It's not a surprise to anyone that U.S. automakers continue to struggle against foreign competition as well as the propensity to drag their huge feet in quicksand. Yes, General Motors Corp. (NYSE: GM) and Ford Motor (NYSE: F) recently saw quarterly profits that surprised many of us, but in reality, none of that should have been a surprise once you break down the sales that led to those quarters.
If we're searching for profits in the domestic auto market, they are not there. International sales, however, show very good strength for both automakers. Are the domestic blues for both companies due to the UAW and union pressures and concessions? I suspect that thought is shared by millions of Americans.
So here's a radical idea: if the U.S. automakers are completely hamstrung in their home market by union nightmares which leave them completely uncompetitive with foreign rivals, how about exiting the U.S. market completely?
Okay, that idea is a bit of a stretch, but if I am an executive looking to maximize both sales and profit on an international scale, and one division constantly drags down those results, it goes bye-bye. It's not nearly that easy in the U.S. (far from it), and since the U.S. is the largest market for almost every global automaker (if not all), nobody can turn tail and just run -- even when profits are more elusive than the Loch Ness monster.
What to do, GM and Ford? One of the greater failings is the inability to convince customers to buy more American cars by citing them as just as (or more) reliable than foreign automobiles. While I'm not sure this was true just 10 years ago, it is most likely that way now. Toyota, however, continues to take home more and more sales (and profit) based partially on what I expect is pure consumer word-of-mouth more than anything JD Power can offer. Ever ask a Toyota Camry owner about the reliability of their car? Set aside about a half-hour. How about a Pontiac Grand Am (from a few years back)? Not so long, eh?
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Reader Comments (Page 1 of 1)
5-06-2008 @ 12:46PM
bill said...
It is not the union that put GM and Ford into financial difficulities, if GM and ford were selling more, they would be doing okay, but each year they lose more car sales to the asians, because of their poor products. I would never owen a ford, GM or dodge, I've had nightmares with their cars, and never again. I simply would not take my chance again with their products, no matter how good it sounds. consumers lost confidence. If GM and Ford are whinning about the cost, then why would they spend billions of dollars on advertisements, like paying tigerwood 200 million for a 7 seconds commercial, would you think I will buy a buick because tigerwood said so! what about those CEO and their millions of dollars salaries?
most engineering who work for Ford live in California and a charter flight flies them to detroit everyday, they simply don't like to live in detroit all at the cost of ford company, GM and Ford dug their owen graves.
8-14-2007 @ 11:33AM
sonnype said...
Unions are not the cause of US automakers losing market shares.Union members assemble the autos,they are not responsible for the design or engineering aspect of the vechile.Poor designs and inferior quality material plus engeneering flaws have given US car makers a bad reputation that they are now trying to improve.It is convient to blame the union worker for poor sales when in fact people could care less if the car they purchase is made by union or non-union workers,only that its worth the money they are spending to purchase it.
8-14-2007 @ 11:34AM
ger said...
who ever wrote this article is a idiot what did you try to get into the auto industry and they wouldnt hire you sounds like sour grapes to me. Lets just sell out every american industry and we will just be a service industry we lose the american auto industry and america will turn into a third world country All we'll have left is the have and have nots auto workers is about all we have left of the middle class its about time america wakes up and starts walking the talk about being proud to be an american
8-14-2007 @ 12:05PM
GTD said...
I agree the losses in the domestic market for Ford and GM are partially a result of poor design and lack of appeal to consumers. However, the drastic difference in costs compared to foreign automotive manufacturers makes it almost impossible for Ford and GM to compete in the domestic market. The average hourly wage is approximately $40 per hour less for the foreign companies. The UAW is going to have to realize they will need to take some financial responsibility for health insurance or other benefits. If the UAW continues bargaining down the one-way street they have been the last 20+ years, we will see far less automotive manufacturing facilities in the United States.
8-14-2007 @ 12:38PM
John said...
Changing perceptions on value take a long time. Domestic cars are now on a par with the better imports but no one is listening. Costs to manufacture domestically are way out of line mainly due to current and legacy labor costs. The imports are doing the American public a service by competing on the basis of realistic labor costs. If the unions had their way a Ford would cost $100,000 and the auto workers would be living like royalty.
8-14-2007 @ 9:09PM
JF said...
Capitol idea! Why not just send all our auto manufacturing to China just like the rest of the american industries. They work for pennies, while keeping the utmost in quality.
(Too much sarcasm? I'm sorry)
In truth, you REALLY think the union is hamstringing the Amrican Auto makers? Then why did Ford spend MILLIONS on getting Alan Mulally? Then they spend MILLIONS on bonuses to their upper echolon (or MILLIONS in golden parachutes to buy them out). The money Ford and GM spend on actual PRODUCTION of the vehicle is a pittance compared to what they spend for their "think-tanks."
You can see with current engineering and marketing, those people have definitely EARNED their money. (/sarcasm off)
8-14-2007 @ 4:25PM
Al said...
If GM had been making cars 20 years ago like they are doing today, they would not have lost that market share. What buyers look for is a good product, not at how much a GM worker makes. If GM can do it today and they are, then the problem was with GM's management, not with the workers wages. Toyota wages are not far from GM's wages.
8-14-2007 @ 5:52PM
GTD said...
Of course the buyer doesn't care about the workers' hourly wage. They are concerned with the quality and price they pay for the product. In terms of profitability, you have to decrease the enormous cost gap between domestic and foreign manufacturers. If the quality and design was exactly the same, would you pay $10,000 more for a domestic car? My guess is the average American would not.
According to Forbes:
Labor cost per hour, wages and benefits for hourly workers, 2006.
Ford: $70.51 ($141,020 per year)
GM: $73.26 ($146,520 per year)
Chrysler: $75.86 ($151,720 per year)
Toyota, Honda, Nissan (in U.S.): $48.00 ($96,000 per year)
8-15-2007 @ 8:24AM
Eric said...
Just like it was in the 70's, the big three got out wit by the foreign car companies, Toyota does it again. When gas prices go up, big cars and trucks go out, simple as that. The consumer wants small car that get 40 miles per gal or more, and they want good made car that will last, and a price they can afford, and with cutting edge style. Look at the Toyota line up from low cost to high price car, there is something there for everyone. The Big Three need to follow Toyota's lead.
8-15-2007 @ 11:18AM
A D said...
Ever ask a Toyota Camry owner about sludge?
Reliabilty is not a Camry hallmark.
The fool that wrote this needs to getr his lips off Toyota's butt.
8-15-2007 @ 1:25PM
Gumby said...
It is simply too hard for GM and Ford to build cars with million retired geezers collecting pension checks every month!!! UAW and management is talking about it right now. I dont know if UAW sincerely wants investors back in the fold and make a killing on the undervalued GM and Ford stock . You can easily get tenfold profits on GM and Ford once UAW throw in the white towel. After this, GM and Ford can regain the market share. Do they still have the chance?? It is fast slipping away.. UAW think they can play shell game with shareholders who is not stupid. UAW might make concessions as we see them but they are likely to replace them with something else hidden in the balance sheets of GM and Ford. UAW control lock, stock and barrel at GM and Ford at great losses for shareholders. UAW is small minded midgets..
8-15-2007 @ 3:19PM
dale said...
Why don't we just put a tarif on all foreign car manufacturers in the US that makes up the difference between the unionized and nonunionized manufacturers. Place that money in a fund to help pay the retirees from Ford,GM and DC this would level the playing field until the foriegn ones have a retiree build up equal to thiers.
8-15-2007 @ 4:40PM
timsweet said...
Couple of things need to happen:
1. Add higher tarriffs on imported complete cars - oh..maybe there aren't that many, then begin limiting the number of plants that overseas car makers use to "assemble" their cars here.
2. The US makers need to tie benefits and increases for the union employees to profits from the US segment only.
3. US makers need to come home from overseas and need to stop buying up portions of overseas auot makers just to improve the shares. There isn't much incentive for Ford and GM to do that and there is a agurement that they may not really care. Profits are profits. I'll hold on to my shares while they work it all out.
4. All company bonuses should be tied to the US segement improvements.
Regards
Tim in Tucson
Ford Stock holder
8-15-2007 @ 4:40PM
lineman said...
Talking about quality, is it just my area paper (Lansing State Journal) that always gives any type of negative press to the domestic manufacturers (GM in particular) a large article with big bold typeface on a prominent page while giving foreign (particularly Toyota) small almost paragraph size articles on the backpages? I see this all the time. The last few recalls from Toyota were tiny articles while having large numbers of vehicles affected. The last recall about GM was the opposite. American quality is going up and media doesnt seem to want to report it.
8-17-2007 @ 7:38AM
Joe said...
It's not the union or the retirees, It's the design and
engineering that is the the issue here.GM with it's
leaking intake manifolds,doing away with transmission
dipsticks,putting starters under intake manifolds etc.
Ford is no better with the elimination of the trans.
dipstick in the explorer.The plastic intakes on the crown vics. GM & Ford need to talk to techs out in field to help with design and engineering to bring the
product line up to where it belongs.
8-17-2007 @ 10:02AM
William Lundholm said...
It is very hard in business to be all things to all people. As an example GM has 70% market share in large suv's. I would guess the new cross overs ford and gm have started to build will do very well also. One big problem is the small cars. Let china and others have this market. These small cars require very heavy investment in automation. If gm & ford insist on supplying small cars, build them in china or where ever. While the demand for small cars is sizeable in the usa, it is hugh in other parts of the world. For those of you who feel the quality at toyota is wonderful, they just took back a lexus vehicle from us after 4 months of trying to fix a bad car. It was impressive that they took it back with no penality, but they did indeed build a bad car. On the other hand I have a 2003 escalade that is wonderful and problem free.
9-17-2007 @ 1:23PM
bill frazier said...
how about this i ran out of x plan pins (8) and called axz plan headquarters for more x pins,they said we will have to go to the adminstrator to get more pins i called and no luck,guess fords sales are so great that they don't need any help,no wonder honda & toyota are kicking our a____..
8-20-2007 @ 6:53AM
russell said...
thats right gumpy, us uaw workers think we can play that shell game with you shareholders, and ummm, we not only think it, we know it, thats been our bargaining chip for about duuuuhhh, 50 years, if the uaw goes under, we take you helpless shareholders with us, reducing the value of your stocks to less than the costs of the paper they're written on, why do you think, duuhhh, gm won't go bankrupt, not only can we play the shell game with you uneducated shareholders, duuuhhh ( keep clinging to the value of your stocks sucker), how do you think the uaw got everything they have stupid, you better hope the uaw wins
8-21-2007 @ 2:10PM
exxxxxonn said...
It's a case of Americans hating other Americans. For sixty years union and salary workers have bad mouthed each other. Congratulations! Now that everyone has heard how salary workers are bad managers, and union workers are lazy, now no one wants to buy an American car. The American auto companies should fire any worker who bad mouths a fellow employee. I worked for Japanese auto supplier for six years, and never heard a Japanese guy bad mouth a fellow employee. I worked for a German auto supplier for six years, and it was the same. I never heard a German guy bad mouth a fellow employee. So when you work for the auto industry, go to another party and tell everyone about how the company you work for is full of lazy idiots and wonder why American car and truck sales are poor.
8-27-2007 @ 4:52AM
Peterson-50yo fire. said...
Who is this small minded uninformed freak called gumby.I'd really like to take you on the shop floor so you and the other idiots that rant about UAW retirees getting paid to much what we did to earn our pensions.GM is not only messing with hourly they are f'n the salaried worse.I was forced out at Delphi which went thru 3 name changes in my 30 yrs.Hired in GM sag.manufacturing worker then gm sold parts divisions off resulting in delphi.Worked 12 hr days last yr just to get 30 yrs in before cut off date on jan 1st .Share holders suck the big one and gumby you are one big rubber.