Mind-blowing auto insights
By John Bebow - January 28, 2009
Recent reports by the Center for Automotive Research will challenge your thinking whether you side with labor, management, US auto makers, or foreign automakers.
You don't have to be a Ford engineer or a line worker at GM to feel the pain in Michigan from the Big Three's meltdown and attempt at transformation.
Recent insights from the Center for Automotive research may be all most everyday citizens need to know about the auto industry in 30 minutes or less…
"Obama is left with a possible no-win situation — ignore or lessen conditions and GM/Chrysler may still fail after losing billions of public money — or force conditions and maybe deal still doesn't happen, or the UAW is destroyed. Shutdown of GM/Chrysler would still cost millions of jobs under Democratic administration. A real set-up."
Michigan is at just under half its auto-related manufacturing employment of a decade ago.
The Big Three's problems are sales, not inefficiencies. "It's revenues, not costs, stupid." Forty percent of potential buyers can't get a loan or lease due to the credit market messes. The federal fiscal stimulus won't help vehicle sales. And the market is in an L-shaped, rather than V-shaped, downturn, meaning a much flatter recovery, if and when it comes, in a couple more years.
The average cost of incentives for a Big Three vehicle last fall was more than $3,500.
Toyota doesn't have the answer, either. Operating earnings are down 50 percent in the past year.
The Big Three have suffered a combined $65 BILLION in operating losses since 2002.
Michigan has lost 13 Big Three plants and their 7,000 jobs since 2005.
GM will likely drop from 48 to 40 nameplates by 2012 (but should go down to 20).
GM will likely drop from 6,450 dealer locations by 2012 (but should do down to 1,500).
The Big Three average 280-376 sales per franchise. Toyota averages 1,806 sales per franchise.
The average UAW worker makes 60 percent more than the average non-UAW manufacturing worker.
The Big Three have become one-third more efficient since the mid-1990s while Toyota has become less efficient.
Here's our favorite… In all that complaining and moaning about a bailout for US automakers, did you hear any mention of the fact that foreign-owned automakers have received more than $3.6 BILLION in government aid in the U.S., or more than half of all economic incentives given to the auto industry? That works out to $267,000 in incentives for each foreign-owned auto job in the United States.
Toyota has a "Jobs Bank," too, and it's bigger than GM's.
The cost of every GM vehicle includes $950 this year to pay for retiree health care. Overall labor cost per vehicle is $3,289 for a GM vehicle, versus $1,900 for Toyota.
"Government will fund the auto industry for years much like agriculture, aerospace, the health system, utilities — well, everything but newspapers actually."
6 Comments
And auto industry strategies are still driven by antiquated management knowledge and an unwillingness to honestly reflect on what works and what does not work.
An inbred dislike of the word "process" and insistence that the person that does the actual work cannot contribute to improvement are just two debilitating mindset characteristics of senior automotive managements.
Internal cost accounting performance tracking methods date back to the thirties and forties; mass production (run until it breaks) is still the rule in manufacturing; and distribution driven by the point at which title (and the cost of inventory) transfers at the manufacturing plant exit all contribute to the inability let all employees identify with their work and contribute to the improvement of same.
Automotive managements are still in denial- "grow baby grow" is not a reasonable improvement strategy.
Is the auto industry willing to do what it takes to survive? It does not appear that way. John Bebow is correct. It is not the expense side so much as the sales side. They need to sell more vehicles. Unfortunately many Americans especially those on the west and east coast still believe the Big 3 or should we say Small 3 make an inferior product.
Here is a common sense thought. Do away with model years. This concept costs automakers millions. Instead Model numbers, a new number comes out when there is something worth changing or inventories get to a preset number. ie the Impala XI …think about it…it makes sense!!
I expected many more comments from Michigan residents. Or is this not a matter for discussion?
If Michigan isn't interested in its survival, then why should Congress and the rest of the nation?
Wake up, Michigan! The world is watching.
This is not a comment, but a question. I have heard that if retiree healthcare is removed from current UAW workers hourly pay, their wages are comparable to non-UAW workers. I have also heard that if the bonuses that non-UAW auto workers receive are included in their hourly rate, they are comparable to UAW wages. Does anybody know the facts?
The one metric above which shocked me and that I had not heard before: Sales per franchise. By my calcluations, Toyota franchises averages between 4x and 7x the sales of GM franchises.
This is staggering! When one things about the time and financial support the Big 3 provide to their networks, this is a significant cost disadvantage. Does anyone know why this is so?
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