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Why American Companies in the Automobile Arena are Losing Money?

J

jrubio

#1
Why american companies in the Automobile arena are losing Money when they are the best sellers?.

The number shows:

RANK NAME
COUNTRY
INDUSTRY
SALES ($BIL)
PROFITS ($BIL)
ASSETS ($BIL)
MARKET VALUE ($BIL)

526 General Motors United States Consumer durables 192.60 -10.60 475.28 11.49

1061 Delphi United States Consumer durables 27.20 -6.37 17.21 0.18

1346 Visteon United States Consumer durables 16.98 -0.27 6.74 0.60

Except Ford.

See the link (Ranking)

Ranking Forbes Automobile industries. The World's Biggest Public Companies
 
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Jen Kirley

Quality and Auditing Expert
Staff member
Admin
#2
Lots of reasons combined.

High costs of doing business here include labor, but much else is not discussed.

Ford blames high gas prices for its contraction, but what does that mean? I asked my husband, who's not involved with this group, and he said it's really down to a failure to make a good mix of appealing cars that inspire consumer confidence. Their F series trucks have always been good and Mustang sales are strong, but this market can only comprise a certain portion of American sales. Now that costs finally factor in the average consumer's daily decisionmaking, they are deciding to buy smaller, more economical cars.

It isn't all about the gas costs. Truck tires cost twice or more what car tires do, a regular expense that just adds to the budget. Ford's repair record for its smaller cars isn't good so why stay loyal to the name and Made In USA label--especially now that Japanese carmakers have US plants?

The US carmakers were bitten by this same problem in the 1970s. The fact they didn't connect the dots (oil consumption by develping countries, for one thing) and forsee low gas prices wouldn't last is purely their own fault.
 
D

DsqrdDGD909

#4
Why american companies in the Automobile arena are losing Money when they are the best sellers?.

The number shows:

RANK NAME
COUNTRY
INDUSTRY
SALES ($BIL)
PROFITS ($BIL)
ASSETS ($BIL)
MARKET VALUE ($BIL)

526 General Motors United States Consumer durables 192.60 -10.60 475.28 11.49

1061 Delphi United States Consumer durables 27.20 -6.37 17.21 0.18

1346 Visteon United States Consumer durables 16.98 -0.27 6.74 0.60

Except Ford.
One of the biggest reason is health care and retirement costs. I believe the number is $2,000/car in additional costs in legacy health care.
 
R

roland_lu

#5
May I add that the extremely powerful unions is one of the reasons?

I read from news report some time ago that the operators whose only responsibility is to drive the cars down the assembly line to the parking lot can make something like USD 60k plus, just because they are protected by the unions. Until today, I still have hard time believe the number.
 

Coury Ferguson

Moderator here to help
Staff member
Super Moderator
#6
May I add that the extremely powerful unions is one of the reasons?

I read from news report some time ago that the operators whose only responsibility is to drive the cars down the assembly line to the parking lot can make something like USD 60k plus, just because they are protected by the unions. Until today, I still have hard time believe the number.
It is most likely true. That amount does not surprise me. The Unions were needed during the early years. I believe they have gotten a little out of Control. I have nothing against Unions, in fact I am a ex Teamster. I do know even though employee's may get a large increase in their pay rate, it just increases the Union Dues.

So is the extra money really benefiting the employees?
 
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Jen Kirley

Quality and Auditing Expert
Staff member
Admin
#7
I agree that unions have had an adversarial relationship with management, but in my view it takes two to make this kind of dysfunctional affair.

I'd like to humbly suggest that $60K isn't as big a wad of money as people seem to think. Factor in any manner of things gone wrong and the money gets sucked right down the drain. In a family of four there's a lot that can go wrong.

My heart also hardens to the persistent whine of high labor costs when considering the executive pay and bonuses, including retirement and even when being fired for poor performance. :nopity:

In my estimation the cost of recalls should be shifting the focus a tad bit away from labor burdens. My husband used to work as a dealership mechanic, whereupon I would get some insider information. :mg:

So unions make a good target but IMO there's more than one problem at work here by far.
 
D

David Hartman

#8
I agree that unions have had an adversarial relationship with management, but in my view it takes two to make this kind of dysfunctional affair.

I'd like to humbly suggest that $60K isn't as big a wad of money as people seem to think. Factor in any manner of things gone wrong and the money gets sucked right down the drain. In a family of four there's a lot that can go wrong.

My heart also hardens to the persistent whine of high labor costs when considering the executive pay and bonuses, including retirement and even when being fired for poor performance. :nopity:

In my estimation the cost of recalls should be shifting the focus a tad bit away from labor burdens. My husband used to work as a dealership mechanic, whereupon I would get some insider information. :mg:

So unions make a good target but IMO there's more than one problem at work here by far.
Jennifer,

I agree that there is more than one problem that needs to be addressed in order to develop an adequate solution (and that is why the U.S. auto industry is still floundering), but if I may point out that the main concern is a lack of profit. If I needed to increase my profit level there are several things that I would look at and one of them would be my payroll.

I have used our local GM plant's 2005 figures for "number of employees" and "payroll" and did the calculations (P/#E) and found that the average annual income for an employee equates to $89,900. Yes I realize that this includes the Plant Manager's (and other salary personnel) salary, but the number of hourly employees far outweighs the number that are on salary.

This is in a community where the next best employer (by wage) pays no more than $33,000 per year to an hourly employee, and the majority of employers would not pay more than $19,000 per year.

Where is the justification for paying a janitor at the GM plant $60k+ and yet paying a janitor at another factory in town only $14.5k?

I must agree that $60k a year is not all that much, but the majority of our community is surviving on much, much less.
 
D

David Bear - 2010

#10
I can think of many reasons American automobile companies are failing. I don't see why it took so long. I also don't see why they can't rebound.

1. The Quality ratings on many of the "foreign" cars has been judged superior for many years. (ex. Toyota Camry, Honda Civic)

2. Poor aesthetic design. Why would you buy an American car that looks just like the foreign car if the quality of the foreign car is better? In the 60s and 70s, looking at a new Camaro, GTO, Mustang, etc. would make your heart race. Has anyone gotten excited about the looks of a Ford Taurus? Does your car look different from anything else in the parking lot? The new Mustangs and 2007 Camaros - they get you excited! The Americans appear to be learning.

3. Lack of common platforms/engines. I had a Toyota Celica with a 22R engine. Replacement parts were extremely cheap. I only needed 3 socket sizes (metric) to disassemble the entire engine. The Chevy and Buick I owned required multiple guesses to pick a socket size. Sensors were very expensive to replace. They seemed to be different each year. American manufacturers are making huge improvements, but they are way behind the Japanese in this area.

4. Trying to put a car/truck in EVERY market segment. Why did Cadillac make the Cimarron? If I wanted a cheap car, I'm perfectly capable of buying the car from another division of GM. Why does GM sell any poorly designed cars? If they can't design a great $25,000 coupe for Saturn, don't make it. Sell consumers on a $25,000 Buick coupe or something similar. If Chevrolet makes 3 great cars/trucks and 2 pieces of crap, consumers will remember the crap. American auto companies dug theirselves a grave by building mediocre cars just to fill in market segments. They are now paying for the lack of consumer confidence.:nope:

5. UAW - The union wages are ridiculously high. I read the average GM employee makes $65,000/yr + overtime which is often over $100,000/yr. Their retirement health care benefits exceed $2000/employee. I've been working as an engineer for over a decade and don't bring home nearly as much money as my Ford assembly line neighbors. I have a friend with an engineering degree and an MBA who was very happy to give that up to make more money on the assembly line at Ford.:yes: Ford and GM are both making progress in this area. The solution seems to be to shut down much of their North American production and build the cars/trucks elsewhere. The UAW isn't giving them much of a choice.
 
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