Isn't that a flat-out admission that their $50-60k a year income is unjustifiable in the real market place? If nobody else would take them for that high of an income. Hopefully they knew it was on borrowed time and saved while pulling that kind of income. I would.
What is the real market place for labor rates ? Compared to China ? India ? Indonesia ? Since we are all proud and global, you have to calculate those wages into your final wage adjustment. A market place wage decision you rich guys determine because of your college education ? I'm so sick and tired of college educated folks telling everyone what's good for everyone else because of "The Market"
Why don't you CEO's and upper mangement get a reality check and work for $100,000 or less for once. There are tens of millions of college educated people in this country and it's not a rare piece of paper like it was 20 or 30 years ago. Many work for under a $100,000 in the "market place" About every young person has a degree today seriously. Why aren't they all getting million dollar paydays. What makes Rick Wagoner more special then Joe Schmoe. Oh I forgot they went to Yale and you didn't. Well we've seen what a Yale education has done for our wonderful leader. :surprise:
$850/mo is actually more than all my personal expenses combined, including food, clothing and non-business transportation. Not even my housing expense is much higher than that. Like I said, the union has been living in cacoon for too long; $650/mo for comprehensive healthcare for a family of 4 is incredibly good deal . . . try buying medical and dental insurances on your own for once; a plan like theirs would cost me around $1500/mo if not more.
A major difference. They Delphi are a multi-billion dollar corporation just like GM and are buying the biggest policies and thus should be paying significantly less for health insurance than you as a individual.
BTW- this is one area the president promised to address and nothing has been done. He's gotta go. Both him and the VP monster. The working class people like the UAW members, american manufactoring, etc. can't take 3 more years of collapse. Somethings going to give and it's not going to be pretty. We are going to destroy small community's all across america. :sick:
So many errors and misstatements in one post, it's hard to know where to start:
The union liability essentially creates a huge burden both in borrowing cost and company manageability.
Nonsense. The union has been in place for decades, yet GM had no problem whatsoever in creating undesirable products and bankrolling several failed M&A deals. The losses are largely the result of falling sales and declining margins, as fleets comprise a significant proportion of its sales, and large incentives and rebates are used routinely to dump product into the retail market.
Had GM wisely invested in its own nameplates to support higher margins generated by non-fleet sales, GM would be generating billions more in revenue each year. They should have hired some of Toyota's managers to show them the way.
The first setence needs to be qualified with "if they can sell at a price point that people want." That's where the labor cost problem comes in.
You seem to miss the point that GM underprices its competition. It not only doesn't sell cars at higher prices than does Toyota, Honda, etc., it sells them for substantially lower margins, thanks in large part to its dependency on low margin fleet sales, which is well documented in this thread. Your alleged "fact" is precisely the opposite of what the data tell us to be true.
In fact, the growth rate of Caddy sales rival those of BMW and Lexus, the top growing brands in that segment
That is not a fact at all. Cadillac US sales increased by fewer than 800 units during 2005, a gain of 3/10ths of one percent. In contrast, BMW sales increased by more than 6,100 units (+2.3%), while Lexus sales increased by almost 15,000 units (+5.2%). So once again, your "facts" are completely inaccurate.
Saab is also making remarkable progress in sales growth.
US SAAB sales during CY 2005 were 20% below 2003 levels, and a whopping 184 units above 2004's. How does one interpret a 20% decline as an improvement?
Whether I'm right or wrong I atleast feel very passionate about this subject. Our lower and middle management support our union secretly since it affects what kind of benefits, retirement plans they will get. I wished I had the choice to buy 100% American content vehicles that were union made by good people of all stripes in this country. I grew up in a "buy american" household and thus care about working people alot. The CEO's it seems regardless of how they perform will still be rich. If a worker doesn't have the best engineered product, machinery, tools, he can't make the best product. GM has a few very nice products and and quite of few bad ones that don't compete with the best cars in the market place. The bad decisions over the years by upper management hurts the present. If GM in the 70' and 80's would of continued to improve there products, machinery, engineering, and invest in R&D we might not be having this discussion. It's one thing to have a few bad sellers in the lower segments, but brands like Buick, Cadillac, Pontiac, Saab should be dominate area's of buisness for GM since their is more margin room. I think many of you would agree that if GM used the best possible materials, fit and finish, Quality, Accountable dealership networks with service, warranty's, Gadgetology, Free Maintence, most americans would spend the extra dough for there products, because the resale values would be so high. The residuals improve leases, traditional finacing, which makes the cars more attractive since they don't lose 25% when you drive it off the lot like many do now. The employee pricing and other such gimmicks don't help matters. I also agree with you socala4, that fleet sales and the low grades of those cars gives GM a bad reputation. They say they are going to reduce fleets. I'm not sure what the ultimate fix is for GM to beable to sell small low margin cars to get that trickel "up" theory of going from Cobalts to SUV's or minivans where the margins are higher. I do believe you are correct saying this is how Honda and Toyota get repeat buyers over the years. Going from a Civic to a Accord, to Pilot, etc, seems to be what is working for Honda.
Will GM beable to turn it around before they run out of cash ???? I'm not sure if it's not to late. Ford appears to be worst off and many FORD fans feel the new Zephyer "MKZ" will be a sales flop for 2006-2007. The new Navigator without the "hurricane" engine might flop to.
Diamler Chrysler, isn't making huge profits, but they are making profits. I'm amazed they are getting away with selling nice exterior cars with faux looking wood and "plasticky" interiors. :confuse:
I like I've said in the past and I will say it again, If our government allows GM to go belly up we "buy american" fans might be left with only Honda, Acura, Toyota, Lexus, Scion, cars that are made here in the U.S. If GM goes down I honestly think Ford will follow. I'm curious to see how long Chrysler will be around and will beable to stay afloat with their current line up which doesn't impress me very much. Nissan and it's designers made some quotes about GM, but I feel if it wasn't for the strong Infiniti brand cars the Nissan brand would get alot more attention I'm not overly impressed with Nissan's fit and finish and feel they should quiet up. I closed the door the other day on another Armada and it sounded very hallow. Well it was a "plasticky" vibration sound, instead of a premium thunk. :surprise:
2007, will be even more interesting for General Motors and feel this next fall will be the year that determines GM fate of BK or survival. The CTS, GMT 900 truck line-up, G4, and perhaps a next springtime (January) G8 might get realeased. We also have the Encave, Greenline, Aura, and maybe a LaCrosse Super being major players. I'm very interested and scared of the future for what was once the largest company on the face of the earth. I guess I can only pray for the survival of them. I hope the Chinese branded cars are immediant sales flops and no-one wants them. I however do believe that could be very much wishful thinking. :sick:
This week's McKinsey's quarterly has an interview with Ratan Tata, the CEO of Tata Group (a very large diversified group in India, currently the biggest domestic auto manufacturer), in which Tata claims that they are planning to come up with a USD 2,200 car in the next three years - Here is a clip from the interview :
The Quarterly: How do you make such an undertaking profitable?
Ratan Tata: Today we're producing a $7,000 car, the Indica. Here we're talking about a $2,200 car, which will be smaller and will be produced in larger volumes, with all the high-volume parts manufactured in one plant. We're also looking at more use of plastics on the body and at a very low-cost assembly operation, with some use of modern-day adhesives instead of welding. But the car is in every way a car, with an engine, a suspension, and a steering system designed for its size. We will meet all the emissions requirements. We now have some issues concerning safety, mainly because of the car's modest size, but we will resolve them before the car reaches the market, in about three years' time.
The volume market in India and China is going to be tough for GM and other high cost manufacturers....
I think there may be a short strike, but the unions have to know that if they stage a prolonged strike, it will bring down the entire domestic auto industry.
Yeah and why should they care if they are in the soup line ? Delphi management wants them to go from $26-27 bucks an hour to $16 bucks an hour. That a $10-11 dollar an hour pay cut for the senior workers. They also haven't decided on healthcare benefits which have ranged has high as $650 dollars a month for a family of 4 in some possible proposals. The pension benefits would be frozen, and a 401K plan would be the only source for retirement. Kinda hard to ask a 50-60 yr. old to start saving up for his Golden Years when they are almost here. :confuse:
$16 per hour is hardly soup line, it works out to $33,280, which is above the poverty line for a family of 7 - and that's with that job as the only source of income, and with no overtime. And, the "skilled workers" would still be making $24 per hour, almost $50k per year. If the union goes on strike, they could lose everything. It would be very easy for Delphi to move all of its production overseas, or into "right to work" states.
I also believe that Delphi doesn't really expect the massive wage and benefit cuts they have put forward.
Well it's went from $9.00 an hour, then to $12 bucks an hours, and now is at $16 bucks an hour. Wages aren't the only huge issue. Healthcare and getting a retirement is as important as wage issues. Non-union Toyota pays $21 bucks an hour in the cheap cost of living of the South.
Yes, Delphi has moved considerably on their position. I've yet to see the union offer anything substantial. Does anyone really think the current labor contract is feasable? The final agreement, whenever it is reached, will be much closer to current wages, but the benefits will have to be cut for Delphi to become competitive again. It really sucks that some people are going to have to make do with less, but the current pay and benefit levels just aren't practical anymore.
I suppose the EX-Delphi workers will have to settle for a greeters job at Walmart since they have lost there youth. No up and coming company is going to hire a 25 yr. veteran of Delphi because of all the wear and tear. These are not just doom and gloom idea's, but are common facts backed by statitics.
Statistics? Like how our economy completely collapsed in the 80s and 90s when large numbers of auto-workers were laid off? In 1979, the UAW represented 1.5 million employees, now it's around 600,000.
Why hire a 55 yr. old, when 25 yr. old Johnny will give me longevity.
Because that 25 yr. old is going to be constantly looking for a better job, while the 55 yr. old is more likely to not jump ship for a slightly better job.
The "Ice Man" Miller honestly doesn't care. Former Multi-Millionaire and CEO J.T. Battenburg who resigned over the cooking the books scandel got out alive. Alan Dawes-CFO- walked away with no lawsuit who was in charge of cooking the books.
I completely agree with you here. When a company goes bankrupt and has to take away things that it promised to its employees, it should have to for its executives as well. Those involved in cooking the books should be thrown in jail along with those who mismanage and underfund pensions. Any money they made under the company should be seized and put back into the company to help it pay off its obligations. But all of that doesn't change the fact that Delphi needs major restructuring of its labor costs.
imidazol97: I just don't see the problem with cars being put into fleets.
It's not a problem if a relatively small percentage of the production run is being sold to fleets. But when anywhere from 30-50 percent of the entire run goes to fleet customers, it negatively impacts image and, more importantly, resale value.
When the rental car companies unload one- and two-year-old Malibus, Impalas and LaCrosses at the used car auctions, it drives down the prices for those models, which means someone who bought a new one at the dealer will get hammered at trade-in time.
You may not notice because you buy used vehicles. (That's another problem with GM vehicles - they are better values as USED cars than as new ones. Which is why every GM fan on this site except lemko buys used GM cars. In the long run, this practice doesn't help GM all that much more than someone who buys a brand-new Camry).
But people who buy new vehicles DO notice and take that into account when making a purchasing decision.
imidazol97: Our police department uses Chevies and they make a good impression on the criminals who get to ride in them.
Perhaps that sentence was posted in jest on April Fool's Day? I seriously doubt that most criminals are in the market for new cars - the lack of money is one reason they are criminals in the first place - and good word-of-mouth at the county jail isn't going to lead to too many sales, given that the criminal's audience isn't free to visit the local Chevy dealer and check out the new Impalas.
>Perhaps that sentence was posted in jest on April Fool's Day?
You're really sharp today!
As for the other, when purchasing the GM car that is sold into fleets that will be showing up on the retail market in 1 or 2 years, that would be a factor in price I am willing to pay. I buy and keep for 10 years, so I'm not much interested in used value to 2 years.
OTOH why would people pay extra for the right to purchase a Camry, pay more for maintenance because of dealer addons and manipulation of their service needed list, and be happy that they trade in 4 years or 3 or 2 and get a little of what they're overpaying back?
It's also important to note where the fleet cars are going as well. Cars going into corporate fleets are more likely to be upper trim levels, leaving a favorable impression on their users. Rental cars, however are more often than not base models which will compare extremely poorly with the mid to upper trim levels most people drive. Because of that people get opinions like this of domestic cars. In that comparison, edmunds compared a base cobalt with mid to upper trim versions of everything else, and savaged the cobalt for not having power windows, having cheap materials, and not having cruise control - all of which are present or improved on mid to upper trim levels. People get impressions like that every time they drive a base model rental car.
You want to be a CEO? It's actually very simple. Just go down to the town hall, and pay $25 to register for a new business . . . ergo, you are a CEO!
Some reality check here: most CEO's and upper management do not have have multi-million dollar salaries. In fact, hardly anyone at GM does. Assuming every CEO and upper management makes as much as the star business tycoons is like saying all garage bands are worth hundreds of millions of dollars like Madonna or every little league baseball player has a $50 million contract like baseball stars. There are certainly 10,000 or more little leaguers for every baseball star.
The cut-off line for the top 10% income tax filer is only $145k . . . that means $72k each for a married couple (and the last grand from the kid's summer job)! There aren't that many people raking in millions despite what you see on TV.
Why does Rick Wagoner deserve his pay more than Joe Schmoe? Certainly not due to going to Yale alone; I had Yale graduate working for me, and I paid her only $20/hr . . . and eventually had to let her go because she was not as good as someone else and I could only afford to keep one of them; there are many Yale graduates making $35k a year or less. Wagoner had shown excellence at his previous positions of responsibility. That's what counts in the real world.
If you really are jealous and have something against college degree holders, there's a piece of good news for you: according to the latest FED study, the income gap between college grads and high school grads have narrowed between 2001 to 2004 (the last 3-yr study cycle) because it has become easier to outsource desk jobs. That is precicsely how the market place works: a piece of paper counts for nothing unless your skill set genuinely creates value. In fact, if you don't like paper qualifications (degrees), you should love the free market place. I for one would rather my daughter grow up to be a plumber or pizza shop operator than going through college with a $100k student debt and no job prospect because of some useless liberal arts degree or even engineering degree that can be easily replaced with someone at the other end of a fiberoptic connection.
I don't see how you can get all upset posing as some kind of outsider . . . you are the ultimate insider, working for the biggest monopoly there is on taxpayer dough, with all benefits, healthcare, and even kids' education taken care of or subsidized. If you pay only $300 for health coverage that is just as comprehensive as one that I would have to pay $1500 for, you are in effect getting a $1200 cash value without having to pay tax on it! There is nothing to prevent you from putting in a few years of hard work at next to no pay to develop a business in your after-hours and take your chances if you are so jealous of others who made it. Frankly, if I were really unscrupulous and have no social conscience, I would rather have a $100k government job (or even a $50k one) with job security than my own business . . . however, as we know, someone in the society has to get some real work done instead of paper pushing.
BTW, if every government bureacrat has a disdain towards free market like you do, we don't need no stinking conquest by the Chinese because you have already full-heartedly embraced the eastern tradition of absolute equalism under the guidance of a paternalistic government that decides what is fair, with a fool-hardy hatred towards commerce and all "profiteers." Very understandable, because free market transactions between willing participants get in the way of co-ersive wealth transfers that is the specialty of imperial bureaucrats. What is the free market? Every time you shop around for your car, that's free market; every time you mail order or buy on the internet, that's free market; every time you buy milk away from your nearest convenience store, that's free market. Why shouldn't employers be allowed to get the best value for their money just like you want for your car money, xmas gift money and grocery money?
Nonsense. The union has been in place for decades, yet GM had no problem whatsoever in creating undesirable products and bankrolling several failed M&A deals.
Still not seeing the connection between the two? I wonder why all union shops, from US Steel, to Pan AM, to Eastern, to United, all have a tendency to churn out products and services that are undesirable and enter into desperate M&A deals that often do not work out . . . co-incidence? Do unions have a tendency to attract especially incompetent management? Is that your answer to this phenomenom? Having an aggressive union on your back in a competitive environment is like having a proverbial boulder on your back for a hill climbing race . . . so you have to zig-zag to make any progress at all, yet you get blamed for not taking the straight path up for losing the race . . . a no win situation.
Had GM wisely invested in its own nameplates to support higher margins generated by non-fleet sales, GM would be generating billions more in revenue each year.
Exactly how would that be accomplished if GM has to churn out more cars than can be sold without discount just to keep the union members working?
You seem to miss the point that GM underprices its competition.
You are comparing apples to oranges. Due to the low content and perceived value that domestic brands have, they need to price at much lower than the import competition. You can't exactly comapre a Malibu to a Camry and call that underpricing; apples to oranges. It's been proven again and again, that whenever price is lowered (as in a big discount), GM cars sell quite well despite all their faults. Everything has a market clearing price point; as a business, it's a matter of finding out where it is and whether it's worthwhile continue making it . . . in the case of GM, the last decision is taken out of the management hands thanks to union contracts.
It not only doesn't sell cars at higher prices than does Toyota, Honda, etc., it sells them for substantially lower margins, thanks in large part to its dependency on low margin fleet sales, which is well documented in this thread.
Once again, thanks to union conract that stipulates full pay even if production is paused.
BTW, it's dishonest for you to look at 2005 numbers alone. Caddy unit sales were up dramaticly in 2003 and 2004; 2005 unit sales was still an increase, and the average price was up much more significantly because the new Caddy models in 2005 are larger cars and SUVs. In comparison, the industry was down for 2005, and the larger BMW and Lexus unit sales increases is partly due to their new entry-level models, the 3 and IS. When CTS was new, it was a huge sales blow-out for Caddy. Once again, you are comparing apples to oranges.
Saab had a major product transitions late in 2005, and still posted a gain in unit sales despite the down turn in the industry. 2003 introduced a much waited new model, which was introduced early in the year. Yet again, you are comparing apples to oranges. Still Saab is posting record unit sales month after month so far this year.
I agree. In addition, it's my opinion that a certain percentage of folks who don't buy GM and Ford products do so because of the inherent welfare state mentality of the companies and the UAW. A portion of the car buying public doesn't earn nearly what an average UAW worker earns, pays tremendously more for healthcare, and has effectively no retirement pension, with the possible exception of a 401(k). So, why do they want to support those companies. Rather, they purchase vehicles based upon value for the dollar wherever they may be made, because they have to! The gravy train is coming to an end for the UAW, and it's about time.
GM resale is low for a very simple reason: fleet sales. GM has to engage in massive fleet sales because . . . UNION CONTRACTS.
Suppose a Malibu costs $12k to make, $6k for material and $6k for labor. When the market is saturated, what's GM to do? Stopping production like any normal business? No, stopping would cost GM $6k for every car not made! Thanks to the union contract stipulating full pay during produciton stoppage. Going ahead making the car and selling it at a loss for $10k would only lose $2k, or $4k better off than not making it! The result? A glut of Malibus. How to get rid of the glut of cars? There is one more thing the management could to minimize loss. Bringing them all to the retail market would immediately depress new Malibu prices. So the company bought out Avis, and made sure that Avis hence forth would mostly stock its rental fleet with unsold Malibus. At least it's not as big an impact on new Malibu prices as a full dealer lot backing up would . . . but it still has an adverse influence through the residuals, probably to the tune of $1k or so with backward propagation (50% in three years depreciation schedule; i.e. a car that clears on the market for $10k becoming worth about $5k three years later) . . . and it's the dealers' job to convince consumers that they should ignore the low 42% residual (5/12), and leasing a $12k MSRP car at $11k with $5k residual is the same or better deal than leasing a competitor's car at $12k with a $6k residual.
There, through some M&A, the management cut the $6k dead loss imposed by the labor union demand to a net $1k loss. The trade off? 42% residual instead of the normal 50%. Of course, few of us give credit to the management for saving $5k. With internet, backseat driving has never been easier ;-)
You brought up 2005 numbers alone, claiming that Caddillac's unit sales only went up slightly, without reconizing that during the same year the industry as a whole was down and the domestics were down huge . . . There are lies, damned lies and statistics.
For a comparison between Caddy and Lincoln, see this article:
Let's not forget, the 24+% increase over 5 years (235,0002 vehicles in 2005 vs. 189,154 in 2000) covered 9-11 and a recession. The annualized 4-5% increase over five years is well among the top performers in that segment.
This broken record union schtick of yours does not excuse or justify billions of dollars squandered by GM management on poorly constructed deals. Nor does any of it address the fundamental difference between management teams such as GM's and Toyota
It's amazing you still can not grasp the enormous difficulties imposed by the labor union even after I repeatedly pointed that out for you. Throwing around terms like "broken record" is not statistical data, nor is it source, nor any backing . . . it's merely insistence on willful ignorance. It's not even a rebuttal. GM and Toyota face entirely different set of parameters; what worked for Toyota may well prove catastrophic for GM . . . if the strike takes place as it seems likely, you will see exactly how the Toyota Just-In-Time production method that GM learned in the past decade and half can lead to catastrophe in a union shop. Oh, wait, it already did, back in 1998, to the tune of $4 billion due to union work stoppage.
The fleet sales . . .
Try dig a hole in the illustrative numbers in my previous post. What would you do when given the same set of numbers? Stop production and lose $6k for every car not made?
If you want vision or leadership in the automotive industry, you're not often going to find it in the state of Michigan.
It's amazing you can't see the folly in your argument. Is there something in the water of Michigan? Are Michigans born stupid? Does the automotive industry advertise for dummies in their recruitment? What makes automotive industry in Michigan different from most everything else? What makes automotive industry in Michigan have in common with US Steel, Pan AM, Eastern and United? The Union!
BTW, the throughput/fixed cost amortization model is exactly what Toyota and Honda follow. Why else do they offer very limited number of platform and engage in so much platform sharing (euphemism for badge engineering invented by Alfred Sloan at GM)? Why else do they have high automation rate? Toyota's success has a lot to do with amortization efficiency thanks to its dominance of Japanese domestic market. Sometimes I have to wonder if many of the cures suggested for GM are worse than the disease . . . your previous focus on small car schtick certain was. Automaking is fundamentally a very boring economy of scale and cost-cutting game. Only the niche players can afford to hand-assemble unreliable cars and sell them for high price because they don't have to sell many cars.
The difference between GM and Toyota/Honda is primarily the caliber of their workers and more importantly the rules of employment/management that they work under. Many Toyota/Honda US managers are ex-Detroiters anyway. Your aspersions about the State of Michigan is quite unfounded.
Your broken record of blaming everyone except for the union is quite tiring (tongue in cheek ;-)
As a history buff you need to read a little more of your US history. Ben Franklin's inventions were secondary to his diplomatic accomplishments. If he had not been in France convincing the French to give us arms and support during the Revolutionary war, we would still be under British rule. I think without a doubt Franklin was the most important man in establishing the United States of America.
Seriously, enough with your bogus allusions to fact. I gave you hard data to prove my points, whereas all you offer are "dramatically" and "significantly" as responses, as if that means anything.
Going forward, I'm going to expect you to provide me with some statistical data with some sources to back it up (I tend to favor company annual reports, Automotive News and Ward's Automotive myself), because despite the length of your posts, they are lacking any facts for anyone to chew on.
This broken record union schtick of yours does not excuse or justify billions of dollars squandered by GM management on poorly constructed deals. Nor does any of it address the fundamental difference between management teams such as GM's and Toyota: GM tries (and fails) to run the company via the balance sheet, while Toyota succeeds with its emphasis on brand development and TQM-based production methods.
The fleet sales have long been driven by a desire to amortize fixed costs across higher volumes, an accounting gimmick that pleases the number crunchers, but it is harmful to product quality. GM used to own National, and Ford until recently owned Hertz, so they saw rental sales as an integral part of their business strategy.
This throughput/fixed cost amortization mentality has been entrenched within the Big 2.5 automakers for decades, and is only now in the spotlight only because Wall Street finally realizes how poor a strategy this has been, not because Big 2.5 managers have understood it to be a problem. If you want vision or leadership in the automotive industry, you're not often going to find it in the state of Michigan.
I wonder why all union shops, from US Steel, to Pan AM, to Eastern, to United, all have a tendency to churn out products and services that are undesirable and enter into desperate M&A deals that often do not work out . . . co-incidence? Do unions have a tendency to attract especially incompetent management?
The reality is that both your and socal's positions have some validity.
Clearly the cost and inflexibility of the union situation is a big boat anchor on GM and others. The jobs banks, high salaries and benefits, and work rules hinder auto manufactuer's ability to be agile and competitive.
Yet this doesn't excuse management incompentency. During the boom years of the late 90's, GM was making high profits and high margins on SUVs, in spite of the union handicap. What did management choose to do with their windfall?
They decided to buy, buy, buy. Acquisitions, poorly thought out, broadened an already vast portfolio of divisions and brands. "Quantity over quality" seemed to be the strategy. This was a furter propagation of a poor strategy that was alreay apparent in declining market share and customer loyalty. Furthermore, the ability to differentiate any true theme between the brands had pretty much been lost. Pontiac, Buick, Chevy, Saturn, GM - the clarity of purpose for these brands had long ago faded. Now let's add Saab, and rebadge SUV's there, too.
Another approach would have been to look at the future. As a GM strategist, you could have said to yourself:
1. This great economy won't last forever, what should we do to prepare? 2. Gas won't stay cheap forever, what should we do to prepare? 3. It looks like the Japanese nameplates are making higher reliability and interior quality an emphasis in their cars, what can we do to become more competitive?
So in the 90's, Toyota and Honda invested in hybrid technology. They worked to add variable valve timing across their entire line. They developed very low emission engines. They improved fuel economy. They added more and more quality to their interiors.
What did GM do, other than poor buyouts of other auto manufacturers?
Senior management has a fiduciary duty to ensure the health and survival of the corporation. They fell short of their responsibility. Heck, a lot of people could see the direction of GM for decades. Yet how astonishing it is how little was done to truly prepare GM for the future.
So now we get to watch the consequences play out. It's pretty late in the game.
Although unions are making it tough for GM, it's disingenuous to pretend that GM's management made smart decisions, and it's all the union's fault.
Thank you for trying to find a middle ground . . . I agree with you that GM management could have done better . . . however, that would be with hind-sight and/or expectations of wisdom far beyond what is realistic.
In real life, there's seldomly good or bad in the absolute sense . . . usually better or worse, compared to peer groups and alternatives. From what I've been hearing on this forum, the GM management could have done far worse.
GM's acquisition in the late 90's was actually very modest compared to its peers. The excercise of call option on Saab in the late 90's was a no-brainer as the strike price was so much lower than existing market metrics. For comparison to its peer group: VW spent billions on Seat, Skoda and Bentley (and a complete waste of money on RollsRoyce), BMW spent billions on Rover, Ford tens of billions on Jag, Volvo and Land Rover.
The three challenges that you listed that GM faced in the late 90's were very succinct, let's see what were GM's answers to the challenges:
1. This great economy won't last forever, what should we do to prepare?
Selling off non-core assets (such as the billions proceeds from Flextronics and Hughs Electronics sales) while the market was near the top, and carefully husband the cash for the coming rainy day. That's where GM's wad of cash came from. Money from selling cars was always a pittance that hardly ever squared off the union liabilities from making them. GMAC Financing was what really generated cash on operating basis, besides those one-time accretive spin-offs.
2. Gas won't stay cheap forever, what should we do to prepare?
Knowing that it's never going to make money from producing cheap small cars uner conventional domestic union labor structure due to part count not scaling with vehicle price, and even non-conventional union arrangement would fail due to union demand on new model development priorities (e.g. the starvation of Saturn), GM took a two-pronged approach to the small car problem:
(1) Find cheap source of production overseas. GM management were real tight-wads on their purchase of Daewoo. They practically picked up the failed plant for next to nothing. That strategy also led to China, which turned out to be a big money maker for GM even before small cheap cars are shipped from China.
(2) Find design and engineering expertise, also as inexpensively as possible. Remember, so many here demand not only small cheap cars, but small cheap cars with flair?! That led to Fiat, the owner of Alpha and Ferrari as well as strong historical ties to Italdesign. That's where GM got nicked badly by Fiat book cooking. Luckily the management negotiated an out option ahead of time. Compared to how much BMW lost on Rover and Ford lost on Jag, both are much small operations, GM management did not come out especially incompetent. Could have done better? Of course, with hind-sight 20/20. However, keep in mind, GM was sitting on a lot of cash, and everyone was clamoring for design expertise on small cars. The Fiat venture, if not for Fiat book cooking, could have been the best deal yet; GM's negotiated price for such a large company was really cheap, before the book cooking was discovered.
3. It looks like the Japanese nameplates are making higher reliability and interior quality an emphasis in their cars, what can we do to become more competitive?
Toyota and Honda were actually de-contenting in the late 90's. Camry only got re-contented with this year's new generation after several generations of thinner and thinner carpets, hardar and harder plastic, largely due to the need to move Toyota brand upmarket in the face of Korean competition. High Reliability, yes that is a Toyota/Honda forte. GM management certainly tried. An attempt at raising production quality and efficiency following Toyota example by the management actually led to a union work stoppage that cost GM $4 billion in a matter of a few weeks! Not even the cash raised from Hughs and Flextronics sales could stand that kind of rapid drain. So GM management had to back down.
GM did develop leading edge DOHC engines, such as the North Star, which were among Ward's top 10 year after year; they are used in Caddillacs, and now Buicks too. The push-rod V6's are just cheaper to produce, equally efficient as high-revving I-4's on open American roads, probably more reliable than new-fangled engines and most important of all, would not involve costly disputes with the union that inevitably would take place if an old engine production line had to be shut down or personnel had to be retrained.
It's just not fair to single out GM management, when nobody except for Toyota has stumbled upon success with Hybrids, which so far is still only a marketting success. Even Honda lost money year after year with it. If GM had pursued it and ended up like Honda, the union supporters would be berating the management for "pointless gambles" like the EV1 of the early 90's.
Senior management has a fiduciary duty to ensure the health and survival of the corporation. They fell short of their responsibility.
Given the tremendous difficulties that they are facing, the GM management has done remarkably well, compared to its peers and any conceivable realistic alternatives. Do you see anyone who could have done better? I certainly don't. Which is why the shareholders seem to be keeping Wagoner in place, for now. There may be a ceremonial hanging at some point in the future just to satisfy the mob, but frankly I doubt that would be fair or that any replacement would/could do any better.
If Joe Schmoe wants to start a buisness where he/she could make multi-millions, you better have multi-millions to beable to invest. Sure you could call up Don Lapre or Carlton Sheets or some other gimmick and order there $39.95 how to become a zillionaire with little or no money. COME-ON !!!!!
BTW- Michigan is a "right to work state" and I don't see why that matters ?
Also the ugly evil union named the UAW, has the Toyota Tacoma plant unionized and last time I checked the tacoma was "MT-truck of the year" :P
I'll put it this way. I'll take my UAW father's skill and brains up against the best the transplants have to offer.
Brightness, first thanks for the thoughtful response.
I agree with you that GM management could have done better . . . however, that would be with hind-sight and/or expectations of wisdom far beyond what is realistic.
This is where we disagree. Your view is that management has done pretty well in a very difficult situation. We agree that the situation is very difficult. We disagree on how well GM management has done. I didn't see any urgency in the 1990's. I've seen the direction of GM for an awfully long time - poor cars, big heavy iron, but not much refinement. Great if you want a big hard working vehicle, lousy if you want a refined family vehicle. The fact that gas wouldn't stay cheap forever was pretty obvious, too.
1. This great economy won't last forever, what should we do to prepare?
Selling off non-core assets (such as the billions proceeds from Flextronics and Hughs Electronics sales) while the market was near the top, and carefully husband the cash for the coming rainy day. That's where GM's wad of cash came from. Money from selling cars was always a pittance that hardly ever squared off the union liabilities from making them.
And what did they do with that husbanded cash to improve their competitiveness? What was the strategy?
If auto manufacturing is not profitable, then either GM should have worked to improve it, or gotten out of that business. I don't see GM having built up the non-auto portions of its business to make it a well-diversified company. As you cite above, they spun off many of the non-auto businesses. So which competency were they driving to? If they were driving to auto manufacturing as their core competency, then what were they going to do to address the union burden? I could see some answers: 1 - build such high quality cars that they're worth the premium. They definitely didn't do this 2 - expand manufacturing outside the US. They've done some of this, but what happened to Geo? Why didn't they import cars under Chevy, etc., to improve the existing brand names?
What you're saying is that GM had an anchor due to unions, that other businesses was where the profit was, yet they divested the profitable businesses and were left with the money loser. So what was the good management performance that was designed to address the structural problems? I'd say that they had an inadequate strategy, and that it failed.
2. Gas won't stay cheap forever, what should we do to prepare?
GM took a two-pronged approach to the small car problem:
(1) Find cheap source of production overseas. GM management were real tight-wads on their purchase of Daewoo. They practically picked up the failed plant for next to nothing. That strategy also led to China, which turned out to be a big money maker for GM even before small cheap cars are shipped from China.
But what did this do for the US? How did the GM purchase of Daewoo improve GMs competitiveness against the Civic and Corolla? How about the Camry and Accord? You cite a decent strategy, but I don't see that it played out to any focus in the US market.
2) Find design and engineering expertise, also as inexpensively as possible. Remember, so many here demand not only small cheap cars, but small cheap cars with flair?!
So we know Fiat was a bust. GM's decisions to find competency at designing small cars failed. So it looks like the answer to the question "Gas won't stay cheap forever, what do we do to prepare?" is that GM's strategies were inadequate/failed.
3. It looks like the Japanese nameplates are making higher reliability and interior quality an emphasis in their cars, what can we do to become more competitive?
Toyota and Honda were actually de-contenting in the late 90's. Camry only got re-contented with this year's new generation after several generations of thinner and thinner carpets, hardar and harder plastic, largely due to the need to move Toyota brand upmarket in the face of Korean competition. High Reliability, yes that is a Toyota/Honda forte. GM management certainly tried. An attempt at raising production quality and efficiency following Toyota example by the management actually led to a union work stoppage that cost GM $4 billion in a matter of a few weeks!
Well, I don't see that even the possibly de-contented interior of the Camry is nearly as bad as the Current G6 or Malibu. Certainly the Cavalier was no good. Help me understand what it was that the union did that stifled the quality of the interiors on GM cars in the late 90's. You're saying the management focused on interior quality and reliability and the union wouldn't let it happen. You might be right, but I'm far from convinced. I've not seen any focus at all in this area until the last 2 years or so.
Again, you make a good argument, but either 1) you're looking through rose colored glasses that the management actually did try these things, but failed, or 2)the reality might be that their efforts were not focused, were so feeble as to be almost nonexistent while they rode high on the SUV bandwagon.
I see it more the latter than the former.
Given the tremendous difficulties that they are facing, the GM management has done remarkably well, compared to its peers and any conceivable realistic alternatives.
While the union certainly makes it a lot tougher, the management earns an F grade for their performance over the last decade. We can disagree!
1. This great economy won't last forever, what should we do to prepare? 2. Gas won't stay cheap forever, what should we do to prepare? 3. It looks like the Japanese nameplates are making higher reliability and interior quality an emphasis in their cars, what can we do to become more competitive?
I think a fourth item needs to be added to the list - global warming. I'm seeing a lot more being reported about the adverse impact of global warming. The Washington and Detroit crowds continue to be in a state of denial over it, but the reports and articles are piling up and becoming harder to ignore. Last week's issue of Time magazine has a number of stories devoted to global warming. 60 Minutes ran a segment on it two weeks ago. Wired Magazine has published three articles on it over the past three weeks. Over 200 mayors of cities have broken ranks with Washington and come out in favor of imposing limits. And let's not forget about the new emissions regulations being imposed by California for the 2009 model year. Those limitations cover carbon dioxide. I believe I read that none of the current SUVs meet those requirements. The auto industry is desperately fighting California in court. In the meantime public momentum is building and it's only a matter of time before we impose carbon taxes and new emissions limits here in the US of A. Once that happens, Detroit truly will have a perfect storm on its hands.
If Joe Schmoe wants to start a buisness where he/she could make multi-millions, you better have multi-millions to beable to invest.
We have been through this many times already. Nobody at GM is taking home a multi-million dollar salary. Even those star executives making multi-million dollar salaries did not start with multi-million dollar salaries either. So why should Joe Schmoe start off with multi-million dollar income?
If Joe Schmoe has the guts to start his own business in this country, all it takes is $25 town registeration and hard smart work ethics finding something people really want. If he's good at it, and with some luck, he will make multi-million dollars . . . if he is really good, he may even get a chance to try his hand at turning around some really messed up company like GM . . . keep in mind though, Joe Schmoe should really think hard before trying his hand at the tar baby. There is such a thing called "insurmountable difficulties." Need an example? Compaq computer was started off in a basement/bedroom, eventually it grew to more than making a few million dollars for its owners . . . then the company couldn't resist the ego trip of trying to turn around Digital Equipment Corp with all its legacy problems . . . result? nearly bankruptcy itself before being bought up by HP.
Turning around a failing company is a lot harder than starting a fresh slate. By the looks of it, many union supporters on this forum don't even know the difference; all the suggestions are as if they were proposing how they'd run a new car company. Turning around an old failing one is a lot harder. If you don't even dare to start a new business from a fresh slate, turning around an old failing one is probably not your cup of tea.
Sure you could call up Don Lapre or Carlton Sheets or some other gimmick and order there $39.95 how to become a zillionaire with little or no money.
Fools and their money soon part company. Relevence? Why do you keep thinking in terms of capital-intensive business ventures when you already acknowledged that low-cost borrowing is not one of your own strength? Find something you are good at before you can offer that to potential consumers/clients. Throwing money at a problem usually does not lead to a good solution; I know, people steeped in bureaucracy may not agree, but hopefully you are only an newbie there; the seasoned imperial bureaucrats don't care about solving problems; all they care about is having more money flowing through their hands . . . so the more money it takes to pretend-solve a problem the better.
Also the ugly evil union named the UAW, has the Toyota Tacoma plant unionized and last time I checked the tacoma was "MT-truck of the year"
The poisons of union takes time to seep through the veins. Ford and GM were once fabulous companies, so were United, Pan AM, and US Steel.
I'll put it this way. I'll take my UAW father's skill and brains up against the best the transplants have to offer.
That's where you are not getting it. The problem is not with your father; the problem is that someone else sitting in an empty room in the job bank watching TV all day ends up being paid just as much as your father receives after working his butt off all day. What does that do to your father's morale? Will he work as hard the next day? or find his way to longer lunch breaks? Overtime, the poinson sets in, and nobody works hard any more because they are no longer motivated. In fact, if your father keeps working hard, he might just find himself very unpopular among fellow union workers.
I'll take my UAW father's skill and brains up against the best the transplants have to offer
Let's get personal here. In your conversations with your dad, has he ever been critical of some of his fellow UAW members? Does he feel that the crew he works with are all doing there share? Are there any fellow workers he would fire if given the chance? Does he feel that the union is holding up the standard of what a good worker should be?
I have questioned the work ethics of those I work with. I have chastised those that make more work for the rest of us. I have turned down numerous management offers since going into the telecommunications business in 1961. I realized early in my career that a supervisor or manager takes the most crap from up above and has little recourse to change things below him.
I think your dad will agree with my assessment of many union workers.
I actually agree with you completely that the smartest thing GM management could have done was selling off the carmaking business altogether, if that were an option. I actually mentioned that in an earlier post, selling it to the union for $1 like BMW did with Rover. However, reality being what it is, I doubt the union would take it, seeing how successful (or lack of) United Airline has done after having no corporate management to lay the blames on over the past decade and half.
Daewoo is making the Aveo for Chevy. The revitalized Buick is supposed to take on the upscaling Camry and Accord. By the looks of it, they seem to be doing all right.
Remember, we are living in reality here. None of our talks of selling off carmaking altogether would fly . . . the union at Delphi is pushing for as little change as possible even in company bankruptcy! To us, it's a clear cut case of smart business decision making, but can you imagine the cries of "disposable workers" if GM actually tried to sell carmaking altogether?!
The same thing with quality and efficiency on the production lines. In our untrained eyes, these are clearly purviews and responsibility of the management. Yet in reality, when Wagoner tried to push for quality and efficiency on one particular production line, it led to a company-wide work stoppage in 1998 that cost GM $4 billion in a matter of weeks.
In the eyes of the union, GM is not there to make cars for consumers or make profit for shareholders; it's there to provide jobs for workers. The range of freedom the management has is very limited, ever since the days when Alfred Sloan and Henry Ford were slapped down by FDR administration; later, Walter Chrysler, too.
Some of the problem with GM is they bought companies that had nothing to do with cars: Hughes and Electronic Data Systems. Granted, some of the technology dribbled into their cars, like Onstar. But, they spent so much money buying these companies they had little money left over for designs and new product lines. I don't think the union has that much to do with GM's problems.
Yet this doesn't excuse management incompentency. During the boom years of the late 90's, GM was making high profits and high margins on SUVs, in spite of the union handicap. What did management choose to do with their windfall?
They decided to buy, buy, buy. Acquisitions, poorly thought out, broadened an already vast portfolio of divisions and brands. "Quantity over quality" seemed to be the strategy. This was a furter propagation of a poor strategy that was alreay apparent in declining market share and customer loyalty.
This is a very good point which reinforces my view that even back in the 90's when SUV profits were awash in Detroit they already knew that they were linked to the death with the UAW. To invest more in this country which meant bringing the unions along with them was foolish. The result was buy up 'distressed' properties overseas or go full force into overseas markets like China and SE Asia.
The SUV/truck business here is still so wildly profitable that it can support a continued strong union presence. The relatively low margin auto business cannot support this weight. what we've seen recently is the first 'fruits' if you will of this strategy in GM ascendence to top automaker in China, the Fulan from Mexico, the movement of a key segment of GM to Shanghai.
In the not to distant future one might see no 'detroit'-based autos being built here while all are imported from satellite manufacturing plants. In the meanwhile non-union transplant production could double from what is now a very high figure.
Unfortunately, you were serious when you posted that it's no big deal when 30-50 percent of a car company's models in critical segments are going to fleet customers. Too bad that part wasn't an April Fool's Day joke as well.
Interestingly, Mr. York - a seasoned executive - appears to disagree with that view, given his recent statements on the matter.
imidazol97: As for the other, when purchasing the GM car that is sold into fleets that will be showing up on the retail market in 1 or 2 years, that would be a factor in price I am willing to pay. I buy and keep for 10 years, so I'm not much interested in used value to 2 years.
That formula may work for you, but given the multi-billion dollar losses that GM is racking up with frightening regularity, it obviously isn't a winning formula in the automobile business.
GM is in the new-car business, not the used-car business. If it can't make money selling new cars to retail customers, it will continue its downward spiral.
It works for you, but it apparently doesn't work for an increasing number of new-car buyers, judging by GM's dismal sales and profitability.
imidazol97: OTOH why would people pay extra for the right to purchase a Camry, pay more for maintenance because of dealer addons and manipulation of their service needed list, and be happy that they trade in 4 years or 3 or 2 and get a little of what they're overpaying back?
Probably because they are getting a better built, more refined car that holds up better over the long run.
In short, it's the same reason people willingly pay more for a meal at a decent mid-level, family-run restaurant than they do for a Big Mac Xtra Value meal.
And GM dealers are just as unscrupulous in trying to get buyers to pay for ad-ons and manipulating the service schedule to earn more money as Toyota dealers.
OTOH why would people pay extra for the right to purchase a Camry, pay more for maintenance because of dealer addons and manipulation of their service needed list, and be happy that they trade in 4 years or 3 or 2 and get a little of what they're overpaying back?
You really dont have any concept of what the required services are on a Camry, Corolla, Avalon, Prius, etc. do you?
Change the oil/filters - in some stores it's FREE change the air filters
Tires are at your descretion
Do this for 200,000 miles or more.
Sell your 10 y.o. vehicle for $2500.
Repeat the process... that's it.
So here is the answer to your question 'Why would people buy a Camry...' Buy it for $21000 pay next to nothing for service for 10 yrs, get 30+ mpg for 200000 miles, have little or no 'events' - ever, sell it for $2500.
During my working career, I maintained some of the support equipment at 3 major auto plants in the Midwest. I had plenty of opportunities to observe the production lines. In my opinion, auto assembly workers are, at best, semi-skilled labor. The job requires some degree of manual dexterity, knowledge of basic handtool use, good hand-eye coordination, and the ability to perform a given task in a given time....and not much more. A janitor has to assume more individual responsibility. The pay and benefit packages UAW workers enjoy are about double what the job is worth. I am sure that auto workers in other countries, and even those who work the foreign car plants here in the US are not paid nearly as well. Unless the playing field is not more fairly leveled with respect to hourly pay, etc., the US auto industry is going to dissappear within the very few next decades. For GM and Ford to remain a viable business, two things need to happen. First, these companies must find a way to manage themselves in such a fashion as to supply high quality products that are appealing to consumers, and second, do so at a price that is competitive with the world market. Upper management needs to be concerned more with the long-term viability of the company, than this years CEO pay and bonuses. The UAW needs to bring its demands in line with world standards, and supply the industry with workers who "give a XXXX".
All right, let's then look at these two deals, shall we? GM bought EDS in 1985 for $2.5 Billion, and sold EDS in 1996 in a spin-off worth about $10 Billion. GM bought Hughes in 1984 for $5 Billion, and sold various divisions of Hughes between 1997 and 2004 for a total of about $20 Billion.
These are fabulous investment returns! Frankly, GM's market timing on these deals should make any mutual fund manager proud: capturing the bulk meat of the greatest bull market just as the company's own stock/core business was about to significantly under-perform the market. If not for these highly accretive M&A + Spin-off operations by the management, where do you think money would come from to feed the union for the last decade? Like I said, in a fair and free market place, GM management should long have sold off all its carmaking business and become a financial instituion with some high tech specialty manufacturing, like GE. Of course, that's politically infeasible.
A fine post, and I certainly won't argue that the union makes this business particularly easy.
That being said, let's look what GM management's badge engineering/ bad acquisition / fleet sales "strategy" has really done to the company -- reduce its ability to command high wholesale prices, thanks to unwanted products and tarnished brands. According to Bloomberg:
The average fleet transaction price is about $15,000, Rod Lache, an analyst with Deutsche Bank Securities Inc. said in an interview in November. That compares with an average price of $18,861 that GM charged for all wholesale transactions, including fleet sales and sales to dealerships, in the first nine months of 2005, he said.
Lache called GM's dependence on fleet sales ``the largest source of the revenue disparity'' between the automaker and its rivals. Toyota's average wholesale price was $23,769 through November of 2006, he said. GM said it intends to reduce the proportion of fleet sales to 20 percent by next year.
So, the difference in average wholesale prices between GM and Toyota last year was $4,908 per car ($23,769 - 18,861 = $4,908) Now, let's run that figure into GM's 2005 income statement to see what would have happened had GM simply been able to earn comparable wholesale prices to Toyota in the US, with everything else held equal:
$4,908 per unit X 4.51 million vehicles sold in US = $22.173 billion of additional revenue
Add this additional revenue to the current income statement, and guess what? GM's $20.5 billion pre-tax loss on its automotive business would have been converted to a $1.7 billion pre-tax profit.
In other words, if GM could have simply sold cars for the same prices as did Toyota, it could have turned a profit. Even with the health care costs. Even with the union.
Contrast this to the "legacy cost" distraction scam: Now, let's repeat the same income statement exercise, except now we hold everything steady but for completely eliminating the alleged $1,500 per car legacy costs claimed by GM. The result: GM's automotive operations would still have suffered a pre-tax loss of $13.8 billion.
The "legacy costs" constantly hyped are certainly meaningful, but are clearly just another excuse by management to ignore the real problem with the company -- undesirable products that require deep discounting to be sold, and a management team that seems incapable of making better products that can be sold at retail.
Despite Wagoner's shell game, the numbers say it all: Eliminate the legacy costs entirely, and the losses would still be staggering. In contrast, simply sell cars at the same wholesale prices as Toyota, and the company would suddenly become profitable, even with the union. Of course, this latter scenario would require that GM actually build a better car that could be sold at retail without deep discounting, a scenario I see as being highly unlikely...
>You really dont have any concept of what the required services are on a Camry,
I do know what people around here have been exposed to for 25 years of foreign brand stores. I don't know what you're smoking but you must have the one store that's not doing the typical in this area.
Has the Toyota extra charge for the area franchise been lifted from the addons?
The service stated was out of Toyota's Service Manual that's given to everyone on delivery. Certain, not all, stores give away perks like free oil/filters for life in order to get customers coming back. But even if it wasn't free and you did it yourself all you have to do every 5000 mi is change the oil/filters, once a year the air filter and rotate the tires as you see fit.
In 4 vehicles and 500,000 miles I've never had brakes done.. ever. Never a muffler or exhaust system as a matter of fact either.
There are exceptions: My 1996 Olds Silhouette. Sold it still running fine and not burning oil.( Oil changes every 3500 miles, 4 sets of tires, two brake jobs, tie rods replaced) total Mileage I put on it was over. 220,000 miles.
BEIJING - Chinese drivers view their cars as a second home, so engineers at the Delphi China Technical Center designed a DVD/radio system for its customers in China.
Now the graphics controller in the audio system is part of Delphi's global building block collection.
Chinese engineers have long adapted products developed elsewhere for use in the China market. Now they are starting to develop applications for global use. Companies like Delphi are counting on their China technical centers to become key players in the global engineering network.
As that capability grows, Delphi officials expect the China Technical Center to become Delphi's largest electronics research center worldwide. Investment will hit $50 million.
"In China, the video graphics engineering capability is very high," says Douglas Brandt, director of business planning for electronic and safety systems at Delphi Automotive Systems (China) Holding Co.
Already Delphi's China customers are offered a range of services. "We have full design, release and calibration activity here in China, as well as development," says the center's engineering director, Joseph Zachariah.
Quick growth
In the past year, the technical center has grown to two office buildings and a heavy- and medium-duty testing lab. Inside the buildings, 350 engineers collaborate with other Delphi engineers in places such as Singapore and India to design new products.
By 2010, another heavy- and medium-duty testing lab will be added. About 1,400 people will work at the center, two-thirds of them engineers.
Currently, the center's work on global products is limited. Besides video graphics, Shanghai has a team of 15 people who approve circuit boards for global use on some electronic components. Chinese engineers are designing an engine module for use in China and India.
Building skills
That is not because of a lack of ability. Rather, it is a function of the center's age - it is only 2 years old. Delphi is building up the Shanghai team's skill set, says Jay Jiang, deputy general manager of public affairs.
Zachariah, who hails from India and spent five years as director of Delphi's tech center in Bangalore, points to India as a model for China. Now 5 years old, the India center has 2,500 engineers and works with Delphi's global operations on simulation testing and software analysis.
China's auto market is growing so fast that Delphi's Chinese engineers "are still not doing a lot of vehicles from the ground up," Brandt admits.
But that fast growth, and the pace of new model releases, gives Chinese engineers a skill that U.S. automakers will need as they try to remain competitive : speed. "Cycle times here are faster than anywhere in the world," Brandt says, "so you learn to go fast."
Let's get personal here. In your conversations with your dad, has he ever been critical of some of his fellow UAW members?
Yes....He even has a few of his fellow co-workers that don't like him. However they all respect him.
Does he feel that the crew he works with are all doing there share?
Yes, All but this lady called Sue. She complains alot but does do her job most of the time.
Are there any fellow workers he would fire if given the chance?
Yes/No, there is always a few that probably could of been fired in the past. (horseplay) Like he says, some have made mistakes but are very mature now and have become great leaders. Some of those same horseplayers have saved the company lots of money. He and I both pretty much believe this happens everywhere both union and non-union. He also says the union rarely has to get involved, because the stewards police the membership.
Does he feel that the union is holding up the standard of what a good worker should be?
He said look at the statitcs. Union Worker vs. foreign worker 3 to 1 output. Union worker vs. non-union worker 2 to 1. Dad has always said they want to build the best product in the world. The Multec 2 is the best fuel injector in the world. Honda "boyracers" put Multec 2 in their pocket rockets. :shades:
I have questioned the work ethics of those I work with. I have chastised those that make more work for the rest of us.
Actually gagrice, we probably have more problems with workers not doing their part than the UAW. We have some that expect everyone else to do the work while they sit around and talk.
I have turned down numerous management offers since going into the telecommunications business in 1961. I realized early in my career that a supervisor or manager takes the most crap from up above and has little recourse to change things below him.
If you think that's bad go try to work in a ma and pa shop. The kids that work there get away with murder, and their parents (your boss) blame you for everything. I finally got pissed and said you want me to do my job plus a good portion of everyone else's for $9.00 bucks an hour.
Well eventually I got the guillotine, and was told I was "laid off".
Well since I was "laid off" I collected unemployment while I looked for a job. My boss tried to tell the michigan unemployment agency that I was fired. :mad:
This is also the same guy that promised me I would eventually make in the low $20's. It got so bad that my boss would alter the time cards and try to accuse me of "milking the clock". I told him milk the clock ??? :surprise: I want to leave this place ASAP because it friday, and you kept me here to finish the mixture of this chemical. :confuse:
This expierence is one of only a few that make me so pro-union. I've worked for one helluva alot more non-union than I have union.
If your a professional that can write his own ticket, then yes a union isn't neccessary.
I'm glad that my current employer and it's supervisors, can't come up to me and tell me I'm fired without a good cause. We've went over a few scenario's in the past of how this has happened to some. The statistics show that the youth of 5-7 years ago will switch jobs more than 7 times or has it gone up ? :surprise: Some employers like to keep a steady flow of employees so they don't have to pay retirements, vacations, healthcare costs on a older workforce, higher salary's, etc. This is why I prefer to work in "evil" unionized company's. I don't want to work until I drop dead. My union has a safety officer that works with management to reduce on the job injuries. the UAW and IUE representatives and teach classes on diversity, safety in the work place, etc. to improve the culture in the plants.
Wow, looks like you did some research before posting. My question is why GM cannot ask the same price for an equivalent automobile as Toyota ? Is it because their products are perceived as inferior in quality, refinedness, fit and finish etc ? If so, then why ? Could it be GM just doesn't have the unlimited amount of cash that they can invest to constantly improve their products like Toyota? GM is depended on bankrupt Delpi for most major components who probably sells them to GM at a loss. How good can those parts be ? I think a lot of people will think twice before buying GM vehicles with Delpi sourced parts.
The engine parts and high skilled parts made here in the U.S. (fuel injectors) are very well made. However when I worked for Johnson Controls, we used wirring harness's for the headliners that had questionable quality concerns. (They were made in Mexico) We had many parts come back as scrap because the wirring had a short in it and we had know way of testing them before they went to the assembly lines. I eventually think with all the outsourcing going on that cars quality will go down. Especially once the major important components that go into the manufactor of a engine starts getting made in third world country's. :sick:
(1) It should be obvious that rental fleet sales involve a product mix that is quite different from retail sales. Comparing the two averages are like comparing apples to oranges.
(2) What happens to supply-and-demand and price elasticity? Do you honestly believe that the higher retail price would hold if all the rental fleet cars were dumped on the market when new as opposed to sidelined to the rental fleets?
Why does GM have to make so many cars, even after retail channel is saturated? Because under union contracts that stipulate full pay, it cost less money making cars than not making them. Here's the simple math:
If a car cost $12k to make, $6k in material and $6k in labor, and the market is already so saturated that any incremental units can only sell for $10k at retail. What's the company to do? Any normal company would shut down production until supply-and-demand balance recover to close to $12k, but not GM, why? because it has to keep paying $6k for every car that is not made! What's your solution? Make the car and lose $2k or not lose the car and lose $6k?
Assuming you made the right choice, lose $2k on every car made. What are you going to do with the resulting cars? Trying to sell them all into normal retail channels would further depress the price point. What would you do? If you were smart, you'd buy out the car rental companies, so that they will take the cars off your hand, shunting the retail market for now. After 3yrs of depreciation, a $12k car typically becomes $6k, and a $10k car typically becomes $5k. If your dealers can convince the consumers that leasing one of your cars for $11k with a residual of $5k is just as good a deal if not better than leasing the competitor's car for $12k with $6k residual, you save another $1k up front.
So, what's your solution? Stop production and lose $6k, or dump all production on the retail and be content with a $9k price (losing $3k) or using the GM management strategy of rental fleet + lease financing and lose only $1k?
Of course, if there is no union demand on full pay during production idle, there wouldn't be such a problem.
In contrast, simply sell cars at the same wholesale prices as Toyota, and the company would suddenly become profitable, even with the union.
You could have done even better: in contrast, simply sell cars at the same marked up premium as Lexus, and the company would suddenly become extremely profitable. How much relevence to reality is there in those hyperboles? The Union production lines refused automation in the 70's 80's, that's when Toyota built its reputation, which enables it to command market premium to this day.
Could it be GM just doesn't have the unlimited amount of cash that they can invest to constantly improve their products like Toyota?
If you look at GM's and Toyota's annual reports (by the way, you can view every company's financial statements and all other SEC filings for free by using the EDGAR website), you will see that both companies spend about the same amount on R&D.
The key difference between them is that GM has about three times the nameplates as does Toyota. In other words, GM has spread itself too thin by building a large number of nameplates, and doing a poor job of developing them.
Toyota did the smart thing -- it has worked hard over the last twenty years to improve its margins and to create consumer loyalty by building its own brands (the Lexus luxury brand and, more recently, the youth-focused Scion), a smart move because there simply haven't been many great automakers available to purchase. In contrast, GM tried to cut corners by buying its R&D and brands from other competitors, a "strategy" that left GM more liabilities and fewer resources that it could have used to invest in its primary badges.
People need to understand that cash and people are a finite resource, so they need to be used wisely. Every bad merger and acquisition is a huge drain of cash and management attention -- surely, the tens of thousands or hundreds of thousands of management hours devoted to buying Saab, FIAT, etc. could have been allocated instead to more profitable activities.
GM has made bad choices for decades, and it's only because of legal competitive barriers that it created to protect its large truck/SUV market and its sheer size that has prevented its collapse any sooner that it has. Now, the reality check is underway only because GM is almost out of money, and has harmed its credit rating so badly that the cost of borrowing makes it harder to squander cash. Now I have to wonder whether the possible sale of GMAC is simply going to provide more cash to be squandered without benefit, because at its current pace of bleeding, GM will probably blow that cash within a year or two of selling it.
There are two main reasons why GM products usually can not command as much of a price premium as Toyota products (except for Caddy, Saab, Hummer and Corvette):
(1) Reputation. GM products were atrocious in the 70's and 80's. Contrary to Rocky's point about outsourcing, there were no outsourcing back then, so UAW workers were/are quite capable of ruining the brand without outside help. Consumer perception takes time to turn around. Case in point, MB product quality is probably below that of GM nowadays, but MB is living off its reputation from the 80's, whereas GM has to live down the reputation from the same era . . . rather ironic.
(2) Simple supply and demand. When a Toyota model doesn't sell well (yes, even Toyota has those models, contrary to union supporters belief that a good management only turn out desirable products), Toyota simply cuts back on production to maintain price point. Case in point, the last generation Lexus IS started sale in the 2k/mo range, and eventually wound down to a trickle of about 400 units per month. If Toyota kept cranking them out at 2k/mo, there's no way they could maintain price close to $30k. Timely production reduction to maintain price point is usually not a realistic option for GM management. They have to pay union workers at full wage regardless whether they are making cars or watching TV. The loss in revenue and profit from driving price down with over production is far less than the loss that would take place if no cars were made yet the workers had to be paid the same regardless. Also, temporarily line idling and product mix change on the production line all have to get approval from the union. Yes, GM management does not get to really manage.
As to Rocky's point about outsourcing being the reason, well, it certainly was not the reason why GM has a bad reputation because there was no outsourcing in the 70's, 80's, when GM domestic UAW production acquired the bad reputation all on its own. If we will indulge ourselves for a moment in Socal4-style statistics, one may even conclude that GM product quality improvement in the late 90's and early 00's correlate very well with increased out-sourcing . . . although, for intellectual honesty's sake, I will not make that conclusion at this point, merely pointing out the statistical correlation.
IMHO, new production lines often experience glitches at the very beginning of production. Even Toyota's early US output was subpar in quality compared to cars shipped from Japan. That problem is usually overcome rather quickly; meanwhile, the company has to count on its reputation during the transition. Toyota made the transition just fine. BMW also made the transition okay with its South Carolina, Finland and Hungary productions (Z3, X5, X3 and Z4); in fact, BMW's facility in South Africa has one of the lowest defect rate in the BMW empire despite its rather dubious beginnings.
The Union production lines refused automation in the 70's 80's, that's when Toyota built its reputation, which enables it to command market premium to this day.
You still continue to amaze me.
The union had nothing to do with GM's refusal to automation. Back in the 80's GM offered "buyouts" which many took to seperate from the company. The Wyoming, Michigan plant used to have 2300 people working at and now it has under 800 people. They currently are getting out more parts with under 800 people, then what they were with 2300. People are working 3 jobs versus 1 and quite literally are working their butts off.
Yeah GM doesn't build in modules like Toyota, but they do in many assembly plants have modern robots contributing to building the vehicles. We showed them (Japanese) how to build cars, and they just improved the methods and in most cases spent a little more on material. I suppose that is the unions fault.
If the unions are all to blame, then why is Toyota still able to build such premium cars in unionized Japan ???? The workers over in Japan get perks and company benefits that would make a UAW member Seriously....:confuse:
The bottom line is Toyota knows how to "manage" their company and it's assets. They don't risk the integrity of the company's future, to satisfy there current desires. They don't risk the future of tommorow for the dreams of today. The culture and vision of the Japanese, is domination. They are indeed very intellegent people, but I as american still feel cautious about them, the same way I do torwards the Russians. Until we fight side by side in a foxhole that feeling of doubt will most definetly be there.
"...you will see that both companies spend about the same amount on R&D.
The key difference between them is that GM has about three times the nameplates as does Toyota."
I'm not sure I understand. Wouldn't the R&D spent to develop, say a new minivan, be applicable to all versions of that minivan sold by GM? Or must Buick, Chevy, Pontiac, etc. all spend their OWN R&D funds to develope their OWN minivan?
BTW - I agree with you that a portion of GM's problem is too many nameplates; I just don't think that "R&D money being spread too thin" is necessarily a good argument. Or are you lumping 'Badge Engineering' funds in with R&D?
If the unions are all to blame, then why is Toyota still able to build such premium cars in unionized Japan ????
You don't need to go all the way to Japan to see examples of that. Some of the best plants in North America are GM plants in Oshawa, Ontario, which use CAW labor. (Of course, the cars themselves are pretty bland, but that's the fault of management, not the union or the line workers.)
Of course, as another indicator of GM management genius at work, these very same plants are slated for closure! (I suppose that shutting your best plants is expected to help product quality???) The more you study GM's management actions, the more you have to question whether the entire demise of the firm comes down to a time-honored tradition of incompetence that has become embedded in the culture. What other management team in America could blow through billions in cash and shut down its best facilities while keeping a straight face?
Some important facts easily refute your thesis. You simply do not know that Toyota has numerous business adventures. In fact, according to its financial statements, Toyota has 500+ subsidiaries and 200+ partial ownerships. While you may see only 3 brands from the compay (actually at least the 4th, Subaru), Toyota also owns Daihats, Hino, Denso, Aisin. Fuji Heavy Industry (owner of Subaru) is 40% owned by Toyota. On top of all that, Toyota Century, Toyota Crown, etc. are practically their own brands with separate badges on the hood etc . . . understandably, Century is a Rolls-Royce competitor.
Contrary to your belief that Toyota was only interested organic growth in the 90's, Toyota actually engaged itself in talks of buying out the entire Japanese automaking industry in the early 90's recession as it already had more than half the market. It was slapped down by anti-trust and political concerns.
The latest Toyota ventures actually involve biotech and personal/family aircraft making . . . talk about getting far afield from carmaking.
I have to wonder whether the possible sale of GMAC is simply going to provide more cash to be squandered without benefit, because at its current pace of bleeding, GM will probably blow that cash within a year or two of selling it.
I agree with your assessment there, with the difference that, the primary drain on cash is actually labor liability, including its choke hold on product output, both in terms of quantity and quality.
Sure, I'm lumping everything together, because the R&D budget for each company is one single aggregate number on its financial statements.
In any case, you can survey the marketplace and gather where each company puts its R&D investments. Toyota has created hybrid technology that I'm sure it will eventually license and for which it has already gained first-mover advantage; GM spent its money on finally getting a decent interior into a gas guzzler (albeit an improved gas guzzler, with its quiet move back to the shutting-down-cylinders plan.)
And while badge engineering may be relatively cheap, it isn't free. It still required cash to convert a Chevy SUV into an overpriced Saab with dim sales prospects, to name but one example. And with that new car comes the need to spend more marketing and distribution dollars, diluting the message with an additional car instead of focusing the cash on promoting and building a solid brand for just one. Again, not a great business model, as the losses should have made obvious.
Comments
What is the real market place for labor rates ? Compared to China ? India ? Indonesia ? Since we are all proud and global, you have to calculate those wages into your final wage adjustment. A market place wage decision you rich guys determine because of your college education ? I'm so sick and tired of college educated folks telling everyone what's good for everyone else because of "The Market"
Why don't you CEO's and upper mangement get a reality check and work for $100,000 or less for once. There are tens of millions of college educated people in this country and it's not a rare piece of paper like it was 20 or 30 years ago. Many work for under a $100,000 in the "market place" About every young person has a degree today seriously. Why aren't they all getting million dollar paydays. What makes Rick Wagoner more special then Joe Schmoe. Oh I forgot they went to Yale and you didn't. Well we've seen what a Yale education has done for our wonderful leader. :surprise:
$850/mo is actually more than all my personal expenses combined, including food, clothing and non-business transportation. Not even my housing expense is much higher than that. Like I said, the union has been living in cacoon for too long; $650/mo for comprehensive healthcare for a family of 4 is incredibly good deal . . . try buying medical and dental insurances on your own for once; a plan like theirs would cost me around $1500/mo if not more.
A major difference. They Delphi are a multi-billion dollar corporation just like GM and are buying the biggest policies and thus should be paying significantly less for health insurance than you as a individual.
BTW- this is one area the president promised to address and nothing has been done. He's gotta go. Both him and the VP monster. The working class people like the UAW members, american manufactoring, etc. can't take 3 more years of collapse. Somethings going to give and it's not going to be pretty. We are going to destroy small community's all across america. :sick:
Rocky
The union liability essentially creates a huge burden both in borrowing cost and company manageability.
Nonsense. The union has been in place for decades, yet GM had no problem whatsoever in creating undesirable products and bankrolling several failed M&A deals. The losses are largely the result of falling sales and declining margins, as fleets comprise a significant proportion of its sales, and large incentives and rebates are used routinely to dump product into the retail market.
Had GM wisely invested in its own nameplates to support higher margins generated by non-fleet sales, GM would be generating billions more in revenue each year. They should have hired some of Toyota's managers to show them the way.
The first setence needs to be qualified with "if they can sell at a price point that people want." That's where the labor cost problem comes in.
You seem to miss the point that GM underprices its competition. It not only doesn't sell cars at higher prices than does Toyota, Honda, etc., it sells them for substantially lower margins, thanks in large part to its dependency on low margin fleet sales, which is well documented in this thread. Your alleged "fact" is precisely the opposite of what the data tell us to be true.
In fact, the growth rate of Caddy sales rival those of BMW and Lexus, the top growing brands in that segment
That is not a fact at all. Cadillac US sales increased by fewer than 800 units during 2005, a gain of 3/10ths of one percent. In contrast, BMW sales increased by more than 6,100 units (+2.3%), while Lexus sales increased by almost 15,000 units (+5.2%). So once again, your "facts" are completely inaccurate.
Saab is also making remarkable progress in sales growth.
US SAAB sales during CY 2005 were 20% below 2003 levels, and a whopping 184 units above 2004's. How does one interpret a 20% decline as an improvement?
Whether I'm right or wrong I atleast feel very passionate about this subject. Our lower and middle management support our union secretly since it affects what kind of benefits, retirement plans they will get.
Will GM beable to turn it around before they run out of cash ???? I'm not sure if it's not to late. Ford appears to be worst off and many FORD fans feel the new Zephyer "MKZ" will be a sales flop for 2006-2007. The new Navigator without the "hurricane" engine might flop to.
Diamler Chrysler, isn't making huge profits, but they are making profits. I'm amazed they are getting away with selling nice exterior cars with faux looking wood and "plasticky" interiors. :confuse:
I like I've said in the past and I will say it again, If our government allows GM to go belly up we "buy american" fans might be left with only Honda, Acura, Toyota, Lexus, Scion, cars that are made here in the U.S. If GM goes down I honestly think Ford will follow. I'm curious to see how long Chrysler will be around and will beable to stay afloat with their current line up which doesn't impress me very much. Nissan and it's designers made some quotes about GM, but I feel if it wasn't for the strong Infiniti brand cars the Nissan brand would get alot more attention I'm not overly impressed with Nissan's fit and finish and feel they should quiet up. I closed the door the other day on another Armada and it sounded very hallow. Well it was a "plasticky" vibration sound, instead of a premium thunk. :surprise:
2007, will be even more interesting for General Motors and feel this next fall will be the year that determines GM fate of BK or survival. The CTS, GMT 900 truck line-up, G4, and perhaps a next springtime (January) G8 might get realeased. We also have the Encave, Greenline, Aura, and maybe a LaCrosse Super being major players. I'm very interested and scared of the future for what was once the largest company on the face of the earth. I guess I can only pray for the survival of them. I hope the Chinese branded cars are immediant sales flops and no-one wants them. I however do believe that could be very much wishful thinking. :sick:
Well I'll stop my rambling and let's carry on....
Rocky
The Quarterly: How do you make such an undertaking profitable?
Ratan Tata: Today we're producing a $7,000 car, the Indica. Here we're talking about a $2,200 car, which will be smaller and will be produced in larger volumes, with all the high-volume parts manufactured in one plant. We're also looking at more use of plastics on the body and at a very low-cost assembly operation, with some use of modern-day adhesives instead of welding. But the car is in every way a car, with an engine, a suspension, and a steering system designed for its size. We will meet all the emissions requirements. We now have some issues concerning safety, mainly because of the car's modest size, but we will resolve them before the car reaches the market, in about three years' time.
The volume market in India and China is going to be tough for GM and other high cost manufacturers....
http://www.ohio.com/mld/beaconjournal/business/14239840.htm
http://www.daytondailynews.com/business/content/business/daily/0402delphi.html
Yeah and why should they care if they are in the soup line ?
Delphi management wants them to go from $26-27 bucks an hour to $16 bucks an hour. That a $10-11 dollar an hour pay cut for the senior workers. They also haven't decided on healthcare benefits which have ranged has high as $650 dollars a month for a family of 4 in some possible proposals. The pension benefits would be frozen, and a 401K plan would be the only source for retirement. Kinda hard to ask a 50-60 yr. old to start saving up for his Golden Years when they are almost here. :confuse:
$16 per hour is hardly soup line, it works out to $33,280, which is above the poverty line for a family of 7 - and that's with that job as the only source of income, and with no overtime. And, the "skilled workers" would still be making $24 per hour, almost $50k per year. If the union goes on strike, they could lose everything. It would be very easy for Delphi to move all of its production overseas, or into "right to work" states.
I also believe that Delphi doesn't really expect the massive wage and benefit cuts they have put forward.
Well it's went from $9.00 an hour, then to $12 bucks an hours, and now is at $16 bucks an hour. Wages aren't the only huge issue. Healthcare and getting a retirement is as important as wage issues. Non-union Toyota pays $21 bucks an hour in the cheap cost of living of the South.
Yes, Delphi has moved considerably on their position. I've yet to see the union offer anything substantial. Does anyone really think the current labor contract is feasable? The final agreement, whenever it is reached, will be much closer to current wages, but the benefits will have to be cut for Delphi to become competitive again. It really sucks that some people are going to have to make do with less, but the current pay and benefit levels just aren't practical anymore.
I suppose the EX-Delphi workers will have to settle for a greeters job at Walmart since they have lost there youth. No up and coming company is going to hire a 25 yr. veteran of Delphi because of all the wear and tear. These are not just doom and gloom idea's, but are common facts backed by statitics.
Statistics? Like how our economy completely collapsed in the 80s and 90s when large numbers of auto-workers were laid off? In 1979, the UAW represented 1.5 million employees, now it's around 600,000.
Why hire a 55 yr. old, when 25 yr. old Johnny will give me longevity.
Because that 25 yr. old is going to be constantly looking for a better job, while the 55 yr. old is more likely to not jump ship for a slightly better job.
The "Ice Man" Miller honestly doesn't care. Former Multi-Millionaire and CEO J.T. Battenburg who resigned over the cooking the books scandel got out alive. Alan Dawes-CFO- walked away with no lawsuit who was in charge of cooking the books.
I completely agree with you here. When a company goes bankrupt and has to take away things that it promised to its employees, it should have to for its executives as well. Those involved in cooking the books should be thrown in jail along with those who mismanage and underfund pensions. Any money they made under the company should be seized and put back into the company to help it pay off its obligations. But all of that doesn't change the fact that Delphi needs major restructuring of its labor costs.
It's not a problem if a relatively small percentage of the production run is being sold to fleets. But when anywhere from 30-50 percent of the entire run goes to fleet customers, it negatively impacts image and, more importantly, resale value.
When the rental car companies unload one- and two-year-old Malibus, Impalas and LaCrosses at the used car auctions, it drives down the prices for those models, which means someone who bought a new one at the dealer will get hammered at trade-in time.
You may not notice because you buy used vehicles. (That's another problem with GM vehicles - they are better values as USED cars than as new ones. Which is why every GM fan on this site except lemko buys used GM cars. In the long run, this practice doesn't help GM all that much more than someone who buys a brand-new Camry).
But people who buy new vehicles DO notice and take that into account when making a purchasing decision.
imidazol97: Our police department uses Chevies and they make a good impression on the criminals who get to ride in them.
Perhaps that sentence was posted in jest on April Fool's Day? I seriously doubt that most criminals are in the market for new cars - the lack of money is one reason they are criminals in the first place - and good word-of-mouth at the county jail isn't going to lead to too many sales, given that the criminal's audience isn't free to visit the local Chevy dealer and check out the new Impalas.
You're really sharp today!
As for the other, when purchasing the GM car that is sold into fleets that will be showing up on the retail market in 1 or 2 years, that would be a factor in price I am willing to pay. I buy and keep for 10 years, so I'm not much interested in used value to 2 years.
OTOH why would people pay extra for the right to purchase a Camry, pay more for maintenance because of dealer addons and manipulation of their service needed list, and be happy that they trade in 4 years or 3 or 2 and get a little of what they're overpaying back?
2014 Malibu 2LT, 2015 Cruze 2LT,
Some reality check here: most CEO's and upper management do not have have multi-million dollar salaries. In fact, hardly anyone at GM does. Assuming every CEO and upper management makes as much as the star business tycoons is like saying all garage bands are worth hundreds of millions of dollars like Madonna or every little league baseball player has a $50 million contract like baseball stars. There are certainly 10,000 or more little leaguers for every baseball star.
The cut-off line for the top 10% income tax filer is only $145k . . . that means $72k each for a married couple (and the last grand from the kid's summer job)! There aren't that many people raking in millions despite what you see on TV.
Why does Rick Wagoner deserve his pay more than Joe Schmoe? Certainly not due to going to Yale alone; I had Yale graduate working for me, and I paid her only $20/hr . . . and eventually had to let her go because she was not as good as someone else and I could only afford to keep one of them; there are many Yale graduates making $35k a year or less. Wagoner had shown excellence at his previous positions of responsibility. That's what counts in the real world.
If you really are jealous and have something against college degree holders, there's a piece of good news for you: according to the latest FED study, the income gap between college grads and high school grads have narrowed between 2001 to 2004 (the last 3-yr study cycle) because it has become easier to outsource desk jobs. That is precicsely how the market place works: a piece of paper counts for nothing unless your skill set genuinely creates value. In fact, if you don't like paper qualifications (degrees), you should love the free market place. I for one would rather my daughter grow up to be a plumber or pizza shop operator than going through college with a $100k student debt and no job prospect because of some useless liberal arts degree or even engineering degree that can be easily replaced with someone at the other end of a fiberoptic connection.
I don't see how you can get all upset posing as some kind of outsider . . . you are the ultimate insider, working for the biggest monopoly there is on taxpayer dough, with all benefits, healthcare, and even kids' education taken care of or subsidized. If you pay only $300 for health coverage that is just as comprehensive as one that I would have to pay $1500 for, you are in effect getting a $1200 cash value without having to pay tax on it! There is nothing to prevent you from putting in a few years of hard work at next to no pay to develop a business in your after-hours and take your chances if you are so jealous of others who made it. Frankly, if I were really unscrupulous and have no social conscience, I would rather have a $100k government job (or even a $50k one) with job security than my own business . . . however, as we know, someone in the society has to get some real work done instead of paper pushing.
BTW, if every government bureacrat has a disdain towards free market like you do, we don't need no stinking conquest by the Chinese because you have already full-heartedly embraced the eastern tradition of absolute equalism under the guidance of a paternalistic government that decides what is fair, with a fool-hardy hatred towards commerce and all "profiteers." Very understandable, because free market transactions between willing participants get in the way of co-ersive wealth transfers that is the specialty of imperial bureaucrats. What is the free market? Every time you shop around for your car, that's free market; every time you mail order or buy on the internet, that's free market; every time you buy milk away from your nearest convenience store, that's free market. Why shouldn't employers be allowed to get the best value for their money just like you want for your car money, xmas gift money and grocery money?
Still not seeing the connection between the two? I wonder why all union shops, from US Steel, to Pan AM, to Eastern, to United, all have a tendency to churn out products and services that are undesirable and enter into desperate M&A deals that often do not work out . . . co-incidence? Do unions have a tendency to attract especially incompetent management? Is that your answer to this phenomenom?
Having an aggressive union on your back in a competitive environment is like having a proverbial boulder on your back for a hill climbing race . . . so you have to zig-zag to make any progress at all, yet you get blamed for not taking the straight path up for losing the race . . . a no win situation.
Had GM wisely invested in its own nameplates to support higher margins generated by non-fleet sales, GM would be generating billions more in revenue each year.
Exactly how would that be accomplished if GM has to churn out more cars than can be sold without discount just to keep the union members working?
You seem to miss the point that GM underprices its competition.
You are comparing apples to oranges. Due to the low content and perceived value that domestic brands have, they need to price at much lower than the import competition. You can't exactly comapre a Malibu to a Camry and call that underpricing; apples to oranges. It's been proven again and again, that whenever price is lowered (as in a big discount), GM cars sell quite well despite all their faults. Everything has a market clearing price point; as a business, it's a matter of finding out where it is and whether it's worthwhile continue making it . . . in the case of GM, the last decision is taken out of the management hands thanks to union contracts.
It not only doesn't sell cars at higher prices than does Toyota, Honda, etc., it sells them for substantially lower margins, thanks in large part to its dependency on low margin fleet sales, which is well documented in this thread.
Once again, thanks to union conract that stipulates full pay even if production is paused.
BTW, it's dishonest for you to look at 2005 numbers alone. Caddy unit sales were up dramaticly in 2003 and 2004; 2005 unit sales was still an increase, and the average price was up much more significantly because the new Caddy models in 2005 are larger cars and SUVs. In comparison, the industry was down for 2005, and the larger BMW and Lexus unit sales increases is partly due to their new entry-level models, the 3 and IS. When CTS was new, it was a huge sales blow-out for Caddy. Once again, you are comparing apples to oranges.
Saab had a major product transitions late in 2005, and still posted a gain in unit sales despite the down turn in the industry. 2003 introduced a much waited new model, which was introduced early in the year. Yet again, you are comparing apples to oranges. Still Saab is posting record unit sales month after month so far this year.
Suppose a Malibu costs $12k to make, $6k for material and $6k for labor. When the market is saturated, what's GM to do? Stopping production like any normal business? No, stopping would cost GM $6k for every car not made! Thanks to the union contract stipulating full pay during produciton stoppage. Going ahead making the car and selling it at a loss for $10k would only lose $2k, or $4k better off than not making it! The result? A glut of Malibus. How to get rid of the glut of cars? There is one more thing the management could to minimize loss. Bringing them all to the retail market would immediately depress new Malibu prices. So the company bought out Avis, and made sure that Avis hence forth would mostly stock its rental fleet with unsold Malibus. At least it's not as big an impact on new Malibu prices as a full dealer lot backing up would . . . but it still has an adverse influence through the residuals, probably to the tune of $1k or so with backward propagation (50% in three years depreciation schedule; i.e. a car that clears on the market for $10k becoming worth about $5k three years later) . . . and it's the dealers' job to convince consumers that they should ignore the low 42% residual (5/12), and leasing a $12k MSRP car at $11k with $5k residual is the same or better deal than leasing a competitor's car at $12k with a $6k residual.
There, through some M&A, the management cut the $6k dead loss imposed by the labor union demand to a net $1k loss. The trade off? 42% residual instead of the normal 50%. Of course, few of us give credit to the management for saving $5k. With internet, backseat driving has never been easier ;-)
For a comparison between Caddy and Lincoln, see this article:
http://money.cnn.com/2006/03/10/Autos/pluggedin_fortune/index.htm
Let's not forget, the 24+% increase over 5 years (235,0002 vehicles in 2005 vs. 189,154 in 2000) covered 9-11 and a recession. The annualized 4-5% increase over five years is well among the top performers in that segment.
This broken record union schtick of yours does not excuse or justify billions of dollars squandered by GM management on poorly constructed deals. Nor does any of it address the fundamental difference between management teams such as GM's and Toyota
It's amazing you still can not grasp the enormous difficulties imposed by the labor union even after I repeatedly pointed that out for you. Throwing around terms like "broken record" is not statistical data, nor is it source, nor any backing . . . it's merely insistence on willful ignorance. It's not even a rebuttal. GM and Toyota face entirely different set of parameters; what worked for Toyota may well prove catastrophic for GM . . . if the strike takes place as it seems likely, you will see exactly how the Toyota Just-In-Time production method that GM learned in the past decade and half can lead to catastrophe in a union shop. Oh, wait, it already did, back in 1998, to the tune of $4 billion due to union work stoppage.
The fleet sales . . .
Try dig a hole in the illustrative numbers in my previous post. What would you do when given the same set of numbers? Stop production and lose $6k for every car not made?
If you want vision or leadership in the automotive industry, you're not often going to find it in the state of Michigan.
It's amazing you can't see the folly in your argument. Is there something in the water of Michigan? Are Michigans born stupid? Does the automotive industry advertise for dummies in their recruitment? What makes automotive industry in Michigan different from most everything else? What makes automotive industry in Michigan have in common with US Steel, Pan AM, Eastern and United? The Union!
BTW, the throughput/fixed cost amortization model is exactly what Toyota and Honda follow. Why else do they offer very limited number of platform and engage in so much platform sharing (euphemism for badge engineering invented by Alfred Sloan at GM)? Why else do they have high automation rate? Toyota's success has a lot to do with amortization efficiency thanks to its dominance of Japanese domestic market. Sometimes I have to wonder if many of the cures suggested for GM are worse than the disease . . . your previous focus on small car schtick certain was. Automaking is fundamentally a very boring economy of scale and cost-cutting game. Only the niche players can afford to hand-assemble unreliable cars and sell them for high price because they don't have to sell many cars.
The difference between GM and Toyota/Honda is primarily the caliber of their workers and more importantly the rules of employment/management that they work under. Many Toyota/Honda US managers are ex-Detroiters anyway. Your aspersions about the State of Michigan is quite unfounded.
Your broken record of blaming everyone except for the union is quite tiring (tongue in cheek ;-)
Don't you think that was intentional. If anyone knows the difference between trim levels and option availability, wouldn't it be edmunds???
2014 Malibu 2LT, 2015 Cruze 2LT,
As a history buff you need to read a little more of your US history. Ben Franklin's inventions were secondary to his diplomatic accomplishments. If he had not been in France convincing the French to give us arms and support during the Revolutionary war, we would still be under British rule. I think without a doubt Franklin was the most important man in establishing the United States of America.
Going forward, I'm going to expect you to provide me with some statistical data with some sources to back it up (I tend to favor company annual reports, Automotive News and Ward's Automotive myself), because despite the length of your posts, they are lacking any facts for anyone to chew on.
This broken record union schtick of yours does not excuse or justify billions of dollars squandered by GM management on poorly constructed deals. Nor does any of it address the fundamental difference between management teams such as GM's and Toyota: GM tries (and fails) to run the company via the balance sheet, while Toyota succeeds with its emphasis on brand development and TQM-based production methods.
The fleet sales have long been driven by a desire to amortize fixed costs across higher volumes, an accounting gimmick that pleases the number crunchers, but it is harmful to product quality. GM used to own National, and Ford until recently owned Hertz, so they saw rental sales as an integral part of their business strategy.
This throughput/fixed cost amortization mentality has been entrenched within the Big 2.5 automakers for decades, and is only now in the spotlight only because Wall Street finally realizes how poor a strategy this has been, not because Big 2.5 managers have understood it to be a problem. If you want vision or leadership in the automotive industry, you're not often going to find it in the state of Michigan.
The reality is that both your and socal's positions have some validity.
Clearly the cost and inflexibility of the union situation is a big boat anchor on GM and others. The jobs banks, high salaries and benefits, and work rules hinder auto manufactuer's ability to be agile and competitive.
Yet this doesn't excuse management incompentency. During the boom years of the late 90's, GM was making high profits and high margins on SUVs, in spite of the union handicap. What did management choose to do with their windfall?
They decided to buy, buy, buy. Acquisitions, poorly thought out, broadened an already vast portfolio of divisions and brands. "Quantity over quality" seemed to be the strategy. This was a furter propagation of a poor strategy that was alreay apparent in declining market share and customer loyalty. Furthermore, the ability to differentiate any true theme between the brands had pretty much been lost. Pontiac, Buick, Chevy, Saturn, GM - the clarity of purpose for these brands had long ago faded. Now let's add Saab, and rebadge SUV's there, too.
Another approach would have been to look at the future. As a GM strategist, you could have said to yourself:
1. This great economy won't last forever, what should we do to prepare?
2. Gas won't stay cheap forever, what should we do to prepare?
3. It looks like the Japanese nameplates are making higher reliability and interior quality an emphasis in their cars, what can we do to become more competitive?
So in the 90's, Toyota and Honda invested in hybrid technology. They worked to add variable valve timing across their entire line. They developed very low emission engines. They improved fuel economy. They added more and more quality to their interiors.
What did GM do, other than poor buyouts of other auto manufacturers?
- Engine technology: nope.
- Interiors: barely.
- Higher quality smaller cars: hardly. Cavalier.
Senior management has a fiduciary duty to ensure the health and survival of the corporation. They fell short of their responsibility. Heck, a lot of people could see the direction of GM for decades. Yet how astonishing it is how little was done to truly prepare GM for the future.
So now we get to watch the consequences play out. It's pretty late in the game.
Although unions are making it tough for GM, it's disingenuous to pretend that GM's management made smart decisions, and it's all the union's fault.
In real life, there's seldomly good or bad in the absolute sense . . . usually better or worse, compared to peer groups and alternatives. From what I've been hearing on this forum, the GM management could have done far worse.
GM's acquisition in the late 90's was actually very modest compared to its peers. The excercise of call option on Saab in the late 90's was a no-brainer as the strike price was so much lower than existing market metrics. For comparison to its peer group: VW spent billions on Seat, Skoda and Bentley (and a complete waste of money on RollsRoyce), BMW spent billions on Rover, Ford tens of billions on Jag, Volvo and Land Rover.
The three challenges that you listed that GM faced in the late 90's were very succinct, let's see what were GM's answers to the challenges:
1. This great economy won't last forever, what should we do to prepare?
Selling off non-core assets (such as the billions proceeds from Flextronics and Hughs Electronics sales) while the market was near the top, and carefully husband the cash for the coming rainy day. That's where GM's wad of cash came from. Money from selling cars was always a pittance that hardly ever squared off the union liabilities from making them. GMAC Financing was what really generated cash on operating basis, besides those one-time accretive spin-offs.
2. Gas won't stay cheap forever, what should we do to prepare?
Knowing that it's never going to make money from producing cheap small cars uner conventional domestic union labor structure due to part count not scaling with vehicle price, and even non-conventional union arrangement would fail due to union demand on new model development priorities (e.g. the starvation of Saturn), GM took a two-pronged approach to the small car problem:
(1) Find cheap source of production overseas. GM management were real tight-wads on their purchase of Daewoo. They practically picked up the failed plant for next to nothing. That strategy also led to China, which turned out to be a big money maker for GM even before small cheap cars are shipped from China.
(2) Find design and engineering expertise, also as inexpensively as possible. Remember, so many here demand not only small cheap cars, but small cheap cars with flair?! That led to Fiat, the owner of Alpha and Ferrari as well as strong historical ties to Italdesign. That's where GM got nicked badly by Fiat book cooking. Luckily the management negotiated an out option ahead of time. Compared to how much BMW lost on Rover and Ford lost on Jag, both are much small operations, GM management did not come out especially incompetent. Could have done better? Of course, with hind-sight 20/20. However, keep in mind, GM was sitting on a lot of cash, and everyone was clamoring for design expertise on small cars. The Fiat venture, if not for Fiat book cooking, could have been the best deal yet; GM's negotiated price for such a large company was really cheap, before the book cooking was discovered.
3. It looks like the Japanese nameplates are making higher reliability and interior quality an emphasis in their cars, what can we do to become more competitive?
Toyota and Honda were actually de-contenting in the late 90's. Camry only got re-contented with this year's new generation after several generations of thinner and thinner carpets, hardar and harder plastic, largely due to the need to move Toyota brand upmarket in the face of Korean competition. High Reliability, yes that is a Toyota/Honda forte. GM management certainly tried. An attempt at raising production quality and efficiency following Toyota example by the management actually led to a union work stoppage that cost GM $4 billion in a matter of a few weeks! Not even the cash raised from Hughs and Flextronics sales could stand that kind of rapid drain. So GM management had to back down.
GM did develop leading edge DOHC engines, such as the North Star, which were among Ward's top 10 year after year; they are used in Caddillacs, and now Buicks too. The push-rod V6's are just cheaper to produce, equally efficient as high-revving I-4's on open American roads, probably more reliable than new-fangled engines and most important of all, would not involve costly disputes with the union that inevitably would take place if an old engine production line had to be shut down or personnel had to be retrained.
It's just not fair to single out GM management, when nobody except for Toyota has stumbled upon success with Hybrids, which so far is still only a marketting success. Even Honda lost money year after year with it. If GM had pursued it and ended up like Honda, the union supporters would be berating the management for "pointless gambles" like the EV1 of the early 90's.
Senior management has a fiduciary duty to ensure the health and survival of the corporation. They fell short of their responsibility.
Given the tremendous difficulties that they are facing, the GM management has done remarkably well, compared to its peers and any conceivable realistic alternatives. Do you see anyone who could have done better? I certainly don't. Which is why the shareholders seem to be keeping Wagoner in place, for now. There may be a ceremonial hanging at some point in the future just to satisfy the mob, but frankly I doubt that would be fair or that any replacement would/could do any better.
BTW- Michigan is a "right to work state" and I don't see why that matters ?
Also the ugly evil union named the UAW, has the Toyota Tacoma plant unionized and last time I checked the tacoma was "MT-truck of the year" :P
I'll put it this way. I'll take my UAW
father's skill and brains up against the best the transplants have to offer.
Rocky
I agree with you that GM management could have done better . . . however, that would be with hind-sight and/or expectations of wisdom far beyond what is realistic.
This is where we disagree. Your view is that management has done pretty well in a very difficult situation. We agree that the situation is very difficult. We disagree on how well GM management has done. I didn't see any urgency in the 1990's. I've seen the direction of GM for an awfully long time - poor cars, big heavy iron, but not much refinement. Great if you want a big hard working vehicle, lousy if you want a refined family vehicle. The fact that gas wouldn't stay cheap forever was pretty obvious, too.
1. This great economy won't last forever, what should we do to prepare?
Selling off non-core assets (such as the billions proceeds from Flextronics and Hughs Electronics sales) while the market was near the top, and carefully husband the cash for the coming rainy day. That's where GM's wad of cash came from. Money from selling cars was always a pittance that hardly ever squared off the union liabilities from making them.
And what did they do with that husbanded cash to improve their competitiveness? What was the strategy?
If auto manufacturing is not profitable, then either GM should have worked to improve it, or gotten out of that business. I don't see GM having built up the non-auto portions of its business to make it a well-diversified company. As you cite above, they spun off many of the non-auto businesses. So which competency were they driving to? If they were driving to auto manufacturing as their core competency, then what were they going to do to address the union burden? I could see some answers:
1 - build such high quality cars that they're worth the premium. They definitely didn't do this
2 - expand manufacturing outside the US. They've done some of this, but what happened to Geo? Why didn't they import cars under Chevy, etc., to improve the existing brand names?
What you're saying is that GM had an anchor due to unions, that other businesses was where the profit was, yet they divested the profitable businesses and were left with the money loser. So what was the good management performance that was designed to address the structural problems? I'd say that they had an inadequate strategy, and that it failed.
2. Gas won't stay cheap forever, what should we do to prepare?
GM took a two-pronged approach to the small car problem:
(1) Find cheap source of production overseas. GM management were real tight-wads on their purchase of Daewoo. They practically picked up the failed plant for next to nothing. That strategy also led to China, which turned out to be a big money maker for GM even before small cheap cars are shipped from China.
But what did this do for the US? How did the GM purchase of Daewoo improve GMs competitiveness against the Civic and Corolla? How about the Camry and Accord? You cite a decent strategy, but I don't see that it played out to any focus in the US market.
2) Find design and engineering expertise, also as inexpensively as possible. Remember, so many here demand not only small cheap cars, but small cheap cars with flair?!
So we know Fiat was a bust. GM's decisions to find competency at designing small cars failed. So it looks like the answer to the question "Gas won't stay cheap forever, what do we do to prepare?" is that GM's strategies were inadequate/failed.
3. It looks like the Japanese nameplates are making higher reliability and interior quality an emphasis in their cars, what can we do to become more competitive?
Toyota and Honda were actually de-contenting in the late 90's. Camry only got re-contented with this year's new generation after several generations of thinner and thinner carpets, hardar and harder plastic, largely due to the need to move Toyota brand upmarket in the face of Korean competition. High Reliability, yes that is a Toyota/Honda forte. GM management certainly tried. An attempt at raising production quality and efficiency following Toyota example by the management actually led to a union work stoppage that cost GM $4 billion in a matter of a few weeks!
Well, I don't see that even the possibly de-contented interior of the Camry is nearly as bad as the Current G6 or Malibu. Certainly the Cavalier was no good. Help me understand what it was that the union did that stifled the quality of the interiors on GM cars in the late 90's. You're saying the management focused on interior quality and reliability and the union wouldn't let it happen. You might be right, but I'm far from convinced. I've not seen any focus at all in this area until the last 2 years or so.
Again, you make a good argument, but either 1) you're looking through rose colored glasses that the management actually did try these things, but failed, or 2)the reality might be that their efforts were not focused, were so feeble as to be almost nonexistent while they rode high on the SUV bandwagon.
I see it more the latter than the former.
Given the tremendous difficulties that they are facing, the GM management has done remarkably well, compared to its peers and any conceivable realistic alternatives.
While the union certainly makes it a lot tougher, the management earns an F grade for their performance over the last decade. We can disagree!
2. Gas won't stay cheap forever, what should we do to prepare?
3. It looks like the Japanese nameplates are making higher reliability and interior quality an emphasis in their cars, what can we do to become more competitive?
I think a fourth item needs to be added to the list - global warming. I'm seeing a lot more being reported about the adverse impact of global warming. The Washington and Detroit crowds continue to be in a state of denial over it, but the reports and articles are piling up and becoming harder to ignore. Last week's issue of Time magazine has a number of stories devoted to global warming. 60 Minutes ran a segment on it two weeks ago. Wired Magazine has published three articles on it over the past three weeks. Over 200 mayors of cities have broken ranks with Washington and come out in favor of imposing limits. And let's not forget about the new emissions regulations being imposed by California for the 2009 model year. Those limitations cover carbon dioxide. I believe I read that none of the current SUVs meet those requirements. The auto industry is desperately fighting California in court. In the meantime public momentum is building and it's only a matter of time before we impose carbon taxes and new emissions limits here in the US of A. Once that happens, Detroit truly will have a perfect storm on its hands.
We have been through this many times already. Nobody at GM is taking home a multi-million dollar salary. Even those star executives making multi-million dollar salaries did not start with multi-million dollar salaries either. So why should Joe Schmoe start off with multi-million dollar income?
If Joe Schmoe has the guts to start his own business in this country, all it takes is $25 town registeration and hard smart work ethics finding something people really want. If he's good at it, and with some luck, he will make multi-million dollars . . . if he is really good, he may even get a chance to try his hand at turning around some really messed up company like GM . . . keep in mind though, Joe Schmoe should really think hard before trying his hand at the tar baby. There is such a thing called "insurmountable difficulties." Need an example? Compaq computer was started off in a basement/bedroom, eventually it grew to more than making a few million dollars for its owners . . . then the company couldn't resist the ego trip of trying to turn around Digital Equipment Corp with all its legacy problems . . . result? nearly bankruptcy itself before being bought up by HP.
Turning around a failing company is a lot harder than starting a fresh slate. By the looks of it, many union supporters on this forum don't even know the difference; all the suggestions are as if they were proposing how they'd run a new car company. Turning around an old failing one is a lot harder. If you don't even dare to start a new business from a fresh slate, turning around an old failing one is probably not your cup of tea.
Sure you could call up Don Lapre or Carlton Sheets or some other gimmick and order there $39.95 how to become a zillionaire with little or no money.
Fools and their money soon part company. Relevence? Why do you keep thinking in terms of capital-intensive business ventures when you already acknowledged that low-cost borrowing is not one of your own strength? Find something you are good at before you can offer that to potential consumers/clients. Throwing money at a problem usually does not lead to a good solution; I know, people steeped in bureaucracy may not agree, but hopefully you are only an newbie there; the seasoned imperial bureaucrats don't care about solving problems; all they care about is having more money flowing through their hands . . . so the more money it takes to pretend-solve a problem the better.
Also the ugly evil union named the UAW, has the Toyota Tacoma plant unionized and last time I checked the tacoma was "MT-truck of the year"
The poisons of union takes time to seep through the veins. Ford and GM were once fabulous companies, so were United, Pan AM, and US Steel.
I'll put it this way. I'll take my UAW
father's skill and brains up against the best the transplants have to offer.
That's where you are not getting it. The problem is not with your father; the problem is that someone else sitting in an empty room in the job bank watching TV all day ends up being paid just as much as your father receives after working his butt off all day. What does that do to your father's morale? Will he work as hard the next day? or find his way to longer lunch breaks? Overtime, the poinson sets in, and nobody works hard any more because they are no longer motivated. In fact, if your father keeps working hard, he might just find himself very unpopular among fellow union workers.
Let's get personal here. In your conversations with your dad, has he ever been critical of some of his fellow UAW members? Does he feel that the crew he works with are all doing there share? Are there any fellow workers he would fire if given the chance? Does he feel that the union is holding up the standard of what a good worker should be?
I have questioned the work ethics of those I work with. I have chastised those that make more work for the rest of us. I have turned down numerous management offers since going into the telecommunications business in 1961. I realized early in my career that a supervisor or manager takes the most crap from up above and has little recourse to change things below him.
I think your dad will agree with my assessment of many union workers.
Daewoo is making the Aveo for Chevy. The revitalized Buick is supposed to take on the upscaling Camry and Accord. By the looks of it, they seem to be doing all right.
Remember, we are living in reality here. None of our talks of selling off carmaking altogether would fly . . . the union at Delphi is pushing for as little change as possible even in company bankruptcy! To us, it's a clear cut case of smart business decision making, but can you imagine the cries of "disposable workers" if GM actually tried to sell carmaking altogether?!
The same thing with quality and efficiency on the production lines. In our untrained eyes, these are clearly purviews and responsibility of the management. Yet in reality, when Wagoner tried to push for quality and efficiency on one particular production line, it led to a company-wide work stoppage in 1998 that cost GM $4 billion in a matter of weeks.
In the eyes of the union, GM is not there to make cars for consumers or make profit for shareholders; it's there to provide jobs for workers. The range of freedom the management has is very limited, ever since the days when Alfred Sloan and Henry Ford were slapped down by FDR administration; later, Walter Chrysler, too.
They decided to buy, buy, buy. Acquisitions, poorly thought out, broadened an already vast portfolio of divisions and brands. "Quantity over quality" seemed to be the strategy. This was a furter propagation of a poor strategy that was alreay apparent in declining market share and customer loyalty.
This is a very good point which reinforces my view that even back in the 90's when SUV profits were awash in Detroit they already knew that they were linked to the death with the UAW. To invest more in this country which meant bringing the unions along with them was foolish. The result was buy up 'distressed' properties overseas or go full force into overseas markets like China and SE Asia.
The SUV/truck business here is still so wildly profitable that it can support a continued strong union presence. The relatively low margin auto business cannot support this weight. what we've seen recently is the first 'fruits' if you will of this strategy in GM ascendence to top automaker in China, the Fulan from Mexico, the movement of a key segment of GM to Shanghai.
In the not to distant future one might see no 'detroit'-based autos being built here while all are imported from satellite manufacturing plants. In the meanwhile non-union transplant production could double from what is now a very high figure.
Unfortunately, you were serious when you posted that it's no big deal when 30-50 percent of a car company's models in critical segments are going to fleet customers. Too bad that part wasn't an April Fool's Day joke as well.
Interestingly, Mr. York - a seasoned executive - appears to disagree with that view, given his recent statements on the matter.
imidazol97: As for the other, when purchasing the GM car that is sold into fleets that will be showing up on the retail market in 1 or 2 years, that would be a factor in price I am willing to pay. I buy and keep for 10 years, so I'm not much interested in used value to 2 years.
That formula may work for you, but given the multi-billion dollar losses that GM is racking up with frightening regularity, it obviously isn't a winning formula in the automobile business.
GM is in the new-car business, not the used-car business. If it can't make money selling new cars to retail customers, it will continue its downward spiral.
It works for you, but it apparently doesn't work for an increasing number of new-car buyers, judging by GM's dismal sales and profitability.
imidazol97: OTOH why would people pay extra for the right to purchase a Camry, pay more for maintenance because of dealer addons and manipulation of their service needed list, and be happy that they trade in 4 years or 3 or 2 and get a little of what they're overpaying back?
Probably because they are getting a better built, more refined car that holds up better over the long run.
In short, it's the same reason people willingly pay more for a meal at a decent mid-level, family-run restaurant than they do for a Big Mac Xtra Value meal.
And GM dealers are just as unscrupulous in trying to get buyers to pay for ad-ons and manipulating the service schedule to earn more money as Toyota dealers.
You really dont have any concept of what the required services are on a Camry, Corolla, Avalon, Prius, etc. do you?
Change the oil/filters - in some stores it's FREE
change the air filters
Tires are at your descretion
Do this for 200,000 miles or more.
Sell your 10 y.o. vehicle for $2500.
Repeat the process... that's it.
So here is the answer to your question 'Why would people buy a Camry...'
Buy it for $21000 pay next to nothing for service for 10 yrs, get 30+ mpg for 200000 miles, have little or no 'events' - ever, sell it for $2500.
For GM and Ford to remain a viable business, two things need to happen. First, these companies must find a way to manage themselves in such a fashion as to supply high quality products that are appealing to consumers, and second, do so at a price that is competitive with the world market. Upper management needs to be concerned more with the long-term viability of the company, than this years CEO pay and bonuses. The UAW needs to bring its demands in line with world standards, and supply the industry with workers who "give a XXXX".
These are fabulous investment returns! Frankly, GM's market timing on these deals should make any mutual fund manager proud: capturing the bulk meat of the greatest bull market just as the company's own stock/core business was about to significantly under-perform the market. If not for these highly accretive M&A + Spin-off operations by the management, where do you think money would come from to feed the union for the last decade? Like I said, in a fair and free market place, GM management should long have sold off all its carmaking business and become a financial instituion with some high tech specialty manufacturing, like GE. Of course, that's politically infeasible.
That being said, let's look what GM management's badge engineering/ bad acquisition / fleet sales "strategy" has really done to the company -- reduce its ability to command high wholesale prices, thanks to unwanted products and tarnished brands. According to Bloomberg:
The average fleet transaction price is about $15,000, Rod Lache, an analyst with Deutsche Bank Securities Inc. said in an interview in November. That compares with an average price of $18,861 that GM charged for all wholesale transactions, including fleet sales and sales to dealerships, in the first nine months of 2005, he said.
Lache called GM's dependence on fleet sales ``the largest source of the revenue disparity'' between the automaker and its rivals. Toyota's average wholesale price was $23,769 through November of 2006, he said. GM said it intends to reduce the proportion of fleet sales to 20 percent by next year.
So, the difference in average wholesale prices between GM and Toyota last year was $4,908 per car ($23,769 - 18,861 = $4,908) Now, let's run that figure into GM's 2005 income statement to see what would have happened had GM simply been able to earn comparable wholesale prices to Toyota in the US, with everything else held equal:
$4,908 per unit
X 4.51 million vehicles sold in US
= $22.173 billion of additional revenue
Add this additional revenue to the current income statement, and guess what? GM's $20.5 billion pre-tax loss on its automotive business would have been converted to a $1.7 billion pre-tax profit.
In other words, if GM could have simply sold cars for the same prices as did Toyota, it could have turned a profit. Even with the health care costs. Even with the union.
Contrast this to the "legacy cost" distraction scam: Now, let's repeat the same income statement exercise, except now we hold everything steady but for completely eliminating the alleged $1,500 per car legacy costs claimed by GM. The result: GM's automotive operations would still have suffered a pre-tax loss of $13.8 billion.
The "legacy costs" constantly hyped are certainly meaningful, but are clearly just another excuse by management to ignore the real problem with the company -- undesirable products that require deep discounting to be sold, and a management team that seems incapable of making better products that can be sold at retail.
Despite Wagoner's shell game, the numbers say it all: Eliminate the legacy costs entirely, and the losses would still be staggering. In contrast, simply sell cars at the same wholesale prices as Toyota, and the company would suddenly become profitable, even with the union. Of course, this latter scenario would require that GM actually build a better car that could be sold at retail without deep discounting, a scenario I see as being highly unlikely...
I do know what people around here have been exposed to for 25 years of foreign brand stores. I don't know what you're smoking but you must have the one store that's not doing the typical in this area.
Has the Toyota extra charge for the area franchise been lifted from the addons?
2014 Malibu 2LT, 2015 Cruze 2LT,
In 4 vehicles and 500,000 miles I've never had brakes done.. ever. Never a muffler or exhaust system as a matter of fact either.
The suspension was a design hangup .
BEIJING - Chinese drivers view their cars as a second home, so engineers at the Delphi China Technical Center designed a DVD/radio system for its customers in China.
Now the graphics controller in the audio system is part of Delphi's global building block collection.
Chinese engineers have long adapted products developed elsewhere for use in the China market. Now they are starting to develop applications for global use. Companies like Delphi are counting on their China technical centers to become key players in the global engineering network.
As that capability grows, Delphi officials expect the China Technical Center to become Delphi's largest electronics research center worldwide. Investment will hit $50 million.
"In China, the video graphics engineering capability is very high," says Douglas Brandt, director of business planning for electronic and safety systems at Delphi Automotive Systems (China) Holding Co.
Already Delphi's China customers are offered a range of services. "We have full design, release and calibration activity here in China, as well as development," says the center's engineering director, Joseph Zachariah.
Quick growth
In the past year, the technical center has grown to two office buildings and a heavy- and medium-duty testing lab. Inside the buildings, 350 engineers collaborate with other Delphi engineers in places such as Singapore and India to design new products.
By 2010, another heavy- and medium-duty testing lab will be added. About 1,400 people will work at the center, two-thirds of them engineers.
Currently, the center's work on global products is limited. Besides video graphics, Shanghai has a team of 15 people who approve circuit boards for global use on some electronic components. Chinese engineers are designing an engine module for use in China and India.
Building skills
That is not because of a lack of ability. Rather, it is a function of the center's age - it is only 2 years old. Delphi is building up the Shanghai team's skill set, says Jay Jiang, deputy general manager of public affairs.
Zachariah, who hails from India and spent five years as director of Delphi's tech center in Bangalore, points to India as a model for China. Now 5 years old, the India center has 2,500 engineers and works with Delphi's global operations on simulation testing and software analysis.
China's auto market is growing so fast that Delphi's Chinese engineers "are still not doing a lot of vehicles from the ground up," Brandt admits.
But that fast growth, and the pace of new model releases, gives Chinese engineers a skill that U.S. automakers will need as they try to remain competitive : speed. "Cycle times here are faster than anywhere in the world," Brandt says, "so you learn to go fast."
He adds: "Speed is everything in this business."
Yes....He even has a few of his fellow co-workers that don't like him. However they all respect him.
Does he feel that the crew he works with are all doing there share?
Yes, All but this lady called Sue. She complains alot but does do her job most of the time.
Are there any fellow workers he would fire if given the chance?
Yes/No, there is always a few that probably could of been fired in the past. (horseplay) Like he says, some have made mistakes but are very mature now and have become great leaders. Some of those same horseplayers have saved the company lots of money. He and I both pretty much believe this happens everywhere both union and non-union. He also says the union rarely has to get involved, because the stewards police the membership.
Does he feel that the union is holding up the standard of what a good worker should be?
He said look at the statitcs. Union Worker vs. foreign worker 3 to 1 output. Union worker vs. non-union
worker 2 to 1. Dad has always said they want to build the best product in the world. The Multec 2 is the best fuel injector in the world. Honda "boyracers" put Multec 2 in their pocket rockets. :shades:
I have questioned the work ethics of those I work with. I have chastised those that make more work for the rest of us.
Actually gagrice, we probably have more problems with workers not doing their part than the UAW. We have some that expect everyone else to do the work while they sit around and talk.
I have turned down numerous management offers since going into the telecommunications business in 1961. I realized early in my career that a supervisor or manager takes the most crap from up above and has little recourse to change things below him.
If you think that's bad go try to work in a ma and pa shop. The kids that work there get away with murder, and their parents (your boss) blame you for everything. I finally got pissed and said you want me to do my job plus a good portion of everyone else's for $9.00 bucks an hour.
Well eventually I got the guillotine, and was told I was "laid off".
Well since I was "laid off" I collected unemployment while I looked for a job. My boss tried to tell the michigan unemployment agency that I was fired. :mad:
This is also the same guy that promised me I would eventually make in the low $20's. It got so bad that my boss would alter the time cards and try to accuse me of "milking the clock". I told him milk the clock ??? :surprise: I want to leave this place ASAP because it friday, and you kept me here to finish the mixture of this chemical. :confuse:
This expierence is one of only a few that make me so pro-union. I've worked for one helluva alot more non-union than I have union.
If your a professional that can write his own ticket, then yes a union isn't neccessary.
I'm glad that my current employer and it's supervisors, can't come up to me and tell me I'm fired without a good cause. We've went over a few scenario's in the past of how this has happened to some.
The statistics show that the youth of 5-7 years ago will switch jobs more than 7 times or has it gone up ? :surprise: Some employers like to keep a steady flow of employees so they don't have to pay retirements, vacations, healthcare costs on a older workforce, higher salary's, etc. This is why I prefer to work in "evil" unionized company's. I don't want to work until I drop dead. My union has a safety officer that works with management to reduce on the job injuries. the UAW and IUE representatives and teach classes on diversity, safety in the work place, etc. to improve the culture in the plants.
Rocky
Rocky
(1) It should be obvious that rental fleet sales involve a product mix that is quite different from retail sales. Comparing the two averages are like comparing apples to oranges.
(2) What happens to supply-and-demand and price elasticity? Do you honestly believe that the higher retail price would hold if all the rental fleet cars were dumped on the market when new as opposed to sidelined to the rental fleets?
Why does GM have to make so many cars, even after retail channel is saturated? Because under union contracts that stipulate full pay, it cost less money making cars than not making them. Here's the simple math:
If a car cost $12k to make, $6k in material and $6k in labor, and the market is already so saturated that any incremental units can only sell for $10k at retail. What's the company to do? Any normal company would shut down production until supply-and-demand balance recover to close to $12k, but not GM, why? because it has to keep paying $6k for every car that is not made! What's your solution? Make the car and lose $2k or not lose the car and lose $6k?
Assuming you made the right choice, lose $2k on every car made. What are you going to do with the resulting cars? Trying to sell them all into normal retail channels would further depress the price point. What would you do? If you were smart, you'd buy out the car rental companies, so that they will take the cars off your hand, shunting the retail market for now. After 3yrs of depreciation, a $12k car typically becomes $6k, and a $10k car typically becomes $5k. If your dealers can convince the consumers that leasing one of your cars for $11k with a residual of $5k is just as good a deal if not better than leasing the competitor's car for $12k with $6k residual, you save another $1k up front.
So, what's your solution? Stop production and lose $6k, or dump all production on the retail and be content with a $9k price (losing $3k) or using the GM management strategy of rental fleet + lease financing and lose only $1k?
Of course, if there is no union demand on full pay during production idle, there wouldn't be such a problem.
In contrast, simply sell cars at the same wholesale prices as Toyota, and the company would suddenly become profitable, even with the union.
You could have done even better: in contrast, simply sell cars at the same marked up premium as Lexus, and the company would suddenly become extremely profitable. How much relevence to reality is there in those hyperboles? The Union production lines refused automation in the 70's 80's, that's when Toyota built its reputation, which enables it to command market premium to this day.
If you look at GM's and Toyota's annual reports (by the way, you can view every company's financial statements and all other SEC filings for free by using the EDGAR website), you will see that both companies spend about the same amount on R&D.
The key difference between them is that GM has about three times the nameplates as does Toyota. In other words, GM has spread itself too thin by building a large number of nameplates, and doing a poor job of developing them.
Toyota did the smart thing -- it has worked hard over the last twenty years to improve its margins and to create consumer loyalty by building its own brands (the Lexus luxury brand and, more recently, the youth-focused Scion), a smart move because there simply haven't been many great automakers available to purchase. In contrast, GM tried to cut corners by buying its R&D and brands from other competitors, a "strategy" that left GM more liabilities and fewer resources that it could have used to invest in its primary badges.
People need to understand that cash and people are a finite resource, so they need to be used wisely. Every bad merger and acquisition is a huge drain of cash and management attention -- surely, the tens of thousands or hundreds of thousands of management hours devoted to buying Saab, FIAT, etc. could have been allocated instead to more profitable activities.
GM has made bad choices for decades, and it's only because of legal competitive barriers that it created to protect its large truck/SUV market and its sheer size that has prevented its collapse any sooner that it has. Now, the reality check is underway only because GM is almost out of money, and has harmed its credit rating so badly that the cost of borrowing makes it harder to squander cash. Now I have to wonder whether the possible sale of GMAC is simply going to provide more cash to be squandered without benefit, because at its current pace of bleeding, GM will probably blow that cash within a year or two of selling it.
(1) Reputation. GM products were atrocious in the 70's and 80's. Contrary to Rocky's point about outsourcing, there were no outsourcing back then, so UAW workers were/are quite capable of ruining the brand without outside help. Consumer perception takes time to turn around. Case in point, MB product quality is probably below that of GM nowadays, but MB is living off its reputation from the 80's, whereas GM has to live down the reputation from the same era . . . rather ironic.
(2) Simple supply and demand. When a Toyota model doesn't sell well (yes, even Toyota has those models, contrary to union supporters belief that a good management only turn out desirable products), Toyota simply cuts back on production to maintain price point. Case in point, the last generation Lexus IS started sale in the 2k/mo range, and eventually wound down to a trickle of about 400 units per month. If Toyota kept cranking them out at 2k/mo, there's no way they could maintain price close to $30k. Timely production reduction to maintain price point is usually not a realistic option for GM management. They have to pay union workers at full wage regardless whether they are making cars or watching TV. The loss in revenue and profit from driving price down with over production is far less than the loss that would take place if no cars were made yet the workers had to be paid the same regardless. Also, temporarily line idling and product mix change on the production line all have to get approval from the union. Yes, GM management does not get to really manage.
As to Rocky's point about outsourcing being the reason, well, it certainly was not the reason why GM has a bad reputation because there was no outsourcing in the 70's, 80's, when GM domestic UAW production acquired the bad reputation all on its own. If we will indulge ourselves for a moment in Socal4-style statistics, one may even conclude that GM product quality improvement in the late 90's and early 00's correlate very well with increased out-sourcing . . . although, for intellectual honesty's sake, I will not make that conclusion at this point, merely pointing out the statistical correlation.
IMHO, new production lines often experience glitches at the very beginning of production. Even Toyota's early US output was subpar in quality compared to cars shipped from Japan. That problem is usually overcome rather quickly; meanwhile, the company has to count on its reputation during the transition. Toyota made the transition just fine. BMW also made the transition okay with its South Carolina, Finland and Hungary productions (Z3, X5, X3 and Z4); in fact, BMW's facility in South Africa has one of the lowest defect rate in the BMW empire despite its rather dubious beginnings.
You still continue to amaze me.
The union had nothing to do with GM's refusal to automation. Back in the 80's GM offered "buyouts" which many took to seperate from the company. The Wyoming, Michigan plant used to have 2300 people working at and now it has under 800 people. They currently are getting out more parts with under 800 people, then what they were with 2300. People are working 3 jobs versus 1 and quite literally are working their butts off.
Yeah GM doesn't build in modules like Toyota, but they do in many assembly plants have modern robots contributing to building the vehicles. We showed them (Japanese) how to build cars, and they just improved the methods and in most cases spent a little more on material. I suppose that is the unions fault.
If the unions are all to blame, then why is Toyota still able to build such premium cars in unionized Japan ????
The workers over in Japan get perks and company benefits that would make a UAW member
The bottom line is Toyota knows how to "manage" their company and it's assets. They don't risk the integrity of the company's future, to satisfy there current desires. They don't risk the future of tommorow for the dreams of today. The culture and vision of the Japanese, is domination. They are indeed very intellegent people, but I as american still feel cautious about them, the same way I do torwards the Russians. Until we fight side by side in a foxhole that feeling of doubt will most definetly be there.
Rocky
The key difference between them is that GM has about three times the nameplates as does Toyota."
I'm not sure I understand. Wouldn't the R&D spent to develop, say a new minivan, be applicable to all versions of that minivan sold by GM? Or must Buick, Chevy, Pontiac, etc. all spend their OWN R&D funds to develope their OWN minivan?
BTW - I agree with you that a portion of GM's problem is too many nameplates; I just don't think that "R&D money being spread too thin" is necessarily a good argument. Or are you lumping 'Badge Engineering' funds in with R&D?
You don't need to go all the way to Japan to see examples of that. Some of the best plants in North America are GM plants in Oshawa, Ontario, which use CAW labor. (Of course, the cars themselves are pretty bland, but that's the fault of management, not the union or the line workers.)
Of course, as another indicator of GM management genius at work, these very same plants are slated for closure! (I suppose that shutting your best plants is expected to help product quality???) The more you study GM's management actions, the more you have to question whether the entire demise of the firm comes down to a time-honored tradition of incompetence that has become embedded in the culture. What other management team in America could blow through billions in cash and shut down its best facilities while keeping a straight face?
Contrary to your belief that Toyota was only interested organic growth in the 90's, Toyota actually engaged itself in talks of buying out the entire Japanese automaking industry in the early 90's recession as it already had more than half the market. It was slapped down by anti-trust and political concerns.
The latest Toyota ventures actually involve biotech and personal/family aircraft making . . . talk about getting far afield from carmaking.
I have to wonder whether the possible sale of GMAC is simply going to provide more cash to be squandered without benefit, because at its current pace of bleeding, GM will probably blow that cash within a year or two of selling it.
I agree with your assessment there, with the difference that, the primary drain on cash is actually labor liability, including its choke hold on product output, both in terms of quantity and quality.
In any case, you can survey the marketplace and gather where each company puts its R&D investments. Toyota has created hybrid technology that I'm sure it will eventually license and for which it has already gained first-mover advantage; GM spent its money on finally getting a decent interior into a gas guzzler (albeit an improved gas guzzler, with its quiet move back to the shutting-down-cylinders plan.)
And while badge engineering may be relatively cheap, it isn't free. It still required cash to convert a Chevy SUV into an overpriced Saab with dim sales prospects, to name but one example. And with that new car comes the need to spend more marketing and distribution dollars, diluting the message with an additional car instead of focusing the cash on promoting and building a solid brand for just one. Again, not a great business model, as the losses should have made obvious.