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Hence my point above: that $4.4 billion could have paid for the entire brand restructuring, provided marketing dollars for a few killer cars and helped to beef up the R&D budget even further. The remaining brands could have been strenghened and made more competitive.
There are at least two errors in that line of thinking:
(1) GM made $30 billion profits on M&A. You can not make that profit without getting your hands dirty in M&A, and when you do, some deals turn out to be duds. If you ever bothered investing on you own, you'd know that already.
(2) $4.4 billion is barely enough for R&D and tooling for one significant platform, like the Civic.
Supporting all these badges just creates brand confusion among consumers, and imposes a bureaucracy that sucks up time and scarce dollars that could be focused on R&D and marketing.
On the other hand, haphazardly shutting down brands create even more consumer confusion. Given that UAW workers have to be paid full wages regardless whether cars are made, GM can not afford to lose a single customer who would have bought a GM car but for brand shut-down and loss of confidence. I agree with you that if it were all a clean slate, GM would be better served with fewer brands; however, the whole problem with GM is that it is not clean slate. It is saddled with UAW; it is saddled with State franchise laws; and it is saddled with consumers still loyal to particular GM brands for whatever reason. GM can not afford to fight them all at the same time. Any management attempt that should indeed be fired.
Already covered this, as you should know. Olds was losing money; it can't lose money anymore. Very simple economics -- losing badges that don't create goodwill or profits need to get cut. One of the few good things that has come out of the current management team, too bad that they didn't do more of it, and more quickly.
Already covered this as well: the loss is then simply shoved into the remaining divisions because the wages paid to those UAW workers making Olds are not touched at all. So now instead of not enough income to cover the expense, you have no income at all.
You don't know your cars. It's a commemorative edition of the Hertz Shelby's of the past.
And it is part of a PR campaign. From Bloomberg
Ford Motor Co., trying to pump up sales of its flagship muscle car, will provide customized Mustang coupes to Hertz Corp.'s rental fleet.
This summer, drivers will be able to rent a souped-up Ford Mustang in Hawaii and a few other states.
Five hundred 2007 Mustang GTs will be transformed by Shelby Automobiles Inc. into Mustang GT-Hs, then shipped to Hertz locations. The cars, unveiled yesterday at the New York auto show, will have customized suspensions and exhaust systems, and a revamped hood and trunk.
Mustang sales declined 3.7 percent in the first quarter, more than a year after Dearborn, Michigan-based Ford introduced a redesigned version. Sales rose 24 percent in 2005, and Ford, the second-largest U.S. automaker, is betting that people who rent cars or see GT-Hs on the road may boost Mustang sales this year.
"Ford is going to do everything they can to keep it fresh," said Erich Merkle, an auto analyst at consulting firm IRN Inc. in Grand Rapids, Michigan. He expects Ford to bring out more Mustang "variants." Ford will sell a version of the car it calls the GT/CS, or "California Special," later this year.
The GT-H won't be available for retail purchase at Ford's dealerships. Hertz will auction its 500 GT-Hs after they have been driven 16,000 to 18,000 miles. Ford, Shelby and Hertz had a similar rental program in 1966 with "Rent-A-Racer," which allowed auto enthusiasts a chance to drive a Shelby-customized coupe.
Hard to see how Ford is going to lose with this one. The only question is whether sales of cars such as Mustangs are going to suffer because of high fuel prices, regardless of the marketing effort.
I know that quite well. I also know that Shelby already does a decent business with Shelby Mustangs in recent years. Why this exercise? To get people to go to Hertz, just like I said. And why is that important? Because Ford is moving tons of Mustangs to Hertz. Also, notice in your Bloomberg article, Mustang sales is already down compared to last year despite the introduction of convertible this year.
Hard to see how Ford is going to lose with this one.
You actually believe these cars will fetch more at auction with 16k-18k miles of rental abuse on the clock than if Ford had auctioned them off when the cars were new from Shelby? The point of the exercise is promoting rental fleet, then only then can Ford's move make sense. It's amusing to see you praise Ford's dumping into the rental fleet after wasting so many electrons on blaming GM management for their retail supply management effort under the constraints imposed by UAW.
>Until an illegal person in the country comes to do it at much, much less.
If the jobs are that easy, I say, let the cats and dogs do it, and let's all sit back and relax. Cheers! :-)
The pony car fans know that you don't know what you're talking about. When Shelby returned to modifying Mustangs last year, it was after a 35-year absence. The last time they built a car together, Tricky Dick was president, we were in Vietnam and gas was less than thirty cents a gallon.
Why this exercise? To get people to go to Hertz, just like I said.
The article above makes it fairly clear that you were wrong -- the goal is to create buzz to drive purchases.
Ford's plan is to create several special editions in order to milk the car for what it's worth. (I would gather that it also being used to promote the new Shelby Mustangs, which are somewhat replacing Saleen's status as the Mustang tuner of note.)
Given that they'll probably recoup most, if not all of the entire cost of developing the cars at auction, Ford has little to lose and a fair bit to gain. Much cheaper than buying into a losing car company, only to have the deal crash-and-burn just a few years later.
Since filing for bankruptcy Delphi has sponsored two cruises for auto dealers and sales people selling auto accessories. 1.2 million down to .8 million estimated cost.
Anyone see a double standard in this?
This is reported in today's Dayton Daily Nothing from the Detroit Free Press.
2014 Malibu 2LT, 2015 Cruze 2LT,
If the trips cost $1 Million each but they generates $50 Million in continuing sales and $3 Million in profits then this 'extravegence' is certainly justified.
It's the way all business is done.
Rocky
In a letter dated April 13, 2006, Sen. John Edwards urges Delphi CEO Steve Miller to provide detailed financial information on the company’s proposed wage and benefit cuts and facility closings to its employees, unions, retirees and communities and to implement any necessary changes gradually, so that all stakeholders have time to adjust.
Read the full text of the letter here (PDF 70KB).
Here's a real patriot standing up against the corporate cowards :shades:
My future Candidate for president.
Rocky
http://www.uaw.org/
do nit know if Aura does but go to a Toyota dealership and try to find a Camry with Nav in it.
Not speculation. GM has announced and stated many times. That is one reason Buikc will have only 3 vehicles next year.
Where in the heck did you read that Buick was only going to have 3 vehicles next year ? :confuse:
Rocky
P.S. I haven't heard anything about the Aura having or not having a Navigation system.
Of course this guy does not go into the positive stuff that could be there like , well, I am sure someone can fill that in!
LaCrosse
Lucerne
Enclave (replaces the now old Rendezvous and temporary Rainier and also the minivan)
Funny how a lot said in this forum is correct. Just that folks are too one sided to see the others view point is often also correct.
Buick is being partnered with GMC and Pontiac ASAP. GM is reducing the number of overlaps in these stores. Buick does not need a truck or minivan to keep the combined stores viable like they did to keep the single Buick stores in business.
Again, it doesn't address all of the issues that impact a company's ability to make money, such as effective brand management or selling products that people want. You still haven't shown us why anybody under age 70 is going to want to buy a Buick, given their design and features.
It's the way all business is done.
Of course, that's the correct answer. An expense that creates value, whether directly or indirectly, is a worthwhile expense.
That car must have been a non-union project. Now the Citation, that was a UAW car.
Rocky
And I'll certainly agree with you about Smith
Most accounting studies show that the UAW contract gives GM/Ford/DC a $1,200 - $2,000 higher cost per vehicle than Toyota, Honda or Hyundai.
That is a big spread, and means that even if GM/Ford/DC built cars as good as the competition they can't stay in business.
Something obviously you haven't considered.
Rocky
I've already documented abundantly throughout this thread that the greatest "legacy cost" to GM is its profound inability to sell cars at the same wholesale prices as its rivals. The discrepancy between GM and Toyota is about $5,000.
I've also illustrated that Toyota's and Nissan's per-vehicle operating costs are actually above those of GM's. So GM actually spends less money building its cars, not more. I've further shown that you could pass the entire legacy cost burden from GM to Toyota, yet Toyota would be profitable while GM would still be losing money. So the legacy cost issue is not the matter of "simple economics" that some what would like to portray.
The revenue discrepancy is, by far, the largest financial gap between GM and its rivals. GM's PR department is doing a fine job of its most recent initiative to blame the workforce for management's mistakes, but the brand killing comes from the top.
While I can't blame GM for wanting to cut its benefits costs, the company will not become competitive until it makes better products and produces them more efficiently. Attacking workers and their morale isn't going to make the products more desirable to purchase than they are now.
Has the ORIGINAL NEED for the UAW ceased to exist?
Given the contentiousness between labor and management, much of which is fed by management, I'd say that the answer to that is probably "no".
Let's ask ourselves what these companies would do in the absence of the unions. I'd say that a good proxy for this would be to look to what companies such as GM do with their suppliers: squeeze their margins, demand continuous price cuts, and otherwise conduct business in a win-lose fashion. (Given the accountant's mentality pervasive at GM, this is not surprising.)
I suspect that the line workers would suffer pretty much the same fate, while the product and design issues would remain unaddressed. If I was a blue-collar employee at GM, I wouldn't want to give up the union, either -- for someone concerned with his economic wellbeing, it would be foolish to do so. After all, what evidence is there that GM would become more competitive if the workers willingly made the sacrifices demanded?
Rocky
'd say that a good proxy for this would be to look to what companies such as GM do with their suppliers: squeeze their margins, demand continuous price cuts, and otherwise conduct business in a win-lose fashion
I used be in sales in the computer industry and Bethelem Steel (before they went bankrupt) was my largest customer. My God, I hated that place. The purchasing dept., didn't give a rats [non-permissible content removed] whether I made a profit or not and demanded low prices and unreasonably high service. They were generally always 180days out in payment and they were a million dollar plus account. They were close to 50% of my sales, 15% of my commissions, and the root cause of 90% of my headaches.
That place was one bad attitude after another. You couldn't pay me enough to work in that environment. I'm sure being a supplier to GM is even worse.
GM not only practices supplier squeeze, it much pretty much invented the game. This article from Automotive Industries illustrates how pervasive this has been among the Michigan automakers (and mind you, this was written during 2001 when times for GM were better than they are today).
Take a look at how badly the major US automakers handle these relationships, it makes you more sympathetic to what it must be like to be an employee within that same environment. Says one supplier:
"There is zero partnership, zero trust. They just don't believe what we tell them. But isn't it ironic that it's only true for GM, Ford and DaimlerChrysler? Look at a contract with Toyota or Honda. It's just one sheet with an addendum page. Here's a Ford contract -- look at it. It's 30 pages. The GM contract is 26 pages, and DC's is 24. Most of it is legal-speak, but it translates to why they don't trust you."
He says it works both ways, though. "When you are spending dollars to put engineers and systems and tooling in place, who do you want to work with? It's not the domestics."
Now contrast this with the transplants. Perhaps this is why they can operate in the US without a union, while the domestics cannot:
Our roundtable execs said that aside from the costly legal wranglings they go through with the domestic OEMs, there is also money lost in partnership compared to the Japanese. By one supplier's account, his relationship with Honda is rewarding and based on mutual trust. He offers that Honda is difficult to land as an account. But once you are partners, Honda will help you with any delivery, quality or pricing problems that come up.
"They are great to work with and so is Toyota," confirms another VP. "They believe in you and they work with you. They are crystal clear on their financial objectives; they are clear on how you score in their rating system. They are methodical, consistent and, most important, they are honest. You can set up a game plan that will exist for years."
Dennis Pawley, who also headed Mazda's U.S. manufacturing operation, says the difference in the Japanese approach and the domestic approach is probably the most troubling factor for him.
"This scares me to death because the people who are sitting back and rubbing their hands with glee about all this are Toyota and Honda," he laments. "Ten years ago the Japanese were kicking our [non-permissible content removed], so we took a lot of work we were doing inside and put it outside and drove down our cost structure. Now we are going back and biting the hands that fed us. We are putting demands on suppliers that can't take it on. Our cost structure will get worse while the Japanese's structure will get better. One day they will come in and wipe us all out of business."
Rocky
This contrast says plenty about the state of automaking in the U.S. these
days. Struggling American parts suppliers, such as Delphi, Visteon and
Dana, are in the midst of a sweeping migration to greener pastures
overseas. While shutting plants in the U.S., they are adding to plants
overseas. With those, they either supply foreign automakers in their home
countries or make low-cost parts to ship stateside.
Meanwhile, foreign suppliers like Bosch of Germany and Denso of Japan have
followed European and Asian automakers to the U.S. as the those firms build
more vehicles here. In 1994, 109 of the 150 biggest suppliers to North
American factories were in the U.S., according to James Rubenstein, a
geography professor at Miami University in Ohio. By 2004 only 68 were.
"It's just a big role reversal," says James Gillette, an auto- supplier
analyst with CSM Worldwide.
Look at Delphi, the former General Motors unit now in bankruptcy. From 2002
through 2004 Delphi's revenues abroad grew 45 percent to $9 billion, while
North American revenues fell 9 percent to $20 billion. Much of Delphi's
U.S. business is unprofitable, since its factories here are old, their
labor costs high and their operations labor intensive. And its biggest
customer, GM, is shrinking. Delphi's fast-growing international operations
lend some hope to creditors awaiting a reorg. Delphi Chief Robert (Steve)
Miller's recently announced restructuring plan would close or sell most of
its U.S. factories, leaving the company with just 8 here and 130 abroad.
The foreign-owned supplier giants are joining their main European and Asian
customers in the U.S. Last year these companies built 4 million cars in the
U.S., up from 3.2 million in 2002. The foreign suppliers choose to move
here to dodge tariffs, currency swings and transportation costs. But they
also mitigate the higher labor costs, often by setting up in the South,
where unions aren't always welcome.
Smaller overseas suppliers gain cheap entrée by buying struggling U.S.
factories. Spain's Corporación Gestamp bought an Alabama factory in 2004
that the now-failed Oxford Automotive built to supply a nearby
Mercedes-Benz plant. Last year India's Bharat Forge bought Federal Forge of
Lansing, Mich. China's Asimco bought a Livonia, Mich. maker of engine
mounts. By and large, the phoenixes rising from these ashes are nonunion.
That's not an opinion, that's a fact. GM does not sell cars for the same wholesale prices as does its rivals, in large part because of fleet sales. (And the issue is not one of MSRP -- manufacturers sell at wholesale, not at window sticker.)
This is clearly demonstrable by taking the revenues of each automaker's vehicle divisions, and dividing that amount by the quantity of vehicles sold or produced. No mystery about it, the math is obvious. Have you read the annual reports of both companies?
Poor quality can be overcome with strategic marketing (Harley Davidson is the classic example) and is not necessarily a doomsday scenario. Thus, I do not see any reason to run out and try to compete with Toyota on a perceived reliability basis. On the other hand, high fixed costs affect everything about a company. The bean counters at headquarters factor those fixed costs every year and reduce budgetary allocations for needed items like new equipment, R&D, etc. Additionally, it promotes spending to the budgetary limit within local departments every year as was addressed in earlier posts because operations are always in emergency mode. Treating high fixed costs as not the primary reason for GM's woes is like trying to medically treat malaria based upon the symptoms and not the parasite. In the end, it does boil down to very simple economics. The only way to resolve GM's issues now would be through marketing and proper availability (ie high mpg) for the upcoming energy shortages and standard of living reductions coming to the US in the years to come. This would mean GM would have to do everything they haven't done in years past. The biggest problem for GM now is the reliability issue. Offering industry leading warranties and fixing repairs after the existing warranties have expired would go a long way. If the UAW agrees to retirement concessions, these efforts might allow GM some low loss years until the retiress die off.
Perhaps you should. (And more to the point, you should compare its report to those of its rivals.) Ignore some of the superfluous management commentary and get out your calculator, and you can see that the differences between GM and its superior competition goes well beyond legacy costs.
On the other hand, high fixed costs affect everything about a company.
Yes, they necessitate higher prices to achieve the margins needed to cover those expenses. I provided Starbucks as an easy-to-comprehend example of a business with a signficant cost structure that also happens to dominate its business. It spends more, because it gets more by doing so.
And I've already shown that Toyota spends more than GM on building each car, so GM is already beating Toyota in that regard. The key difference is that Toyota sells cars that retail consumers want, which means that the wholesale price isn't subject to fleet discounting in as many instances.
It is a classic trap for accountants to fall into a pennywise/pound-foolish cost-slashing strategies. If you cut an expense by one dollar, but lose two dollars in revenue as a result, that creates a net loss, not a net profit.
Around 2,800 workers at Ford Motor Co. have accepted buyout offers this year from the Dearborn automaker, which is slimming down its North American manufacturing operations.
Among them are 800 workers at plants formerly owned by parts supplier Visteon Corp. that Ford took back as part of a bailout deal for its onetime subsidiary.
The number of hourly workers who have agreed to take buyouts comes to 4,300 to date, including 1,500 at former Visteon plants who accepted early-retirement offers last fall. In addition, Ford has cut nearly 4,000 white-collar U.S. jobs, including contract positions, in the first quarter of this year.
Like crosstown rival General Motors Corp., Ford is offering buyouts to shrink its North American hourly work force and restore its U.S. operations to profitability.
Ford wants to cut the number of its U.S. factory jobs by 30,000, or more than a third, from the 87,000 now employed, over the next six years. During that time, it plans to close seven assembly plants and an equal number of parts plants.
The automaker began offering five different buyout packages to workers at certain plants either slated for closure or considered overstaffed in mid-January. By the end of March, about 2,000 workers at its Edison, N.J.; Lorain, Ohio; and St. Louis assembly plants had accepted offers, Ford spokeswoman Marcey Evans said.
The majority took buyouts designed for workers eligible for retirement or nearing retirement age, while 670, or about a third, opted for $100,000 lump-sum offers or packages featuring education benefits.
"If you're talking three plants in a short period, it sounds like it's a pretty healthy number," said David Healy of Burnham Securities.
Of the workers at former Visteon plants who have taken buyouts, 43 percent chose the lump-sum or educational buyout, said Della DiPietro, spokeswoman for Automotive Components Holdings LLC, a Ford unit.
Ford has no intention of matching GM's move to offer buyouts to all of its U.S. hourly employees, as well as many of those at Delphi Corp., GM's former parts subsidiary. Ford executives say their strategy allows the automaker to target facilities that are overstaffed or slated for closure.
It has announced plans to close assembly plants in Norfolk, Va.; St. Paul, Minn.; St. Louis; Atlanta; and Wixom. It is also closing Batavia Transmission in Ohio and Windsor Casting in Ontario.
The automaker expects to announce the closures of two more North American assembly plants and five more parts plants.
Eligible hourly workers may choose from five buyout offers. Workers 55 and older who have 30 or more years with the company can receive a $35,000 check and begin retirement with full benefits. Workers 50 or older with 10 or more years seniority receive a fixed income for life, though not as much as they would get through normal retirement. A pre-retirement program for workers with 28 years of service allows them to take leave -- during which they would receive 85 percent of their pay -- until they reach 30 years of service.
This year, Ford added two buyout offers of a less traditional nature: a $100,000 payment for workers who agree to leave and forgo all benefits except pensions they have accrued, and an educational opportunity program. It provides workers with at least one year of seniority as much as $15,000 a year for tuition to an accredited school for up to four years, plus full medical benefits and half their regular pay while they attend school.
Rocky
Rocky
Now that it is so bad the union has agreed to allow a few changes. To survive they must stop the job banks and high benefits.
Of course this is only one side of the way out. They have been improving the quality which is what caused buyers to leave in the first place. Now they have to improve the product with less money per car to spend.
Rocky