25 June 2003
To sleep in Detroit City
From Autoextremist.com, a summary of why the Big 2.5 (or whatever) American automakers are a long way from the comeback trail:
GM, the most profitable of what's left of the Big Three, earned $701 per vehicle in North America. Chrysler earned just $226, and Ford made no money at all. In contrast, Nissan made $2069 per vehicle, Toyota $1,214 and Honda $880. Labor costs for the Detroit-based car companies are anywhere between $300 and $400 more than costs for their Asian rivals, and when health care and pension costs are factored in, the gap widens dramatically. The domestic car companies are paying through the nose chasing non-product issues, while their Asian rivals are pouring profits back into research & development and meaningful product improvements. Detroit's share of the North American market dropped from 65.2% in 2000, to 61.6% in 2002.
That's $300-400 per vehicle, mind you. And these numbers (from the Harbour Report) appeared just in time for negotiations with the United Auto Workers, too. How will the UAW address these issues? Autoextremist.com quotes union president Ron Gettelfinger:
"Make no mistake about this: We are not going to shift health care costs in negotiations with the Big Three. We're not going to pick up premiums, we're not going to pick up co-pays, we're not going to pick up deductibles."
The UAW, judging by the numbers I've seen, is starting to get a handle on the quality-control issue; maybe they can deal with only one problem at a time?
None of this implies that Ford or GM is doomed, necessarily, or that the Daimler-Benz guys are rethinking their ownership of the Chrysler Group. But clearly they can't go on with such meager margins, and there seems to be a real fear that if the flood of rebates is shut off, market share will dwindle even faster.
Which is why, more than ever, what Detroit needs is superior product, cars and trucks and whatever the hell falls between, vehicles so good that Joe and Susan Sixpack, whom they lost to Toyota years ago, will rush back into the showrooms and sign the check and not expect $2000 cash back. I have no doubt that they can do it: but will the planners and the bean counters and the union actually let them do it?