to a major automobile and tractor manufacturer. It has acquired plants in China[7] and the United Kingdom[8], and has three assembly plants in the USA. M&M has partnerships with international companies like Renault SA, France[9] and International Truck and Engine Corporation, USA.
*****
Note the three and soon to be four plants in the U.S. already. They're in a prime situation to take over a few closed plants from Chrysler and/or GM.
But, no, you never need a billion in startup money. Just a better idea and product. And, given the hideously bland crap that Toyota and Honda and GM and Ford are churning out, it's not as hard as it seems.
http://www.mahindrana.com/indian-cars-and-trucks.html
30mpg, TDI engine. If the cash-for-clunkers program gets an extension, a LOT of these are going to get sold.
Just developing your own engine today would be require a massive amount of venture capital in 2009.
I'd imagine the same deal today would require 400 million bucks, just for a majority share in a car company that only produces a few thousand cars a year.
Sure Mickey Mouse Motors won't cost you billions, but you'll never matter in the grand scheme of things, either. And you'll be running other people's engines and drivelines, and you'll have to charge a fortune for each car---which will probably make you go out of business.
$125K for a Tesla? $12,000 for a tiny electric car that can't go over 35 mph? A $50,000 Lotus sports car with a Toyota engine?
Well, okay......if that's what you want to come out of the ashes of the D3....
I agree, why have the Secret Service at all???
In any case, providing a handful of vehicles that are essentially stripped down to the frame and built back up again is a poor excuse to maintain an industry and claim it's for national security purposes.
If some wealthy company was moved to put a few of our out of work people back to work, factory space will be selling at pennies on the dollar when GM and C breath their last. All the bailouts will do is keep a few working a little longer. Has any of the Chrysler factories went back into production. I know only a few GM ones have. Where are the promised jobs the Billions in bailouts promised?