Tough Times at U.S. Makers of Auto Parts

[aNoodle]

"The shrinkage in the customer base of General Motors and the Ford Motor Company has long squeezed their Midwestern suppliers large and small. But in the last year, the outlook has become much grimmer for the largest domestic suppliers, Delphi and Visteon, which were spun off half a decade ago by G.M. and Ford....

"This month Delphi said that it would shed 3,000 jobs in the United States and another 5,500 in Europe. That is on top of the more than 9,000 jobs the company already cut this year, largely in the Midwest. Visteon is offering buyouts to its 8,300 domestic salaried workers but has not said how many have accepted the offers...

"It's very hard to keep jobs here," he said, citing rising health care, pension and litigation costs as crucial disadvantages. The nation's medical system is seen as particularly unsuited for preserving jobs. G.M., Ford, Delphi and Visteon compete against companies based in nations with socialized health care and thus far lower costs. G.M. spends $1,400 per assembled vehicle in the United States on health care, more than it spends on steel."
http://www.nytimes.com/2004/12/24/business/worldbusiness/24auto.html

 

[epj3]

So are they going to blame this on foreign manufacturers again like they did in the late 70's to japanese cars? Just to cover their lack of a quality product that stopped selling well??

 

[codex57]

Sure that stuff make a difference, but what it all boils down to is whether you build a good car or not. Nissan was bleeding money when they had good, but not remarkable cars. They produce some worthy of some excitement, and suddenly they're back making a profit. Crazy turnaround.

It's all about the product. You produce a Camry (boring, yet very good car), you make a ton of profit. You produce a Taurus (boring, but not a good car), then you've got some problems.

 

[epj3]

Sure that stuff make a difference, but what it all boils down to is whether you build a good car or not. Nissan was bleeding money when they had good, but not remarkable cars. They produce some worthy of some excitement, and suddenly they're back making a profit. Crazy turnaround.

It's all about the product. You produce a Camry (boring, yet very good car), you make a ton of profit. You produce a Taurus (boring, but not a good car), then you've got some problems.

Wasn't the tarus one of the best selling cars ever

 

[aNoodle]

"And a domestic worker would still be 10 times as expensive as a worker in Mexico and 12 to 13 times a typical industry worker in Shanghai, according to figures provided by Delphi."

"G.M. spends $1,400 per assembled vehicle in the United States on health care, more than it spends on steel."

These are not insubstantial differences.

 

[Bryan330i]

I think the bottom-line problem is quality. The $1,400.00 does seem substantial but does become a lot less significant when looking at the huge rebates, discounts, and cut rate financing domestics need to offer to generate sales. Look at the financing rates for excellent credit offered by Toyota, Honda and other imports compared to domestics that make little if anything from financing.

I talked to a guy from GMAC in late 2001 and he told me that GM makes $2,000.00-3,000.00 less in average financing charges than do most import companies. This is just salt in the wound of the required price cut to get the car sold.

Look at the selling price (what you must pay to buy the vehicle) of a Toyota Sequoia and similar imports and the finance rate for excellent credit, compare this to the Expedition and Tahoe with manufacturers financing.


2005 Toyota Sequoia 4x4 Limited V8
MSRP Price: $47,025
Invoice Price: $42,548
CarsDirect Price: $43,298
Pricing as of 12/27/04

2005 Chevrolet Suburban 1500 4x4 LT w/1SM
MSRP Price: $47,485
Invoice Price: $42,504
CarsDirect Price: $40,104
Pricing as of 12/27/04

 

[codex57]

Wasn't the tarus one of the best selling cars ever

It was until more and more people realized teh Japanese built better family cars. The Midwest was the strongest holdout, but even those people have caved recently and started buying Japanese. California basically kicked out the Taurus back in the 90s. The Japanese big trucks aren't clearly better so the domestics should have a lockdown on the truck market for the foreseeable future.

 

[Bryan330i]

I think I know what you are saying about American trucks and this being the strong American product. However, the imports seem very strong in achieving the same or better reliability and durability and better safety. The imports seem to be impressive competition from manufacturers that are new to this market segment.

I also think American manufacturers have lost big sales in the medium-duty market to Isuzu and others. I have worked with some hard-core American product people that admit it's hard to beat the import medium-duty frame and drivetrain for commercial use.

I would sure like to see American manufacturers become more aggressive and quality driven.

 

[codex57]

Yeah, when talking about American trucks, I was referring to the full size ones. I think the imports have won the compact truck market. But, the full size truck market still belongs to the domestics.

They are in danger though. The first serious volleys from the Japanese have been fired. The Tundra is good, but undersized. The next generation (if Toyota holds true to form) will be a major threat. The Titan is good, but plagued with quality problems. If Nissan can fix that (time and experience should help a lot), then they'll be a major playor too. Plus, there are rumblings from Honda in this area.

The domestics have some time to survive though. They've been improving themselves. Plus, they're finally starting to back up their words and attempt to build cars that we want. We'll see how the new Ford Five Hundred turns out. I haven't looked into it much yet myself cuz I'm not in the market. But, the Mustang was a pretty significant leap forward. If the next gen of domestic cars can keep improving, the domestics stand a good chance of staying dominant.

 

[Bryan330i]

I agree that the American manufacturers are strong in the full-size market and their consumer heavy-duty models are strong products that imports can’t touch.

Some people are probably reading my previous post and saying WTF???? I forgot to designate that when I said Isuzu and others I was referring to COMMERCIAL medium-duty industrial use frames and drive trains used for box trucks and similar. It’s like the American makes have the heavy-duty consumer market but are losing the medium-duty commercial, and it seems like they can’t even compete in medium-to-light-duty consumer.