-The Beetle is an icon, with one of the best marketing campaigns ever seen in the US market.
Good marketing does not make a good vehicle. My 65 VW was junk. Not reliable and got lousy gas milage. Lot's of things are Icons without being universally accepted as good. I don't care for Elvis, never thought he could sing. The new beetle sold well because a lot of baby boomers thought it was cool. The ultimate retro car. Perhaps a bit youthful for them (now that they are in BMW's) but great for their kids.
I think we'd all be better off if VW had left the American market. Overpriced and unreliable only survives in a market where status thrives.
Personally I thought the Vega with the aftermarket V* was pretty cool. Other than that I saw no use for it.
I think the Unions and management need to share the blame for the demise of GM. Maybe Toyota can do a buy out ans save the jobs?
"What the Big 3 should have done was to fight them on the beaches and push them back into the sea." "It isn't enough to sell products, an effort has to be made to keep rivals from gaining strength." "GM, as the owner of over half of US market share, would quickly have found the Department of Justice Anti-Trust Division on its back if the management ever uttered these words."
Well I'm not saying GM management is smart but I don't think they would say those words. However there would be nothing wrong with a strategy that says we'll build a better car in this market than the Japanese and they will not be able to survive in our market. GM could have fought then head on and won.
But unless the product is so fantastic that it sells itself, every product needs to be well marketed. (Not necessarily advertised, but certainly promoted.)
I'd say that GM actually has been most guilty in believing that marketing is a substitute for quality. The GM strategy was to build a third-rate product, and think that it had more appeal by selling the same dreck under multiple names.
At least VW managed to pave the way to make a car that could achieve cult status in a positive way. But similarly to GM, it has taken many steps backwards in the North American market despite once being the dominant import, with product quality being its greatest reason for losing customers. It, too, should have been effective in limiting Toyota to remain as a minor player in the US market, but failed to do so thanks to Rabbits and Dashers that people remember almost as fondly as they do Vegas and Pintos.
I have serious doubts that today's MB are "the most reliable ever". I suspect I could take a properly maintained 15-20 year old E class and have no more problems than a new one fresh off the lot. MB used to be ahead of the competition...the cars required more servicing than simpler cars, but they didn't fail so often, didn't have the glitches so many do now.
So dodgy old Euro cars are the fault of unions now? Care to document this wild claim? And please work in the facts that middle class Europe really didn't become motorized until after the war...was it a supply or demand issue? There weren't queues of people lining up for Ford Ys and Standard 9s...there just wasn't a mass of demand for private vehicles. Many didn't have the money and many didn't care to own a car. Different societies, different industries, apples to oranges.
Is there any evil that in your eyes is not caused by a union? It's very amusing sometimes. You obviously memorized a lot of stuff in school, but I don't know how much of this industry you've really decided to know.
I don't drive an extra distance to any store. If it's not convenient, I don't patronize. What facts lead you to believe that a supposed "free market" will put someone other than the established elite in power? Why do you think that these forces will act with any measure of ethics and responsibility?
He offered the wage so he could produce a mass of consumers to buy his products. Funny how that works...most employees of mass market producers will patronize their employer if they can afford to. His efficiencies enabled him to price his cars so much lower and produce at such a volume that he could easily eat the costs of paying an actual livable wage, and in turn produce more consumers of his products and others. A different form of "trickle down" theory I suppose...and one that actually benefits people. His wage was more than double the competition, it had nothing to do with some kind of labor shortage. Henry got wackier as he aged, but this $5 idea was a winner. This type of thinking - paying people more than a poverty wage - is what has made the US as great as it is.
So which force acts as the check-and-balance in your utopia? Corporate interests? I feel no better selling my soul to a corporate suit than I do to a union boss.
"It's absolutely critical that they do more in Mexico, a heck of a lot more," said David Healy, a Sierra Vista, Ariz.-based analyst for Burnham Securities Inc. "They pay way too much for labor in the U.S."
Ford's move to Mexico could have the added benefit of stemming some of the tide of immigrants coming across our borders. They get cheaper labor and take some of the heat off the Congress and Administration.
Can't disagree with the man. With the "global" economy, it is practically impossible to find something "Made in the USA" these days. Other industries have evolved and the auto industry must follow.
I've tended to think for quite awhile that Mr. Brightness makes up a lot of the info he posts. His ignorance of some of the most basic things in the automotive world is nothing short of astounding.The Vega beat the Beetle in quality? Maybe in its last couple of years of production.Maybe. But the damage had been done at that point. I'm not trying to insult anyone here.It's just that some people around here need to do there homework.
"Unfortunately for them, the Detroit automakers' large size and long history of minimal competition made them fat and complacent, and left them with poor managers who were inexperienced in building new markets and who had grown accustomed to success achieved with minimal effort. They inherited the whole thing, and like any second-rate rich kid living on inherited wealth, all they knew how to do was to squander it."
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You know, I've never really thought of it that way... But now that I think about it, you're thoughts on that matter really hit the nail on the head.
Japanese cars of the 70's were known for rusting fast anyway..... Regardless how little you think of the Vega, it beat the original Beetle handsdown, both in quality and sales.
The rust on Japanese cars in the '70's was NOTHING like the rust on the Vega. I had a friend who worked a year at McDonald's to buy a brand new 1974 Vega, with cash. After only two years (in Southern Cal, no snow or salt on roads) the thing had HOLES around the windows from rust. The Vega was a nice looking piece of SH*T.
Myself, I spent $670 for a used '66 VW beetle. I sold that same car in 1992 with 235K miles on it. My friend's Vega died in 1979 with engine failure at 55K miles.
That one car caused GM to lose at least two (and probably more) sales for life - me, my friend, and many members of his family. Talk about penny-wise and pound-foolish on GM's part. Multiply that story by thousands of people over the years and you know why GM is where it is. You're in denial if you think GM did well in the '70's and the Japanese cars were junk.
"The fact of the matter is, in the low end of the market, price is king; mfrs with low labor cost has tremendous advantage."
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If low labor costs were the end-all and be-all that allowed for automakers to sell cheap cars...
Then how is it that Volkswagen will be selling it's 'not de-contented' VW Golf MkV (aka - the Rabbit) stateside at the low price of $14,900?
With a radio, A/C, airbags, Stability Control, 5-speed transmission (manual AND/OR automatic), etc, etc, etc, etc. And all the while manufacturing the Golf (or Rabbit, as it'll be known stateside) in Wolfsberg, Germany.
Whereas GM cannot offer a small car with comparable power, quality, and equipment at the same price?
According to your view, since VW has the higher labor cost, this is patently impossible. (German labor unions verse the UAW, who really has the lower cost of labor? News at eleven!)
But it's going to happen within a month or so (if it hasn't happened already, vwvortex forums have some who have already pre-ordered their Rabbit).
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Labor cost's really do help a company sell products at a lower price. But it's not as critical as you make it out to be. After all, if it was so critically important, Honda would not be able to sell it's Civic, as the Hyundai Elantra is cheaper. The same for the Toyotas Corolla verse the Kia Spectra.
A well-designed car with good handling/power, exterior/interior, and reliability (for it's market segment) all at a price similar to it's competition will win the day.
Honda knows this. Toyota knows this. VW, after it's reliability disaster in its Brazilian manufacturing, now knows this. Chrysler even seems to be figuring it out.
But does GM?
Given it's past history, the answer doesn't look good.
RCA sent me to school in TN for 14 weeks in 1973. I rented a brand new Vega wagon. It looked good. Over the 14 weeks I put 13k miles on that car. It was rattling and making strange noises before the end. It was maintained per schedule. I would never consider owning one after that rental experience. It was a classic POC. I owned a 1967 Bug when I went to Alaska in 1970. It was a much better car. The only complaint was the heater with that air cooled engine. Best 2WD car on snow bar none.
I like GM trucks, never bought a new GM car. I have not wanted one since the 1957 Nomad.
If low labor costs were the end-all and be-all that allowed for automakers to sell cheap cars...
Then how is it that Volkswagen will be selling it's 'not de-contented' VW Golf MkV (aka - the Rabbit) stateside at the low price of $14,900?
Exactly right. Of course, there's more to it than that. Honda, Toyota, Nissan, Mitsubishi, Hyundai, Mazda, BMW, and Mercedes, among others have all built plants in the US and/or Canada, despite the high labor costs.
Labor costs are obviously not a deterrent for these companies. They could have readily shipped all of their production to Mexico or China, but they didn't, and for good reason.
One primary reason is because the automakers build a product that is complex enough that they need workers who are sufficiently educated to be trained to do the work. While Mexico and China are currently low-cost producers, they are less consistent in their ability to produce quality manufactured products.
VW took the low cost method by shifting production to Puebla, but this has come at a high price -- it has taken them years to get the QC to even passable levels, and its US market share has not been immune to the reliability issues. (Not that it always does a fantastic job in Europe, either, but that's another story...)
Unlike many manufactured goods, the most expensive aspect of automaking is in the parts and materials, not the labor. And while the labor is costly, the lack of an educated workforce would be even more costly, given the thousands of parts and many man-hours needed to build a car.
So how you explain the following? 1. GM's Hamtramck plant in 1984 was the most automated plant in the world, employing the latest production technology. Yet it obviously did not work out. 2. Southwest Airlines is one of the most unionised airlines in the US, yet very successful.
Clearly, Unions have to share the blame when the failure is on a scale that GM is experiencing. But are they the only reason?
Autoworkers were making way beyond poverty wages even before Henry Ford's $5 per day offer. Automaking was the most productive/high margin line of work at the time, like internet software engineers of the lat 1990's. Ford's main problem with its production line method was high worker turn over rate. He offered $5 day in order to retain workers. $5 was a lot of money back then. A model T only cost $300, and 90% of all cars being produced in the world were model T's in its hey days in the late 1910's and around 1920. If today's new car aveage price is about $24k, 1/60th of that makes $5 back then equivalent to about $400 today in today's terms! That's $50/hr. Yes, autoworkers were being paid like internet software engineers of the late 1990's. Indeed, you are correct that it was trickle-down economics at work. Higher worker productivity in the competitive market place leads to higher pay for workers; otherwise workers would simply go to the higher bidder.
The little bit about Henry Ford raising pay because he wanted his employees to be able to afford the product was part of Henry's propaganda projecting his "benevalence." Tens of millions of Model T's were made; employee ownership could not have accounted for more than a tiny per centage. The reality was that Ford was losing workers because production line jobs were boring and tedious compared to old fashioned workshops. He had to pay more.
The check-and-balance in a competitive market place is provided by competing alternative offers. Ford could not keep wage down at $2-3 per day and expect to keep workers because there were other employers willing to pay the same or more and offer a job that was more comfortable or rewarding. The beauty of competitive market place is that you do not have to sell your soul to anyone. Keep your own soul, and pick and choose what you like to serve you. Model T accounted for 90% of all cars being made in the world by the mid-to late 1910's, yet within less than a decade after that both GM and Chrysler had surpassed Ford in sales because the paternalistic Henry thought he knew what consumers wanted and refused to change. That was competitive market place at work. Paternalistic and anachronistic unions held onto power for 70 years because they owned the workers, body and soul, Whereas paternalistic and anachronistic capitalist like Henry Ford could not even hold onto market dominance for a decade thanks to market competition.
What did I make up? This latest repsonse of yours is further evidence that you are very gullible to media hype, and lacking independent judgement based on raw facts.
"Youth/gateway car" is marketing-speak for cheap car. Youth usually do not buy "youth cars." They want bling. The mature practical types buy economy "youth cars."
The difference you are trying to say about old Beetle vs. Vega was pure media spin. Vega was a far more advanced car than the old Beetle, far more reliable and far safer. The difference in media hype was that some brash lawyer with an axe to grind targetted the 800lb domestic auto industry and gave a free pass to all imports. The old Beetle sales was stopped in the US because it could not meet federal safety standards of the early 1970s! A Pinto was probably safer than an old Beetle; a Vega was far safer.
You are also incorrect about New Beetle saving VW in the US. New Beetle was not here untill the 1998 model year. VW was already on a rebound by the early mid 90's, with the new A4 and Passat, which was marketed as an exercise of A4/A6 parts bin. VW/AudiUSA is one of those companies that live off suckers of every generation. Wait for a few years (or a decade), and another generation is born oblivious of just how bad their products are.
A model T only cost $300, and 90% of all cars being produced in the world were model T's in its hey days in the late 1910's and around 1920. If today's new car aveage price is about $24k, 1/60th of that makes $5 back then equivalent to about $400 today in today's terms! That's $50/hr.
It's comments such as these that shows me that you just make this stuff off the top of your head.
Case in point: Here is inflation data from the Bureau of Labor Statistics that shows inflation indexes from 1913 up to now.
Ford introduced the $5 day in January 1914. -The CPI index (based upon 1982-1984 equalling 100) for Jan. 1914 was 10. -The CPI index for this month is 202.5
What that means is that the $5 day of 1914 is equivalent to a $101 day in 2006.
If Ford workers had an 8-hour day (and it may have been longer than that in 1914), then that works out to be $12.65 per hour.
Of course, this makes sense. They've had a few raises since 1914, as we all know.
And you should have known this. After all, you have been arguing that the unions drive up labor costs to an unreasonable level throughout the thread, yet the math in your last post is effectively claiming that they've actually had a pay cut.
In case you did not know, official CPI has been understating inflation for years if not decades due to "hedonistic adjustment." For example, if Dells sells a computer twice as powerful this year as last year but at the same price, somehow the corresponding official CPI component is adjusted downwards by 50% because of it. How does that make sense? Can you get half a computer?
In any case, I was talking about the relative value of a particular line of work compared to average lines of the work at the time. An autoworker in 1910 was commanding the kind of salary premium that a software engineer in the 1990's did. Using the car price to wage ratio was probably far more relevant to the discussion than some suspect CPI number. Over time, as an industy loses its leading edge status, the workers (and management for that matter) lose their salary premium vs. other even newer industries. That's how the market place re-allocates human resources from obsolete industries to new productive ones. Unions get in the way of that process, and lock workers into obsolete jobs.
"Youth/gateway car" is marketing-speak for cheap car. Youth usually do not buy "youth cars." They want bling. The mature practical types buy economy "youth cars."
See, this is another example of how you simply make up "facts" to suit your own convenience.
If you read the industry trades, you would know that Toyota had these goals with the Echo. This wasn't spin used to market the cars to buyers, but a business strategy understood by those in the business. From a 1999 article from Ward's Dealer Business:
Toyota Motor Corp. knows that if it doesn't find a way to appeal to young buyers, its future is bleak. One of Toyota's little secrets is that the average age of its buyers is disturbingly Buick-like.
To address that problem, Toyota is looking to lure Generation Xers, as well as those coming up behind them, with a new direction from its product lineup that it hopes will appeal to young needs and slim cash flow. The best example is the '00 entry-level Echo sedan, expected to be priced around $12,000, which is considerably less than Toyota's segment-leading Corolla.
High-tech Echo arrives with a completely new platform and a new direction in passenger compartment packaging. Nearly every component is new and shared with no other vehicle. What Echo does share Toyota's initiative to develop a highly efficient "world" car for youth markets.
That's not spin used to sell cars, that is a sober article aimed at a professional audience that discusses the company's plans for the product.
As it turns out, TMC missed the mark in its segmentation strategy. The Echo sold in reasonable numbers, but Echo buyers actually worsened TMC's aging demographic problem, which is not particularly good news for Toyota's long term prospects. If you read publications such as Ward's, you will see that Scion was created as an attempt to succeed where the Echo failed, this point is well understood and not really subject to debate. (You can argue whether or not it is working, but you can't refute that this was a primary goal.)
It would help if you provided references and links to support your arguments going forward, so that we don't spend more time discussing the validity of your allegations than we do the topic at hand.
(And yes, when it comes to things such as inflation data above, I'm going to believe a credible third-party source before I believe some anonymous dude on the internet.)
1. A chain is only as strong as its weakest link. Hamtramck is not a brand in its own right. Consumers simply do not know or do not care to know whether a GM vehicle is made in in Hamtramck or elsewhere.
2. Southwest _was_ very successful thanks to a docile union. LUV stock has not made any headway since early 2001.
Of course unions are not the only reason for GM's failures. It may not even be biggest reason: monetary reality far beyond the control of either GM management or union may indeed have a lot to do with this. For example, few raises chicken, farm corn/wheat, make cars or even consumer goods in the middle of NYC ever since railroad and interstate highway made transportation of these goods into NYC feasible. Money centers make money instead of goods; the opportunity cost of maintaining a life style in the money center is way to high to accommodate the drudery of making commodidized goods; specialized goods and services that can only be made locally command much higher return on capital and labor; if your line of work does not make a lot money you can not afford to live there, not without subsidy anyway. The US is the money center of the world.
That being said, it's ludicrous to suggest that unions are blameless in this, especially the shattered dreams of cushy retirement by hundreds of thousands and the taxpayer bills that will eventually pay for some of the promised retirement benefits.
For crying out, if that article is not spin, what is?? It's obviously a hack piece put together at the behest of Toyota itself, with a wink . . . typical trade rag stuff. If it were a real sober article should have mentioned that Echo was the result of a TMC study on how to make a car with the cheapest parts at the lowest spec, instead of all this nonsense talk about "completely new platform."
BTW, even this article says "it [toyota] hopes will appeal to young needs and slim cash flow." Notice the "and"; i.e. youth needs is not the exclusive aim. In any case, it hardly matters whether Toyota marketted the car to the youth or to the poor or to the rich who do not want to spend money on cars. All it mattered was that it was a car designed to do battle with the likes cheap Korean imports in the lower teens. It failed miserably because Japanese labor cost was a lot higher than Korean; to compensate for that in a small car, Echo had to cut numerous corners . . . the result was a car with poor value proposition, just like GM management realized more than three decades ago. All the "youth" or not hype is competely irrelevent. There were only two types of people who mattered to Echo: (1) those spent $12k on the car; (2) those spent $12k on a competitor. Debating buyer age is about as relevant as debating how many angels can dance on the tip of a pin . . . all hype no substance.
The details of CPI caculation and hedonic adjustment are quite beyond the scope of this discussion, but if you are interested in the subject on why the numbers are suspect, here's a beginner's link: http://www.kitco.com/ind/Puplava/jun242005.html
In any case, to get a feel of just how much wage premium $5 a day represented, one has to compare it to then prevailing wage, not some CPI adjusted value some 90 years later. Are you so naive as to believe anyone or any methodology can accurately account for inflation over 90 year time span?? And how is today's wage level revelant to what was offered on the streets of Detroit 90 years ago?
For crying out, if that article is not spin, what is?
It's obvious what it is -- it's TMC telling you what their product plan was for the Echo back during its introduction.
The sales that have occurred since then provide further data, and we all know that Toyota's plan didn't work. TMC has already admitted failure with its plan for the car in stories subsequent to this. This has been egg on Toyota's face, and they've effectively conceded this point.
You don't seem to grasp that "spin" is defined as when someone tries to sell bad news as good news. This is the precise opposite of that -- Toyota admitted that things didn't work out as planned, a rather honest admission of a mistake that GM would never have conceded. (It makes me think of what happened with the GTO -- cut sales projections by about one-third, then follow up by saying that sales are going as expected!)
The funny thing is that vis-a-vis spin, the biggest spin of all is this "legacy costs" argument as an excuse for GM's lack of revenue, as if pension requirements caused American buyers to prefer Hondas to Chevys. If you want to study spin doctoring, you'll find a lot more of it coming out of Detroit than you will out of Toyota City.
$15k for a car with less than 100" wheelbase is not cheap at all. There are quite a few different Chevy models under $15k that are much bigger cars. Honda Accord Value Package only costs $1k more, and that's a car two sizes bigger.
What you are missing is that both Civic and Corolla have moved out the bottom end of the market due to high Japanese labor cost compared to the newer entrants. Civic and Corolla once occupied markets where you find Accent and Rio now.
So in other words, even you admit that the Ward's article was just parotting what TMC marketting material said. How can you then call it a credible source?
Calling cheap-[non-permissible content removed] budget special "completely new platform" is also spin, trying to sell the bad news of really cheaply engineered car as "new" therefore implied to be improved and good.
Labor/Legacy cost obviously matters for revenue. Echo sales werepoor because the car had to be engineered to compensate for high labor cost. Don't tell me Toyota geniuses hand-picked dummies for the Echo project. You seem to have a firm belief that management, designers and engineers can build cars in complete vaccum unfettered by cost or capital/human-capital availability issues. Echo is a clear case that proved you wrong.
I doubt any 15-20 year old model of any make can be statisticly more reliable after 15-20 years of service than new cars. MB was ahead of competition, and now it's behind. It was MB management's claim that their cars are made to higher manufacturing standards today than ever before, not mine.
Prior to WWII, European workers' unions were very much against production line methods. That's the reason behind high cost of European cars before WWII. High cost obviously led to lower ownership rate. French union influence was so strong that they even stopped the adoption of production line methods in their combat aircraft industry, with dire consequence in 1940.
Rest assured, union is only one form of monopoly. There are other monopolies and market inefficiencies.
I don't drive an extra distance to any store. If it's not convenient, I don't patronize.
So, do you order everything delivered to your house? I only do that when I'm really out of time . . . in any case, I'm quite aware that's not how most Americans live, just by the size of crowds at big stores on weekends.
What facts lead you to believe that a supposed "free market" will put someone other than the established elite in power?
Well, since we are talking about the auto industry, Henry Ford was a rural farm hand . . . Walter Chrysler was a janitor . . . Knudsen (Sloan's successor) was a Nordic (Danish??) immigrant . . . Competitive market place provides opportunity for upward mobility. On the other hand, who gets to exercise the monopolistic powers such as regulation and unions? Of course the established elite themselves and their offsprings. Just look at the familiar family names in our nation's politics (both parties) and the third-generation union leaders.
Why do you think that these forces will act with any measure of ethics and responsibility?
We should not entrust any power to act with ethics. Whose standards of ethics and responsible to whom?? Power corrupts. That's why each participant in the market place should only be allowed very limited power (the less the better), and check-and-balance each other in a symmetric fashion. The best antidote to a worker's plight is another employer willing to pay more, and because the new employer is a symmetric entry with no special privileges, when he gets greedy, there is naturally another waiting on the wings to out-compete him with no special appointment necessary, unlike the multi-layers regulators that inevitably result in societies that believe in government interventions in details.
That's just a flawed argument, and I don't mean anything personal by that. Ford more than DOUBLED his competitors...why would he do that unless he suspected some other economic benefits? Ford was hated by the robber barons and other fatcats of his day for paying a living wage. And comparing a Model T to the "average" new car today is just hilarious...a Model T was as barebones then as it is now...a Model T might be a basic Aveo now, certainly not a well-equipped 24K Camcord. The T was bottom of the line, the butt of jokes. More apples to oranges.
Looking at the people and forces running the market now, I see no reason why "competing offers" wouldn't compete to drive wages down over time. These people don't have a great track record for acting with foresight or accountability.
Properly maintained, a car like a 124 is amazing. I've seen these engines hit 300K with no significant work done, and still running excellently. There are no "statistics" on the current reliability of 20 year old cars, not to mention anything convincing about current models, so that point is moot. My knowledge and experience lets me know all I need about said vehicles. You said you agree with MB management. It doesn't matter who made the claim...you support it. And I find the claim dubious at best. Go talk to an independent MB mechanic about which models to avoid...he won't bash the older ones...
"That's the reason behind high cost of European cars before WWII."
Many of these cars were not expensive...there was just little demand for a private vehicle until well past the war, as technology and purchasing power both increased. A private car was a massive lifestyle change for many people at that time, and it simply was not demanded until later. Unions did not cause this. It was a different world.
"Well, since we are talking about the auto industry"
Any examples from the past 75 years? It's a different scheme now...cronyism drives things more than anything else. Look at the corporate elite.
"Of course the established elite themselves and their offsprings.
Why do you think this utopian "free market" will oust these parties from power and influence? They'll still have control.
"That's why each participant in the market place should only be allowed very limited power "
And who allows this power? Who makes sure one side doesn't attain too much power and special priveleges? Let me guess...the tenuous idea of the marketplace in general is the miracle cure.
"The best antidote to a worker's plight is another employer willing to pay more"
Why do you have faith that this will exist, given current corporate actions?
You read like a slanted econ textbook, or even Ayn Rand's rantings...all theory and no meat.
I'm not sure what wheelbase size has to do with anything.
However, that's not the point.
New car shoppers do not rely soley on price when buying a car. Value is the most important principle. IE, does a Corolla give 'me' more for the price compared to a Civic?
Shoppers really don't simply say, "Hmm, I want a mid-sized car. What is the cheapest? That is what I'll buy."
And for the VW example I gave... To get a Civic, or Corolla, or Mazda3 comparably equipped would result in the new Rabbit being cheaper.
IE, it's a good value for the money. (Possible reliability issues aside - :P )
And GM doesn't do much of a good job in providing value to shoppers. Whereas VW can (in the new Rabbit case), even with higher labor costs.
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BTW - Using Korean manufacturers as an example in comparison to those car manufacturers with unions isn't all that good of an idea.
Korea has possibly has the most militant labor unions in the world. There are nearly guaranteed yearly work stoppages in Korea's car, shipbuilding, iron/steel manufactories with the unions demanding more pay and benefits. Usually the riot police have to be called out to deal with them.
Heck, I can remember one year when all the medical professionals joined in and had a nationwide strike. All the hospitals shut down for a week. (and yes, people died because of it)
Additionally, Korea has a severe lack of natural resources which requires them to import all the raw materials for auto manufacturing.
So, yes, Korea does have a cheaper labor force. But the yearly work stoppages, factory damage from striking workers, and the cost of importing all the raw materials does wonders in offsetting it.
The avearage autoworker was already making $3 a day at the time Henry Ford offered $5. So it was not quite more than doubling. The avearage worker wage of the whole country, not autoworkers, were somewhere between $1-2 a day . . . goes to show my previous point that autoworers were among the best paid already because their industry was at the leading edge of productivity at the time. In any case, it was a significant jump to $5 a day. The economic benefit that Henry Ford had in mind for himself was quite simple: to retain workers for his rather boring and tedious production lines. If Henry's real purpose was to get more of the Model-T produced off the market, all he had to do was giving one to every worker after a year of service; that would save marketting cost too. The reality was that even if every worker were given or puchased a Model-T, it would have made little difference to the total number of Model-T's produced, which went to 10's of millions.
Looking at the people and forces running the market now, I see no reason why "competing offers" wouldn't compete to drive wages down over time. These people don't have a great track record for acting with foresight or accountability.
With all due respect to you as a person, this is a really flawed argument. Employers competing for workers can not possibly compete to drive wages down. If you offer less than other employers in the same labor market, you simply don't get workers. Outsourcing means exiting the competition in the US labor market and compete in the labor markets overseas. Even outsourcing is driving up wages in India and China dramaticly.
As to foresight and accountability, Henry Ford would like to project himself as a sage with foresight and accountability. He may had some once upon a time, but when he lost it, GM and Chryler quickly proved him wrong. It's highly doubtful politicians clamoring for more control and regulation have much foresight or accountability at any time. Those with foresight and accountability historically always advocated smaller government.
See below about your wage claims. A quick trip to google will show just about every source showing a claimed average wage of under $2.50, and I can't find anything showing $3. With all due respect to you as a person, you'll need to get up a little earlier to pull off something like that...
And now they were among the best paid? Compared to? Coal miners or those in a sweatshop?
You're not looking at the big picture. Paying his workers enough to afford his product not only sold his product to his workers, but to others in the economy who suddenly benefitted from this infusion of spending power. It might not have been signficant on a global scale, but Ford didn't pay these people simply to be nice or to compete with other factories...he did it because he saw a long term benefit, he knew his product would get cheaper as volumes increased, which in turn would lower the price again.
"If you offer less than other employers in the same labor market, you simply don't get workers"
And with all due respect, you give a frightening amount of benefit of the doubt to the ethics of these employers. If all employers work to reduce wages, wages will in fact fall. If a worker is dissatisfied with his deteriorating wage, but the competing employer has also lowered his wage, the stage is set.
The foresight and accountability of Ford was never a matter of discussion. He indeed was not impressive in his later years. But that's beside the point. I trust the foresight and accountability of a politician no more than I trust it from a CEO who will represent the "market" in this utopia.
For every car of any model that hits 300k miles, there are at least several having been laid out to the pasture. Independent Mechanics love old cars and want you to buy them because they live off old cars that do not need specialized equipment to fix newer cars. Go check vehicle registeration data, cars of any model have a tendency to drop off after 10-15 years, even MB's and Toyota's. MB's of 20 years ago were already using electronic engine controllers. The circuit boards in the engine compartment do deteriorate with age, and you may just end up stranded by the side of the road even if the engine is mechanically sound.
Europeans were ahead of the Americans at the very start of the auto industry . . . obviously there was demand or the industry would not have started. Henry Ford's production line method was what pulled Americans ahead in terms of ownership. A typical contemporary European car at the time cost more than an order of magnitude (10-20 times actually) more than Model-T. German advance in WWI was stopped by the first motorized infantry of the world when an entire French Corp was transported by the Paris taxicabs to fill a gap in the line. So, obviously, the market for passenger cars were there even for the European life style . . . Cars were just more costly in the post-WWI (not WWII) Europe because they were slow to adopt production line methods: the French had the unions and the German economy was in turmoil in the early 1920's.
Any examples from the past 75 years? It's a different scheme now...cronyism drives things more than anything else. Look at the corporate elite.
The auto industry has not been a freely competitive market place in the last 70-75 years. The last major act of competitive domestic automaking took place about 80 years ago, when GM and Chrysler over took Ford, whose model-T accounted for 90% of worldwide car sales only a few years earlier. Ever since the early 1930's, the domestic auto industry has been dominated by unions, which entrenched the oligopolies because now they no longer competed for labor . . . union rules made sure that no other new domestic entries could really compete because the would be new entrants could not possibly absorb the overhead nor would willing to see their capital investment essentially squattered by unions supported by the government . . . even Chrysler was barely hanging in there ever since the 1950's.
We have to look to other industries for examples of entreprenureship in the last 75 years. There are plenty: HP, DEC, Wang, Sun, SiliconGraphics, MIPS, Compaq, Dell, etc., just to name a few. They were all heavy weights in their industries built by first-generation entreprenuers. Some of them are no longer with us, to make room for even younger generations of entreprenuers. The result is faster and better computers for consumers, far superior to anything coming out of the government-funded research labs of Russia or Japan.
Why do you think this utopian "free market" will oust these parties from power and influence? They'll still have control.
The term "Utopian" is actually far better applied to your vision: that somehow, those in charge of making complicated regulations directly affecting price of labor and products and enforcing those regulations would always be fair-minded; or for that matter, elite and their offsprings should be categorically ousted just because they are erstwhile elites, and that would lead to a fair society.
There is nothing utopian about competitive market place. The market place exists so long as we do not all turn into self-sufficient hermits. There will always be transaction between individual human beings until the human species is extinct. All advocates of free competitive market place are saying is, such transactions should be based on voluntary basis, and individuals should be allowed to shop around. Advocates of the regulatory utopia on the other hand believes that the market place would be better of if some individuals are given special privileges to decide whether transactions between other individuals should take place at all on a routine basis. Now you tell me, which system is more likely to entrench established elite?
There is nothing special about established elite wanting to perpetuate their own privileges and pass onto their children (almost every one of us would do the same in the same shoes; otherwise why do parents bother sending kids to good schools to be apprentice elite??) The key is how exclusively heridatory is the system: do the offsprings gain the privileges by being born or do they have to prove their own worthy and how; do talents born of less prilileged blood get a crack at the system. Free market place tend to make it necessary for the existing elite to prove their own worthy on a constant basis (just look at the near-failure of Ford in Henry's late years, the failure of DEC, Wang, Compaq, MIPS and SGI). Free market place also tend to discover new talents and open the door for them; witness those who vanquished the previous list (Compaq, MIPS and SGI actually killed DEC, and were in turn killed by HP and Dell . . . all six companies founded by first-generation entreprenures, not previously established elite).
What's interesting is that, even without considering any theory, one has to realize that market place was what eventually brought down medieval feudalism: the rise of the merchant class displaced the hereditory privileged class.
If you think American entreprenurial spirit is not as vibrant today as it once was more than 75 years ago, perhaps it's the result of over-regulation? Frankly, nationalistic socialism, with its pipe dreams of elite decision maker that do not have to compete against each other in an open market place, but still taking care of the public at large out of their own benevolence and honesty really does smack of feudalism.
I think he wanted to insure a stable workforce. I would imagine the skill level in 1910 was higher than in todays automated factory. Much more of the car was hand built even with the advent of the assembly line.
I would imagine the skill level in 1910 was higher than in todays automated factory.
Actually, it was probably the opposite. Ford borrowed from Taylor, reducing every worker to one repetitive task with the line moving at a constant rate, with none of the flexible work rules and team building methods introduced by Toyota.
A key difference between now and then is that automaking was much more dangerous, people lost fingers and were hurt by machinery and through industrial accidents more frequently than happens today. One reason that turnover was so high is that people were scared of getting hurt, and Ford had to pay a premium to offset the genuine risk to their personal safety.
Unfortunately, coal mining, textile were the primary forms of other industry that employed a lot of semi-skilled labor at the time (Ford had his own steel-making in-house). Autoworkers were indeed well paid by the standards of the day even before Ford raised their wages.
I may have made a mistake on $2.34 vs. $3, but it was an honest mistake and the exact amount not all that material like I said before; it was still higher than the national average for unskilled and semi-skilled labor of. Remember much of the country were still worked on farms, and that was less than $1 per day, even less than coal mining and sweatshops, which had been at the leading edge of wage premium in the 19th century America. For much of the 19th century, the avearge farm hand (the overwheming majority of workers in America) were paid about $10-15 per month.
Lets look at the big picture indeed. At least we agree that Henry Ford did not pay extra to be nice :-) He was however competing with other factories for workers. The new theory you are proposing that he raised wages in order to let the money flow through the economy and enable more people to buy his cars makes even less sense than giving money to workers for them to buy cars like the original legend proposed. The extra money flowing back to him after filtering through the economy would be less than what he lavished to begin with simply because there are other things to buy and people had saving habits. Put it simply, if that were a workable scheme, Henry could have just given money to anyone and everyone in Detroit, in Michigan or in the whole country to grow his business. Obviously that's a silly way of growing private business, literally akin to the joke about making a small fortune by starting out with a big one! In Kenseayn economics, the government is supposed to be able to grow economy by giving out money only because the government can print money at next to zero cost. Henry did not own the monetary print press, not to mention even the Kenseyan scheme did not even work for the government in the long run, resulting in a huge government debt combined with long term massive inflation. Any "money multiplying" hypothesis in such a give-away scheme would have to rely on fractional-reserve banking, something old Henry disdained; besides, if fractional-reserve banking were to be introduced into the anaylysis, the power of fractional-reserve banking could have been harnessed without giving any money out; leaving the money in the bank and having it lend out to consumers will do even better.
Henry was willing to pay more for very simple reasons: he wanted to lower worker turn-over rate, and drive less efficient competitors out of business by forcing them to either raise wage or lose workers.
If all employers work to reduce wages, wages will in fact fall. If a worker is dissatisfied with his deteriorating wage, but the competing employer has also lowered his wage, the stage is set.
How is it even possible for all employers to act together on wages? If that were possible, wouldn't every worker in every industry be paid the legal minimum wage now? The reality is that, if and when wage drops, there may even be new employers in addition to existing employers.
In contrast, government-driven inflation of currency, thereby lowering the effective wage for everyone, is indeed easily accomplished. That's what happens when we surrender individual decision making to collective decision making.
I trust the foresight and accountability of a politician no more than I trust it from a CEO who will represent the "market" in this utopia.
Well then, you ought to really love the competitive market place like I do :-) Whereas politicians face election only once in two or four years, the competitive market place get voted on every day, every hour, every minute, every second, as each and every consumer vote with their purchase decisions. Any single CEO can hardly represent the "market"; in fact, CEO's of big corporations are probably more akin to political bosses, big ship slow to turn. It's the everyday small decisions that each and everyone of us make indepedently that make the competitive market place efficient. Ford Model T represented 90% of worldwide car sales in its heyday, yet it was surpassed by both GM and Chrysler separately a few years later, courtesey of numerous small decisions made by individual consumers.
Honest mistake on my part. In any case, it was still significantly more money than other forms of unskilled or semi-skilled labor at the time, like farm hands, textile and mining. To what end? I don't think there was any. Even $2.25 per day was a high wage back then; some other sources seem to indicate $2.34 to $2.5. The farm hands made less than $1 a day.
And with all due respect, you give a frightening amount of benefit of the doubt to the ethics of these employers. If all employers work to reduce wages, wages will in fact fall. If a worker is dissatisfied with his deteriorating wage, but the competing employer has also lowered his wage, the stage is set.
"Falling wages is what we've seen over the last 5 or 6 years in the manufactoring sectors" :sick:
One more interesting fact, politicians and big corporate CEO's are often the same people, at different times. Recent CEO's of Goldman Sachs have headed the Treasury Department in both Clinton and Bush administrations. Yet another had bought a Senate seat and recently bought the governorship . . . all within the last decade or so. If we are to surrender our freedom in making our own individual choices in the competitive market place, who do you think will be the regulators and rule setters making the decisions for us?
Various unflattering words like "utopian" and "pipe dream" have been levelled against me and my view on compettive market place. I mean no disrespect here to anyone personally, but doesn't the faith in regulation hinges upon the presumption that saintly regulators can be found to do the job? and at all time, those same levers of monopolistic regulatory power do not fall into the wrong hands?
The buggy whip industry probably faced the same problem after cars came out; typewriter industry too after wordprocessors came out, and wordprocessor makers themselves after general purpose PC became prevalent.
Wheelbase is the most basic characteristic of a car. It's the most important factor in the cost of a platform vs. others for the same manufacturer. Cars with short wheelbases are much cheaper to produce. That's why the typical 2 or 3-sedan lineups from every mfr are usually distinguished by wheelbase length; the old saying being, same sausage in different lengths :-)
People do narrow down their vehicle choices by size and price. Cheapest mid-size cars are indeed very popular; not necessarily cheapest by MSRP, but by monthly payment. I doubt Rabbit will underprice Civic or Corolla comparably equipped when it can be purchased. In any case, reliability is a very important factor for "value" in this segment, at least perceived reliability. If one does not care about reliability (or perceived), there are plenty domestic and Korean choices in this segment that are much less expensive.
Korean carmakers were brought up as an example of how low cost labor can enable a company to succeed in the small car market segment despite competition with stellar reputation. Labor union in Korea is not all that relevant. They can strike 200 day a year if they want to so long as at the end they turn out to make enough cars in time at labor costs significantly lower than Japanese, Toyota and other Japanese makers would still have a nearly impossible task to compete in the small car segment without resorting to cheap labor source themselves. I agree with you that the militant labor union is hurting the Koreans, including the labor themselves. They'd be even more competitive on the world stage without the labor strife.
Korean carmakers were brought up as an example of how low cost labor can enable a company to succeed in the small car market segment despite competition with stellar reputation.
Well, that would explain all those Korean car factories in Alabama.
The Alabama plant makes Sonata (and down the road its platform-mate SUV's), which is two-classes bigger than the small cars like Accent and Rio in the Hyundai-Kia world. Rio used to be one class even smaller not long ago. Hyundai and Kia are cancelling further US production expansion for the time being.
You miss the obvious point. You are constantly harping about labor costs, as if it is the dominant driver of all of the companies, when it clearly is not.
These companies would build all of their operations in low-cost countries such as Mexico if labor costs mattered as much to them as they do to you.
Oddly enough, the firms that have prioritized Mexico as a base of production -- GM, Ford, DCX, and VW -- are the very same firms that are in the most trouble or else have the most mediocre performance. Perhaps that's what happens when management forgets that you can't earn a profit when you don't manage your revenues.
Sometimes the truth isn't flattering. You are a perpetual propaganda machine, giving us all endless theories and wishes. The idealistic libertarian utopia gives no proof that those in control will be any better than those currently in power.
Labor cost is less of an issue for larger cars because the part-count does not not scale with vehicle size or price tag. That's why the domestics focused on larger cars/trucks when they had a labor cost disadvantage, and Toyota has been doing the same thing as Koreans started competing in the bottom end of the market.
There are plenty places in the world besides Mexico that have low labor cost. Korea and China being two of them. Hyundai and Kia produce far higher per centage of their cars in Korea and China than any domestic carmaker in Mexico. Hyundai has no need for Mexico production. It set up shop in Alabama as hedge against currency risk and potential political backlash.
Personal attacks is really not going to carry this discussion very far. The libertarian ideal is actually letting those in control have as little control and as little power as possible. If you can overlook the personal animosity you seem to harbor towards me, I suspect our positions are actually not that far apart.
My position actually requires very little theories or wishes. All it takes is your current level of skepticism of established elite. You are just bogged down by the wishful thinking that somehow an ideal set of elite can be found to make the regulations for us and take care of mankind (as obviously, not everyone can sit around all day making rules and enforcing them, leaving nobody to do any real work; those entrusted with that power in the name of the people is automaticly the new elite). Once you give up that presumption, we will quickly find common ground.
BTW, since you criticized the books that I read, care to share what books you read, and where you got your economic theory?
Dude, this has gone too far. I am honestly quite flattered that you think enough of me to devote what must be inordinate amounts of time in the quest to brainwash myself and all of us into supporting the libertarian economic fantasy, but you don't have to put forth so much work.
I'll chalk up your independent mechanic remarks to simply not having a knowledge of these cars. Not to knock you...but research is a cool thing. I'd wager a 2003 E class will suffer an electronic failure before a 1986 model, both being pressed into normal daily use. Wanna bet?
The European economy at the start of the automobile simply could not support a massive American-style industry. There was demand from the upper crust, nothing else. Do you have data to support your "10-20 times" claim? And the year for which this claim is suggested? 1913 or 1926? Completely different worlds in the development of the auto industry.
" So, obviously, the market for passenger cars were there even for the European life style "
Obviously? Based on what? The conscription of city-dwelling taxis in wartime? Irrelevant.
Look at popular car pricing in the 30s. The differences were not gigantic, yet people across the Atlantic just didn't run to these cars. Society hadn't demanded their use en masse...many places wouldn't gain competent roadway infrastructure until after WWII anyway. There was no demand. People who wanted cars had them.
No industry has been "freely competitive", as your idealistic view of an economy does not exist. Branching off into a discussion of other industries is a nice deflection, but it's not what was asked for.
I'd say your fantastic desired world is a utopia...it has no chance of existing, and it is a supposed paradise for all, where everything falls into balance and everyone wins. It's a plausible as workable communism. Human nature is always going to act as a monkey wrench. There is everything both utopian and fantastic about the marketplace you theorize. There is nothing to support any benefits of this dreamy system, nothing to suggest there would be any benefit for anyone but the already established elite. Again, no meat, all theory.
You should drop your undoubtedly wildly successful small business and become a college prof.
Personal attacks? Where? It's not like I'm lying. I have no animosity towards you personally...in fact, I think you are quite intelligent. I just get worn out by the constant propaganda and the perpetual anti-union diatribes.
I have no faith in an invisbile hand, no faith in those in power to make any decisions that benefit anyone but themselves should all regulations be abolished. Sorry, that's just how I am. I have no ties to unions...I don't work in a union job, none of my immediate family do so or have done so. I just don't see unions as an evil in and of themselves.
It's not cool to ask questions when you don't answer those asked of you. I've likely read many of the same volumes as you, and experienced similar education. The theories just never won me over.
Yeah, a 20-25% is immaterial, it was all a mistake. If I was offered a 25% raise, I'd just shrug my shoulders.
How many farmhands lived in urban areas? And I have to believe that autoworkers were at least somewhat more skilled than those working in textile sweatshops...or why would they be hired? Looks like a different worker, at least somewhat more competent.
If Ford was just competing with others, why did he more than double the existing wage scale? He went a bit overboard, didn't he? He could have accomplished the same damage with less expense. Do you really think he had no plans for his workers to consume his products? Spare me the memorized econ class theories, it's more speculation with no real world reflection. I'll give you credit for one thing though, you really paid attention in school. Kudos to you and your professors.
"How is it even possible for all employers to act together on wages?"
People talk to each other. Some regulation in the market prevents such collusion...make it dog-eat-dog, and I'll wager an awful lot of money we'll lose that.
I still find it endlessly amusing that these horrible organized workers and the unions are responsible for all the evils of this industry, yet the successes of these same workers working in this industry somehow just don't exist. You're a great propaganda artist. To somehow think that this wild plan has any chance in the real world. Entertainment.
Wheelbase is the most basic characteristic of a car. It's the most important factor in the cost of a platform vs. others for the same manufacturer. Cars with short wheelbases are much cheaper to produce.
Sure, that's true. That's why the Lotus Exige is less expensive than a Crown Victoria, and a Ford F-150 is more unaffordable than is a 911...oh, wait a minute, that isn't true, is it?
That's why the typical 2 or 3-sedan lineups from every mfr are usually distinguished by wheelbase length; the old saying being, same sausage in different lengths
Er, you may have forgotten different engines, trim levels and product positioning. If you think that the major differences between a Cobalt and a Cadillac, or a 3-series and a 7-series is the wheelbase, then you might want to read this website and get back to me...
Comments
Good marketing does not make a good vehicle.
My 65 VW was junk. Not reliable and got lousy gas milage. Lot's of things are Icons without being universally accepted as good. I don't care for Elvis, never thought he could sing. The new beetle sold well because a lot of baby boomers thought it was cool. The ultimate retro car. Perhaps a bit youthful for them (now that they are in BMW's) but great for their kids.
I think we'd all be better off if VW had left the American market. Overpriced and unreliable only survives in a market where status thrives.
Personally I thought the Vega with the aftermarket V* was pretty cool. Other than that I saw no use for it.
I think the Unions and management need to share the blame for the demise of GM. Maybe Toyota can do a buy out ans save the jobs?
"It isn't enough to sell products, an effort has to be made to keep rivals from gaining strength."
"GM, as the owner of over half of US market share, would quickly have found the Department of Justice Anti-Trust Division on its back if the management ever uttered these words."
Well I'm not saying GM management is smart but I don't think they would say those words. However there would be nothing wrong with a strategy that says we'll build a better car in this market than the Japanese and they will not be able to survive in our market. GM could have fought then head on and won.
But unless the product is so fantastic that it sells itself, every product needs to be well marketed. (Not necessarily advertised, but certainly promoted.)
I'd say that GM actually has been most guilty in believing that marketing is a substitute for quality. The GM strategy was to build a third-rate product, and think that it had more appeal by selling the same dreck under multiple names.
At least VW managed to pave the way to make a car that could achieve cult status in a positive way. But similarly to GM, it has taken many steps backwards in the North American market despite once being the dominant import, with product quality being its greatest reason for losing customers. It, too, should have been effective in limiting Toyota to remain as a minor player in the US market, but failed to do so thanks to Rabbits and Dashers that people remember almost as fondly as they do Vegas and Pintos.
So dodgy old Euro cars are the fault of unions now? Care to document this wild claim? And please work in the facts that middle class Europe really didn't become motorized until after the war...was it a supply or demand issue? There weren't queues of people lining up for Ford Ys and Standard 9s...there just wasn't a mass of demand for private vehicles. Many didn't have the money and many didn't care to own a car. Different societies, different industries, apples to oranges.
Is there any evil that in your eyes is not caused by a union? It's very amusing sometimes. You obviously memorized a lot of stuff in school, but I don't know how much of this industry you've really decided to know.
I don't drive an extra distance to any store. If it's not convenient, I don't patronize. What facts lead you to believe that a supposed "free market" will put someone other than the established elite in power? Why do you think that these forces will act with any measure of ethics and responsibility?
So which force acts as the check-and-balance in your utopia? Corporate interests? I feel no better selling my soul to a corporate suit than I do to a union boss.
Ford move to Mexico
Ford's move to Mexico could have the added benefit of stemming some of the tide of immigrants coming across our borders. They get cheaper labor and take some of the heat off the Congress and Administration.
I'm not trying to insult anyone here.It's just that some people around here need to do there homework.
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You know, I've never really thought of it that way... But now that I think about it, you're thoughts on that matter really hit the nail on the head.
:surprise:
Regardless how little you think of the Vega, it beat the original Beetle handsdown, both in quality and sales.
The rust on Japanese cars in the '70's was NOTHING like the rust on the Vega. I had a friend who worked a year at McDonald's to buy a brand new 1974 Vega, with cash. After only two years (in Southern Cal, no snow or salt on roads) the thing had HOLES around the windows from rust. The Vega was a nice looking piece of SH*T.
Myself, I spent $670 for a used '66 VW beetle. I sold that same car in 1992 with 235K miles on it. My friend's Vega died in 1979 with engine failure at 55K miles.
That one car caused GM to lose at least two (and probably more) sales for life - me, my friend, and many members of his family. Talk about penny-wise and pound-foolish on GM's part. Multiply that story by thousands of people over the years and you know why GM is where it is. You're in denial if you think GM did well in the '70's and the Japanese cars were junk.
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If low labor costs were the end-all and be-all that allowed for automakers to sell cheap cars...
Then how is it that Volkswagen will be selling it's 'not de-contented' VW Golf MkV (aka - the Rabbit) stateside at the low price of $14,900?
With a radio, A/C, airbags, Stability Control, 5-speed transmission (manual AND/OR automatic), etc, etc, etc, etc. And all the while manufacturing the Golf (or Rabbit, as it'll be known stateside) in Wolfsberg, Germany.
Whereas GM cannot offer a small car with comparable power, quality, and equipment at the same price?
According to your view, since VW has the higher labor cost, this is patently impossible. (German labor unions verse the UAW, who really has the lower cost of labor? News at eleven!)
But it's going to happen within a month or so (if it hasn't happened already, vwvortex forums have some who have already pre-ordered their Rabbit).
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Labor cost's really do help a company sell products at a lower price. But it's not as critical as you make it out to be. After all, if it was so critically important, Honda would not be able to sell it's Civic, as the Hyundai Elantra is cheaper. The same for the Toyotas Corolla verse the Kia Spectra.
A well-designed car with good handling/power, exterior/interior, and reliability (for it's market segment) all at a price similar to it's competition will win the day.
Honda knows this. Toyota knows this. VW, after it's reliability disaster in its Brazilian manufacturing, now knows this. Chrysler even seems to be figuring it out.
But does GM?
Given it's past history, the answer doesn't look good.
RCA sent me to school in TN for 14 weeks in 1973. I rented a brand new Vega wagon. It looked good. Over the 14 weeks I put 13k miles on that car. It was rattling and making strange noises before the end. It was maintained per schedule. I would never consider owning one after that rental experience. It was a classic POC. I owned a 1967 Bug when I went to Alaska in 1970. It was a much better car. The only complaint was the heater with that air cooled engine. Best 2WD car on snow bar none.
I like GM trucks, never bought a new GM car. I have not wanted one since the 1957 Nomad.
Then how is it that Volkswagen will be selling it's 'not de-contented' VW Golf MkV (aka - the Rabbit) stateside at the low price of $14,900?
Exactly right. Of course, there's more to it than that. Honda, Toyota, Nissan, Mitsubishi, Hyundai, Mazda, BMW, and Mercedes, among others have all built plants in the US and/or Canada, despite the high labor costs.
Labor costs are obviously not a deterrent for these companies. They could have readily shipped all of their production to Mexico or China, but they didn't, and for good reason.
One primary reason is because the automakers build a product that is complex enough that they need workers who are sufficiently educated to be trained to do the work. While Mexico and China are currently low-cost producers, they are less consistent in their ability to produce quality manufactured products.
VW took the low cost method by shifting production to Puebla, but this has come at a high price -- it has taken them years to get the QC to even passable levels, and its US market share has not been immune to the reliability issues. (Not that it always does a fantastic job in Europe, either, but that's another story...)
Unlike many manufactured goods, the most expensive aspect of automaking is in the parts and materials, not the labor. And while the labor is costly, the lack of an educated workforce would be even more costly, given the thousands of parts and many man-hours needed to build a car.
1. GM's Hamtramck plant in 1984 was the most automated plant in the world, employing the latest production technology. Yet it obviously did not work out.
2. Southwest Airlines is one of the most unionised airlines in the US, yet very successful.
Clearly, Unions have to share the blame when the failure is on a scale that GM is experiencing. But are they the only reason?
The little bit about Henry Ford raising pay because he wanted his employees to be able to afford the product was part of Henry's propaganda projecting his "benevalence." Tens of millions of Model T's were made; employee ownership could not have accounted for more than a tiny per centage. The reality was that Ford was losing workers because production line jobs were boring and tedious compared to old fashioned workshops. He had to pay more.
The check-and-balance in a competitive market place is provided by competing alternative offers. Ford could not keep wage down at $2-3 per day and expect to keep workers because there were other employers willing to pay the same or more and offer a job that was more comfortable or rewarding. The beauty of competitive market place is that you do not have to sell your soul to anyone. Keep your own soul, and pick and choose what you like to serve you. Model T accounted for 90% of all cars being made in the world by the mid-to late 1910's, yet within less than a decade after that both GM and Chrysler had surpassed Ford in sales because the paternalistic Henry thought he knew what consumers wanted and refused to change. That was competitive market place at work. Paternalistic and anachronistic unions held onto power for 70 years because they owned the workers, body and soul, Whereas paternalistic and anachronistic capitalist like Henry Ford could not even hold onto market dominance for a decade thanks to market competition.
"Youth/gateway car" is marketing-speak for cheap car. Youth usually do not buy "youth cars." They want bling. The mature practical types buy economy "youth cars."
The difference you are trying to say about old Beetle vs. Vega was pure media spin. Vega was a far more advanced car than the old Beetle, far more reliable and far safer. The difference in media hype was that some brash lawyer with an axe to grind targetted the 800lb domestic auto industry and gave a free pass to all imports. The old Beetle sales was stopped in the US because it could not meet federal safety standards of the early 1970s! A Pinto was probably safer than an old Beetle; a Vega was far safer.
You are also incorrect about New Beetle saving VW in the US. New Beetle was not here untill the 1998 model year. VW was already on a rebound by the early mid 90's, with the new A4 and Passat, which was marketed as an exercise of A4/A6 parts bin. VW/AudiUSA is one of those companies that live off suckers of every generation. Wait for a few years (or a decade), and another generation is born oblivious of just how bad their products are.
It's comments such as these that shows me that you just make this stuff off the top of your head.
Case in point: Here is inflation data from the Bureau of Labor Statistics that shows inflation indexes from 1913 up to now.
Ford introduced the $5 day in January 1914.
-The CPI index (based upon 1982-1984 equalling 100) for Jan. 1914 was 10.
-The CPI index for this month is 202.5
What that means is that the $5 day of 1914 is equivalent to a $101 day in 2006.
If Ford workers had an 8-hour day (and it may have been longer than that in 1914), then that works out to be $12.65 per hour.
Of course, this makes sense. They've had a few raises since 1914, as we all know.
And you should have known this. After all, you have been arguing that the unions drive up labor costs to an unreasonable level throughout the thread, yet the math in your last post is effectively claiming that they've actually had a pay cut.
In any case, I was talking about the relative value of a particular line of work compared to average lines of the work at the time. An autoworker in 1910 was commanding the kind of salary premium that a software engineer in the 1990's did. Using the car price to wage ratio was probably far more relevant to the discussion than some suspect CPI number. Over time, as an industy loses its leading edge status, the workers (and management for that matter) lose their salary premium vs. other even newer industries. That's how the market place re-allocates human resources from obsolete industries to new productive ones. Unions get in the way of that process, and lock workers into obsolete jobs.
See, this is another example of how you simply make up "facts" to suit your own convenience.
If you read the industry trades, you would know that Toyota had these goals with the Echo. This wasn't spin used to market the cars to buyers, but a business strategy understood by those in the business. From a 1999 article from Ward's Dealer Business:
Toyota Motor Corp. knows that if it doesn't find a way to appeal to young buyers, its future is bleak. One of Toyota's little secrets is that the average age of its buyers is disturbingly Buick-like.
To address that problem, Toyota is looking to lure Generation Xers, as well as those coming up behind them, with a new direction from its product lineup that it hopes will appeal to young needs and slim cash flow. The best example is the '00 entry-level Echo sedan, expected to be priced around $12,000, which is considerably less than Toyota's segment-leading Corolla.
High-tech Echo arrives with a completely new platform and a new direction in passenger compartment packaging. Nearly every component is new and shared with no other vehicle. What Echo does share Toyota's initiative to develop a highly efficient "world" car for youth markets.
That's not spin used to sell cars, that is a sober article aimed at a professional audience that discusses the company's plans for the product.
As it turns out, TMC missed the mark in its segmentation strategy. The Echo sold in reasonable numbers, but Echo buyers actually worsened TMC's aging demographic problem, which is not particularly good news for Toyota's long term prospects. If you read publications such as Ward's, you will see that Scion was created as an attempt to succeed where the Echo failed, this point is well understood and not really subject to debate. (You can argue whether or not it is working, but you can't refute that this was a primary goal.)
It would help if you provided references and links to support your arguments going forward, so that we don't spend more time discussing the validity of your allegations than we do the topic at hand.
(And yes, when it comes to things such as inflation data above, I'm going to believe a credible third-party source before I believe some anonymous dude on the internet.)
2. Southwest _was_ very successful thanks to a docile union. LUV stock has not made any headway since early 2001.
Of course unions are not the only reason for GM's failures. It may not even be biggest reason: monetary reality far beyond the control of either GM management or union may indeed have a lot to do with this. For example, few raises chicken, farm corn/wheat, make cars or even consumer goods in the middle of NYC ever since railroad and interstate highway made transportation of these goods into NYC feasible. Money centers make money instead of goods; the opportunity cost of maintaining a life style in the money center is way to high to accommodate the drudery of making commodidized goods; specialized goods and services that can only be made locally command much higher return on capital and labor; if your line of work does not make a lot money you can not afford to live there, not without subsidy anyway. The US is the money center of the world.
That being said, it's ludicrous to suggest that unions are blameless in this, especially the shattered dreams of cushy retirement by hundreds of thousands and the taxpayer bills that will eventually pay for some of the promised retirement benefits.
BTW, even this article says "it [toyota] hopes will appeal to young needs and slim cash flow." Notice the "and"; i.e. youth needs is not the exclusive aim. In any case, it hardly matters whether Toyota marketted the car to the youth or to the poor or to the rich who do not want to spend money on cars. All it mattered was that it was a car designed to do battle with the likes cheap Korean imports in the lower teens. It failed miserably because Japanese labor cost was a lot higher than Korean; to compensate for that in a small car, Echo had to cut numerous corners . . . the result was a car with poor value proposition, just like GM management realized more than three decades ago. All the "youth" or not hype is competely irrelevent. There were only two types of people who mattered to Echo: (1) those spent $12k on the car; (2) those spent $12k on a competitor. Debating buyer age is about as relevant as debating how many angels can dance on the tip of a pin . . . all hype no substance.
The details of CPI caculation and hedonic adjustment are quite beyond the scope of this discussion, but if you are interested in the subject on why the numbers are suspect, here's a beginner's link: http://www.kitco.com/ind/Puplava/jun242005.html
In any case, to get a feel of just how much wage premium $5 a day represented, one has to compare it to then prevailing wage, not some CPI adjusted value some 90 years later. Are you so naive as to believe anyone or any methodology can accurately account for inflation over 90 year time span?? And how is today's wage level revelant to what was offered on the streets of Detroit 90 years ago?
It's obvious what it is -- it's TMC telling you what their product plan was for the Echo back during its introduction.
The sales that have occurred since then provide further data, and we all know that Toyota's plan didn't work. TMC has already admitted failure with its plan for the car in stories subsequent to this. This has been egg on Toyota's face, and they've effectively conceded this point.
You don't seem to grasp that "spin" is defined as when someone tries to sell bad news as good news. This is the precise opposite of that -- Toyota admitted that things didn't work out as planned, a rather honest admission of a mistake that GM would never have conceded. (It makes me think of what happened with the GTO -- cut sales projections by about one-third, then follow up by saying that sales are going as expected!)
The funny thing is that vis-a-vis spin, the biggest spin of all is this "legacy costs" argument as an excuse for GM's lack of revenue, as if pension requirements caused American buyers to prefer Hondas to Chevys. If you want to study spin doctoring, you'll find a lot more of it coming out of Detroit than you will out of Toyota City.
What you are missing is that both Civic and Corolla have moved out the bottom end of the market due to high Japanese labor cost compared to the newer entrants. Civic and Corolla once occupied markets where you find Accent and Rio now.
Calling cheap-[non-permissible content removed] budget special "completely new platform" is also spin, trying to sell the bad news of really cheaply engineered car as "new" therefore implied to be improved and good.
Labor/Legacy cost obviously matters for revenue. Echo sales werepoor because the car had to be engineered to compensate for high labor cost. Don't tell me Toyota geniuses hand-picked dummies for the Echo project. You seem to have a firm belief that management, designers and engineers can build cars in complete vaccum unfettered by cost or capital/human-capital availability issues. Echo is a clear case that proved you wrong.
Prior to WWII, European workers' unions were very much against production line methods. That's the reason behind high cost of European cars before WWII. High cost obviously led to lower ownership rate. French union influence was so strong that they even stopped the adoption of production line methods in their combat aircraft industry, with dire consequence in 1940.
Rest assured, union is only one form of monopoly. There are other monopolies and market inefficiencies.
I don't drive an extra distance to any store. If it's not convenient, I don't patronize.
So, do you order everything delivered to your house? I only do that when I'm really out of time . . . in any case, I'm quite aware that's not how most Americans live, just by the size of crowds at big stores on weekends.
What facts lead you to believe that a supposed "free market" will put someone other than the established elite in power?
Well, since we are talking about the auto industry, Henry Ford was a rural farm hand . . . Walter Chrysler was a janitor . . . Knudsen (Sloan's successor) was a Nordic (Danish??) immigrant . . . Competitive market place provides opportunity for upward mobility. On the other hand, who gets to exercise the monopolistic powers such as regulation and unions? Of course the established elite themselves and their offsprings. Just look at the familiar family names in our nation's politics (both parties) and the third-generation union leaders.
Why do you think that these forces will act with any measure of ethics and responsibility?
We should not entrust any power to act with ethics. Whose standards of ethics and responsible to whom?? Power corrupts. That's why each participant in the market place should only be allowed very limited power (the less the better), and check-and-balance each other in a symmetric fashion. The best antidote to a worker's plight is another employer willing to pay more, and because the new employer is a symmetric entry with no special privileges, when he gets greedy, there is naturally another waiting on the wings to out-compete him with no special appointment necessary, unlike the multi-layers regulators that inevitably result in societies that believe in government interventions in details.
Looking at the people and forces running the market now, I see no reason why "competing offers" wouldn't compete to drive wages down over time. These people don't have a great track record for acting with foresight or accountability.
"That's the reason behind high cost of European cars before WWII."
Many of these cars were not expensive...there was just little demand for a private vehicle until well past the war, as technology and purchasing power both increased. A private car was a massive lifestyle change for many people at that time, and it simply was not demanded until later. Unions did not cause this. It was a different world.
"Well, since we are talking about the auto industry"
Any examples from the past 75 years? It's a different scheme now...cronyism drives things more than anything else. Look at the corporate elite.
"Of course the established elite themselves and their offsprings.
Why do you think this utopian "free market" will oust these parties from power and influence? They'll still have control.
"That's why each participant in the market place should only be allowed very limited power "
And who allows this power? Who makes sure one side doesn't attain too much power and special priveleges? Let me guess...the tenuous idea of the marketplace in general is the miracle cure.
"The best antidote to a worker's plight is another employer willing to pay more"
Why do you have faith that this will exist, given current corporate actions?
You read like a slanted econ textbook, or even Ayn Rand's rantings...all theory and no meat.
However, that's not the point.
New car shoppers do not rely soley on price when buying a car. Value is the most important principle. IE, does a Corolla give 'me' more for the price compared to a Civic?
Shoppers really don't simply say, "Hmm, I want a mid-sized car. What is the cheapest? That is what I'll buy."
And for the VW example I gave... To get a Civic, or Corolla, or Mazda3 comparably equipped would result in the new Rabbit being cheaper.
IE, it's a good value for the money. (Possible reliability issues aside - :P )
And GM doesn't do much of a good job in providing value to shoppers. Whereas VW can (in the new Rabbit case), even with higher labor costs.
---
BTW - Using Korean manufacturers as an example in comparison to those car manufacturers with unions isn't all that good of an idea.
Korea has possibly has the most militant labor unions in the world. There are nearly guaranteed yearly work stoppages in Korea's car, shipbuilding, iron/steel manufactories with the unions demanding more pay and benefits. Usually the riot police have to be called out to deal with them.
Heck, I can remember one year when all the medical professionals joined in and had a nationwide strike. All the hospitals shut down for a week. (and yes, people died because of it)
Additionally, Korea has a severe lack of natural resources which requires them to import all the raw materials for auto manufacturing.
So, yes, Korea does have a cheaper labor force. But the yearly work stoppages, factory damage from striking workers, and the cost of importing all the raw materials does wonders in offsetting it.
Looking at the people and forces running the market now, I see no reason why "competing offers" wouldn't compete to drive wages down over time. These people don't have a great track record for acting with foresight or accountability.
With all due respect to you as a person, this is a really flawed argument. Employers competing for workers can not possibly compete to drive wages down. If you offer less than other employers in the same labor market, you simply don't get workers. Outsourcing means exiting the competition in the US labor market and compete in the labor markets overseas. Even outsourcing is driving up wages in India and China dramaticly.
As to foresight and accountability, Henry Ford would like to project himself as a sage with foresight and accountability. He may had some once upon a time, but when he lost it, GM and Chryler quickly proved him wrong. It's highly doubtful politicians clamoring for more control and regulation have much foresight or accountability at any time. Those with foresight and accountability historically always advocated smaller government.
The avearage autoworker was already making $3 a day at the time Henry Ford offered $5. So it was not quite more than doubling.
Yet a bit of quick research turns up this from the Michigan Historical Museum:
At the time, workers could count on about $2.25 per day, for which they worked 9-hour shifts.
Again, you've exaggerated the data (in this case, by 33%), and to what end? Take a bit more care in your research, please.
And now they were among the best paid? Compared to? Coal miners or those in a sweatshop?
You're not looking at the big picture. Paying his workers enough to afford his product not only sold his product to his workers, but to others in the economy who suddenly benefitted from this infusion of spending power. It might not have been signficant on a global scale, but Ford didn't pay these people simply to be nice or to compete with other factories...he did it because he saw a long term benefit, he knew his product would get cheaper as volumes increased, which in turn would lower the price again.
"If you offer less than other employers in the same labor market, you simply don't get workers"
And with all due respect, you give a frightening amount of benefit of the doubt to the ethics of these employers. If all employers work to reduce wages, wages will in fact fall. If a worker is dissatisfied with his deteriorating wage, but the competing employer has also lowered his wage, the stage is set.
The foresight and accountability of Ford was never a matter of discussion. He indeed was not impressive in his later years. But that's beside the point. I trust the foresight and accountability of a politician no more than I trust it from a CEO who will represent the "market" in this utopia.
Europeans were ahead of the Americans at the very start of the auto industry . . . obviously there was demand or the industry would not have started. Henry Ford's production line method was what pulled Americans ahead in terms of ownership. A typical contemporary European car at the time cost more than an order of magnitude (10-20 times actually) more than Model-T. German advance in WWI was stopped by the first motorized infantry of the world when an entire French Corp was transported by the Paris taxicabs to fill a gap in the line. So, obviously, the market for passenger cars were there even for the European life style . . . Cars were just more costly in the post-WWI (not WWII) Europe because they were slow to adopt production line methods: the French had the unions and the German economy was in turmoil in the early 1920's.
Any examples from the past 75 years? It's a different scheme now...cronyism drives things more than anything else. Look at the corporate elite.
The auto industry has not been a freely competitive market place in the last 70-75 years. The last major act of competitive domestic automaking took place about 80 years ago, when GM and Chrysler over took Ford, whose model-T accounted for 90% of worldwide car sales only a few years earlier. Ever since the early 1930's, the domestic auto industry has been dominated by unions, which entrenched the oligopolies because now they no longer competed for labor . . . union rules made sure that no other new domestic entries could really compete because the would be new entrants could not possibly absorb the overhead nor would willing to see their capital investment essentially squattered by unions supported by the government . . . even Chrysler was barely hanging in there ever since the 1950's.
We have to look to other industries for examples of entreprenureship in the last 75 years. There are plenty: HP, DEC, Wang, Sun, SiliconGraphics, MIPS, Compaq, Dell, etc., just to name a few. They were all heavy weights in their industries built by first-generation entreprenuers. Some of them are no longer with us, to make room for even younger generations of entreprenuers. The result is faster and better computers for consumers, far superior to anything coming out of the government-funded research labs of Russia or Japan.
Why do you think this utopian "free market" will oust these parties from power and influence? They'll still have control.
The term "Utopian" is actually far better applied to your vision: that somehow, those in charge of making complicated regulations directly affecting price of labor and products and enforcing those regulations would always be fair-minded; or for that matter, elite and their offsprings should be categorically ousted just because they are erstwhile elites, and that would lead to a fair society.
There is nothing utopian about competitive market place. The market place exists so long as we do not all turn into self-sufficient hermits. There will always be transaction between individual human beings until the human species is extinct. All advocates of free competitive market place are saying is, such transactions should be based on voluntary basis, and individuals should be allowed to shop around. Advocates of the regulatory utopia on the other hand believes that the market place would be better of if some individuals are given special privileges to decide whether transactions between other individuals should take place at all on a routine basis. Now you tell me, which system is more likely to entrench established elite?
There is nothing special about established elite wanting to perpetuate their own privileges and pass onto their children (almost every one of us would do the same in the same shoes; otherwise why do parents bother sending kids to good schools to be apprentice elite??) The key is how exclusively heridatory is the system: do the offsprings gain the privileges by being born or do they have to prove their own worthy and how; do talents born of less prilileged blood get a crack at the system. Free market place tend to make it necessary for the existing elite to prove their own worthy on a constant basis (just look at the near-failure of Ford in Henry's late years, the failure of DEC, Wang, Compaq, MIPS and SGI). Free market place also tend to discover new talents and open the door for them; witness those who vanquished the previous list (Compaq, MIPS and SGI actually killed DEC, and were in turn killed by HP and Dell . . . all six companies founded by first-generation entreprenures, not previously established elite).
What's interesting is that, even without considering any theory, one has to realize that market place was what eventually brought down medieval feudalism: the rise of the merchant class displaced the hereditory privileged class.
If you think American entreprenurial spirit is not as vibrant today as it once was more than 75 years ago, perhaps it's the result of over-regulation? Frankly, nationalistic socialism, with its pipe dreams of elite decision maker that do not have to compete against each other in an open market place, but still taking care of the public at large out of their own benevolence and honesty really does smack of feudalism.
I think he wanted to insure a stable workforce. I would imagine the skill level in 1910 was higher than in todays automated factory. Much more of the car was hand built even with the advent of the assembly line.
Actually, it was probably the opposite. Ford borrowed from Taylor, reducing every worker to one repetitive task with the line moving at a constant rate, with none of the flexible work rules and team building methods introduced by Toyota.
A key difference between now and then is that automaking was much more dangerous, people lost fingers and were hurt by machinery and through industrial accidents more frequently than happens today. One reason that turnover was so high is that people were scared of getting hurt, and Ford had to pay a premium to offset the genuine risk to their personal safety.
I may have made a mistake on $2.34 vs. $3, but it was an honest mistake and the exact amount not all that material like I said before; it was still higher than the national average for unskilled and semi-skilled labor of. Remember much of the country were still worked on farms, and that was less than $1 per day, even less than coal mining and sweatshops, which had been at the leading edge of wage premium in the 19th century America. For much of the 19th century, the avearge farm hand (the overwheming majority of workers in America) were paid about $10-15 per month.
Lets look at the big picture indeed. At least we agree that Henry Ford did not pay extra to be nice :-) He was however competing with other factories for workers. The new theory you are proposing that he raised wages in order to let the money flow through the economy and enable more people to buy his cars makes even less sense than giving money to workers for them to buy cars like the original legend proposed. The extra money flowing back to him after filtering through the economy would be less than what he lavished to begin with simply because there are other things to buy and people had saving habits. Put it simply, if that were a workable scheme, Henry could have just given money to anyone and everyone in Detroit, in Michigan or in the whole country to grow his business. Obviously that's a silly way of growing private business, literally akin to the joke about making a small fortune by starting out with a big one! In Kenseayn economics, the government is supposed to be able to grow economy by giving out money only because the government can print money at next to zero cost. Henry did not own the monetary print press, not to mention even the Kenseyan scheme did not even work for the government in the long run, resulting in a huge government debt combined with long term massive inflation. Any "money multiplying" hypothesis in such a give-away scheme would have to rely on fractional-reserve banking, something old Henry disdained; besides, if fractional-reserve banking were to be introduced into the anaylysis, the power of fractional-reserve banking could have been harnessed without giving any money out; leaving the money in the bank and having it lend out to consumers will do even better.
Henry was willing to pay more for very simple reasons: he wanted to lower worker turn-over rate, and drive less efficient competitors out of business by forcing them to either raise wage or lose workers.
If all employers work to reduce wages, wages will in fact fall. If a worker is dissatisfied with his deteriorating wage, but the competing employer has also lowered his wage, the stage is set.
How is it even possible for all employers to act together on wages? If that were possible, wouldn't every worker in every industry be paid the legal minimum wage now? The reality is that, if and when wage drops, there may even be new employers in addition to existing employers.
In contrast, government-driven inflation of currency, thereby lowering the effective wage for everyone, is indeed easily accomplished. That's what happens when we surrender individual decision making to collective decision making.
I trust the foresight and accountability of a politician no more than I trust it from a CEO who will represent the "market" in this utopia.
Well then, you ought to really love the competitive market place like I do :-) Whereas politicians face election only once in two or four years, the competitive market place get voted on every day, every hour, every minute, every second, as each and every consumer vote with their purchase decisions. Any single CEO can hardly represent the "market"; in fact, CEO's of big corporations are probably more akin to political bosses, big ship slow to turn. It's the everyday small decisions that each and everyone of us make indepedently that make the competitive market place efficient. Ford Model T represented 90% of worldwide car sales in its heyday, yet it was surpassed by both GM and Chrysler separately a few years later, courtesey of numerous small decisions made by individual consumers.
"Falling wages is what we've seen over the last 5 or 6 years in the manufactoring sectors" :sick:
Rocky
Various unflattering words like "utopian" and "pipe dream" have been levelled against me and my view on compettive market place. I mean no disrespect here to anyone personally, but doesn't the faith in regulation hinges upon the presumption that saintly regulators can be found to do the job? and at all time, those same levers of monopolistic regulatory power do not fall into the wrong hands?
People do narrow down their vehicle choices by size and price. Cheapest mid-size cars are indeed very popular; not necessarily cheapest by MSRP, but by monthly payment. I doubt Rabbit will underprice Civic or Corolla comparably equipped when it can be purchased. In any case, reliability is a very important factor for "value" in this segment, at least perceived reliability. If one does not care about reliability (or perceived), there are plenty domestic and Korean choices in this segment that are much less expensive.
Korean carmakers were brought up as an example of how low cost labor can enable a company to succeed in the small car market segment despite competition with stellar reputation. Labor union in Korea is not all that relevant. They can strike 200 day a year if they want to so long as at the end they turn out to make enough cars in time at labor costs significantly lower than Japanese, Toyota and other Japanese makers would still have a nearly impossible task to compete in the small car segment without resorting to cheap labor source themselves. I agree with you that the militant labor union is hurting the Koreans, including the labor themselves. They'd be even more competitive on the world stage without the labor strife.
Well, that would explain all those Korean car factories in Alabama.
These companies would build all of their operations in low-cost countries such as Mexico if labor costs mattered as much to them as they do to you.
Oddly enough, the firms that have prioritized Mexico as a base of production -- GM, Ford, DCX, and VW -- are the very same firms that are in the most trouble or else have the most mediocre performance. Perhaps that's what happens when management forgets that you can't earn a profit when you don't manage your revenues.
There are plenty places in the world besides Mexico that have low labor cost. Korea and China being two of them. Hyundai and Kia produce far higher per centage of their cars in Korea and China than any domestic carmaker in Mexico. Hyundai has no need for Mexico production. It set up shop in Alabama as hedge against currency risk and potential political backlash.
My position actually requires very little theories or wishes. All it takes is your current level of skepticism of established elite. You are just bogged down by the wishful thinking that somehow an ideal set of elite can be found to make the regulations for us and take care of mankind (as obviously, not everyone can sit around all day making rules and enforcing them, leaving nobody to do any real work; those entrusted with that power in the name of the people is automaticly the new elite). Once you give up that presumption, we will quickly find common ground.
BTW, since you criticized the books that I read, care to share what books you read, and where you got your economic theory?
I'll chalk up your independent mechanic remarks to simply not having a knowledge of these cars. Not to knock you...but research is a cool thing. I'd wager a 2003 E class will suffer an electronic failure before a 1986 model, both being pressed into normal daily use. Wanna bet?
The European economy at the start of the automobile simply could not support a massive American-style industry. There was demand from the upper crust, nothing else. Do you have data to support your "10-20 times" claim? And the year for which this claim is suggested? 1913 or 1926? Completely different worlds in the development of the auto industry.
" So, obviously, the market for passenger cars were there even for the European life style "
Obviously? Based on what? The conscription of city-dwelling taxis in wartime? Irrelevant.
Look at popular car pricing in the 30s. The differences were not gigantic, yet people across the Atlantic just didn't run to these cars. Society hadn't demanded their use en masse...many places wouldn't gain competent roadway infrastructure until after WWII anyway. There was no demand. People who wanted cars had them.
No industry has been "freely competitive", as your idealistic view of an economy does not exist. Branching off into a discussion of other industries is a nice deflection, but it's not what was asked for.
I'd say your fantastic desired world is a utopia...it has no chance of existing, and it is a supposed paradise for all, where everything falls into balance and everyone wins. It's a plausible as workable communism. Human nature is always going to act as a monkey wrench. There is everything both utopian and fantastic about the marketplace you theorize. There is nothing to support any benefits of this dreamy system, nothing to suggest there would be any benefit for anyone but the already established elite. Again, no meat, all theory.
You should drop your undoubtedly wildly successful small business and become a college prof.
I have no faith in an invisbile hand, no faith in those in power to make any decisions that benefit anyone but themselves should all regulations be abolished. Sorry, that's just how I am. I have no ties to unions...I don't work in a union job, none of my immediate family do so or have done so. I just don't see unions as an evil in and of themselves.
It's not cool to ask questions when you don't answer those asked of you. I've likely read many of the same volumes as you, and experienced similar education. The theories just never won me over.
How many farmhands lived in urban areas? And I have to believe that autoworkers were at least somewhat more skilled than those working in textile sweatshops...or why would they be hired? Looks like a different worker, at least somewhat more competent.
If Ford was just competing with others, why did he more than double the existing wage scale? He went a bit overboard, didn't he? He could have accomplished the same damage with less expense. Do you really think he had no plans for his workers to consume his products? Spare me the memorized econ class theories, it's more speculation with no real world reflection. I'll give you credit for one thing though, you really paid attention in school. Kudos to you and your professors.
"How is it even possible for all employers to act together on wages?"
People talk to each other. Some regulation in the market prevents such collusion...make it dog-eat-dog, and I'll wager an awful lot of money we'll lose that.
I still find it endlessly amusing that these horrible organized workers and the unions are responsible for all the evils of this industry, yet the successes of these same workers working in this industry somehow just don't exist. You're a great propaganda artist. To somehow think that this wild plan has any chance in the real world. Entertainment.
Sure, that's true. That's why the Lotus Exige is less expensive than a Crown Victoria, and a Ford F-150 is more unaffordable than is a 911...oh, wait a minute, that isn't true, is it?
That's why the typical 2 or 3-sedan lineups from every mfr are usually distinguished by wheelbase length; the old saying being, same sausage in different lengths
Er, you may have forgotten different engines, trim levels and product positioning. If you think that the major differences between a Cobalt and a Cadillac, or a 3-series and a 7-series is the wheelbase, then you might want to read this website and get back to me...