Tuesday, November 25, 2008

Death of the Big Three

Here's a striking suggestion - simultaneous bankruptcy filings from the big three American car makers. This, say the authors, would reduce stigma and would not be 'an indication that American manufacturers produce inferior cars and trucks.' But they do - the clearest evidence of which is the fact that Toyota's market capitalisation is now twenty times that of Ford, Chrysler and GM combined. It's simply not credible that there's nothing wrong with their products. Otherwise, the simultaneous filing makes perfect sense.


  1. If they had filed their cars into better shapes then chapter 11 would not be looming.
    Did you know that both Ford Koln and Georg von Opel at Russelsheim are both very profitable companies and have been responsible for shoring up their parents for some time now. Fords plant is the most efficient in Europe, recently overtaking Nissan at Sunderland.
    Fords latest Fiesta is probably the best small car Europe has ever produced.
    They are presently wondering if they will be dragged down by their Detroit dinosaur parents

  2. I know why Toyotas are better than GM cars... it's because Toyotas are made in the USA and GMs are made in Mexico.

  3. I am confused about Ford and GM's business decisions. They close their most efficient assembly plants when they stop making a model. Wouldn't it make more sense to retool a factory that has efficient workers instead of laying them all off? Building a factory can't be cheap. Or does their logic say that it's cheaper to build a new factory in Mexico where you can get labor at a tenth of the cost even if they make crappy cars?

  4. Tom P, line operators in Detroit = $29 per hour, in Mexico = $9 per hour.
    GM are introducing new contracts in Detroit @ $13 per hour.
    Sometimes citing labour costs as the reason to relocate is complete shit, where the labour costs are in percentage terms quite low. Startup costs, training costs, cost of liabilities all come into play. Often the size of the grants (both up front and hidden) will tip the scale. American companies in particular are past masters at grant grabbing, heading for the hills as soon as the grant claw back period has expired. Flymo in Durham was a good example.
    Interestingly Ford build Volvo buses in Mexico, to the highest standards.
    Toyota Japan don't have a clue about original design, they are merely copiers, their Nice styling studio however, is full of excellent design.
    Lexus is the company that would be BMW, they don't even come close.

  5. I own a 1996 Silverado pick up truck that runs fabulously and has 170,000 miles on it. Still highly reliable. The one I had before that had 215,000 and was running great when it got totaled.

    Unfair competition is the main reason behind the big three having so much trouble. The union contracts were decided upon, under Congress's nose, and often with their arbitration. For the US Congress to then allow foreign manufacturers to come in and undercut the union agreements is backstabbing.

    Right now, it is GM that has the JD Powers nod for cars with initial quality. And as Toyota especially has grown, they have put out cars with decreasing quality.

    GM has had to sell off and hire out aspects of its business. For instance, car salesmen used to be trained by reps from the factory, getting word from the horse's mouth. Now, the trainers are contracted from outside--often the same people, however. As the assets are released, even with sound and positive financial reasoning behind the decisions, the bankrupt nature of the company gets revealed even the more it gets alleviated.

    The idea is to continually position the company for a future of less expense, so that they may compete: thus the buying out of employees to leave both the company and the union, but also the building of plants in Mexico and elsewhere. The stickers now read about parts made in US and Canada, and parts made elsewhere, as if US and Canada are the same country, a sort of transnational patriotism. Why not just put Mexico in there too, of just say "NAFTA Built".

    It is amazing that the US manufacturers have been able to survive this long. I just wish a majority of the current discussions had to do with the foreign manufacturers letting either UAW or some auto-workers' union in if they are to continue to build cars in the US. I'm not one to think that a company of white shirts will automatically treat worlers fairly, so it cannot be about lessing the treatment of the workers.

    And if we are to be global, which is great, then we should be sure we are able to inspect the plants in other countries, to be sure they run things up to snuff with what would be reasonable union demands. Some companies do this anyway, such as Newmans, which inspects farms in South America to be sure the workers are treated well. That's an idea worth expanding upon. The good spirit of the labor movement needs to prevail through all this financial maneuvering.


  6. Er, Rus I would strongly recommend you to look at your own home grown manufacturers exploitation of workers before you criticize companies outwith your own shores. In particular visit the major rotational moulders such as Little Tykes or Step Two. Criminally blatant ignoring of the most basic of health and safety rules, using any foreign cheap labour they can lay their hands on.
    For years your American companies have shoved their fifth rate junk down our throats, McDonalds,
    Kellogs and Coca Cola to name but a few.
    Your indigenous automotive industry is a dinosaur and really deserves to go down the pan, the only reason I hope this does not happen is the effect it will have on their properly managed European subsidiaries. Everywhere else in the world the Automotive industries share technology and parts and are the healthier for it. In your country the top three are back in the dark ages.

    I'll not even mention Microsoft, who's thuggish business practices have set the computer industry back at least 5 years.

    No American should ever have the temerity to talk about unfair competition.

  7. Hi Malty,

    I didn't criticize anyone in particular. I certainly did not favor any country over another in my comment. That would have been the last misread I would have wanted. I'm urging standards for workers no matter where they are. And I am prepared to join any boycott against any manufacturer that does not live up to such high standards, whether the company is here in Lowell or in Timbuktu.

    I look at my own country's exploitation. I come from the birth city of the American Industrial Revolution. After the Irish laborers were numerous enough to vote in a favorable city council, they had our city hall erected with a clock on all four sides of the tower, so that the men working in the canals could see what time it was, from any ditch in the city. Check it out: Lowell City Hall. They did this, because the mill owners were slowing the clock down throughout the day, to get extra work out of the laborers. We all need to demand high standards for labor all over the world, not just in the US, and I am well aware that no company automatically has haloes over the managers' heads unless there is a union or some powerful labor-friendly force to keep them honest. I would equally welcome other countries inspecting our facilities, of course.

    As far as being a dinosaur, GM is actually technologically rich, and not only in the mechanics of the cars and truck, but with OnStar, Flex Fuel, and so forth. Neither technology nor quality is currently a problem per se. The company is a world leader in these aspects as I write. The argument that they are dinosaurs is archaic, and relates to the troubles they had in the 80s. The midsize Malibu, for instance is very impressive. I prefer, however, the Impala. And I prefer them over the Japanese models, the Accord and Camry, which are not keeping pace.

    The Nissan and Toyota trucks are making strides in the US market, but the American truck driver demands more than they have yet. No question, however, that the aforementioned horrendous competitive advantage they have, should allow these manufacturers to make further headroads in truck manufacturing. The should get there. All that said, you have to hand it to the American manufacturers for making quite often superior cars for the money, even with the strong winds against them.

    I know it's fashionable to bash the US, its workers, especially as it all can relate to politics. But the dinosaur argument simply does not apply. Go visit Chevy and Fords sites to see what they're up to.