Free Republic
Browse · Search
General/Chat
Topics · Post Article

Skip to comments.

Debunking Myths About Detroit
Wards Autoworld ^ | 12/11/08 | John McElroy

Posted on 12/17/2008 5:34:35 AM PST by Liberty1970

Debunking Myths About Detroit

By John McElroy

WardsAuto.com, Dec 11, 2008 9:53 AM

CommentaryThe debate about bailing out Detroit’s auto makers has hit a fever pitch. Everybody wants to weigh in with their opinion.

The louder they rant, and the crazier their claims, the more coverage they get.

Strangely, the media are devoting far more attention to the $34 billion bridge loan auto makers are requesting than the $700 billion bailout of the financial industry. How does that make us a better informed citizenry?

There always are two sides to every argument, but this discussion shows how much misinformation, misperception and wrong-headed “facts” are being bandied about. Let me debunk the five most popular myths I keep hearing.

“The Big Three build cars nobody wants.” Oh really? Somehow last year they managed to find more than 8 million customers to buy those cars nobody wants. And a good many are not just satisfied with their purchase, they are passionately devoted to them. The Corvette, Mustang and Viper enjoy cult followings. Ford F-150, Chevy Silverado and Dodge Ram owners are the most loyal truck buyers in the business.

“The Big Three build crappy quality.” Says who? According to J.D. Power’s Vehicle Dependability Survey, Mercury and Cadillac brands are rated ahead of Toyota. Buick and Lincoln are ahead of Honda. Ford is ahead of Infiniti. Chrysler and Dodge are ahead of Mini, Scion and Volvo. In fact, of the 10 brands at the bottom of the list, eight are imports. J.D. Power data show the Big Three have closed the quality gap.

“The Big Three cars don’t get good fuel economy.” Do apples-to-apples comparison of vehicles with the same-size footprint and powertrain, and you’ll see the Detroit Three match or, in some cases, beat their foreign competitors. When it comes to hybrid-electric-vehicle technology, General Motors, Ford and Chrysler have HEVs in showrooms right now. Only two of the eight Japanese auto makers make HEVs (Nissan buys its hybrid technology from Toyota). Not one Korean or European auto maker has an HEV on the road yet.

“UAW plants are not competitive with the transplants.” Only if you ignore the facts. The 2008 Harbour Report shows Chrysler tied with Toyota and ahead of Honda in manufacturing productivity. GM is ahead of Nissan. Ford is ahead of Hyundai. But this is a “How many angels can dance on the head of a pin?” argument. All of them are within one labor hour or so of each other. In other words, they all are extremely competitive.

“Those greedy UAW workers make $75 an hour.” Wrong. This figure includes total labor costs, which dumps the cost for all retirees into the equation. The average worker on the line actually earns $55,000 a year, which comes to about $28 an hour. With benefits, those numbers have been a lot higher in the past. But after last year’s historic UAW contract, those benefits get whacked down to levels neaerly equivalent to the transplants.

The Big Three have been going through a painful, gut-wrenching restructuring for several years. That process will continue. I’m amazed they don’t get credit for the significant progress they’ve made. And I’m puzzled why these myths persist in the face of the facts.


TOPICS: Business/Economy
KEYWORDS: auto; bailout; big3
Navigation: use the links below to view more comments.
first 1-2021-27 next last
I'm neutral on the Big 3 and anti-bailout, but this article makes some good points that FReepers would do well to digest.
1 posted on 12/17/2008 5:34:37 AM PST by Liberty1970
[ Post Reply | Private Reply | View Replies]

To: Liberty1970
...but this article makes some good points that FReepers would do well to digest.

But every point made is irrelevant.

The only way any of these things is relevant is if you look at the bailout as a reward or at the denial of the bailout as a punishment. Whether or not Detroit has been good or bad in the past has no bearing on the question.

Liberals want to use the bailout to twist the arm of Detroit, to force them to build a certain type of car or to pay a certain wage (higher for the workers, lower for management). To Liberals, all of these matters are of great importance, because they are trying to force the Big 3 in that particular direction.

We should not play that game. The Big 3 must be permitted to manage their own affairs. We should insist on that premise before we even start talking about a bailout.

2 posted on 12/17/2008 5:43:03 AM PST by gridlock (QUESTION AUTHORITY)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Liberty1970

“The Big Three build cars nobody wants.”

No. They build cars the government don’t want us to have.

As long as we have SUV’s and Pickup Trucks they can’t impose their green caveman economix on us. They can’t force the greedy oil companies out of business or the dirty coal mines out of business as long as consumers dictate our market freedom.


3 posted on 12/17/2008 5:47:41 AM PST by o_zarkman44 (Since when is paying more, but getting less, considered Patriotic?)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Liberty1970

“Ford is ahead of Hyundai”

They must be so proud.


4 posted on 12/17/2008 5:48:08 AM PST by icwhatudo
[ Post Reply | Private Reply | To 1 | View Replies]

To: Liberty1970

Those greedy UAW workers make $75 an hour.” Wrong. This figure includes total labor costs, which dumps the cost for all retirees into the equation. The average worker on the line actually earns $55,000 a year, which comes to about $28 an hour. With benefits, those numbers have been a lot higher in the past. But after last year’s historic UAW contract, those benefits get whacked down to levels neaerly equivalent to the transplants.

But the costs for retirees etc are the problem. Yeah Yeah yeah...new hires get less going forward. If there are new hires. In the meantime the big 3 pay laid off employees 95% of their pay.

Dunno...seems passing strange that Toyota and GM sold almost the same number of vehicles and Toyota made around 17billion while GM lost 38billion.


5 posted on 12/17/2008 5:49:23 AM PST by Adder (typical basicly decent bitter white person)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Liberty1970
“The Big Three have been going through a painful, gut-wrenching restructuring for several years. That process will continue. I’m amazed they don’t get credit for the significant progress they’ve made. And I’m puzzled why these myths persist in the face of the facts.”

Finally, someone who actually understands the auto industry. I agree with him that US auto companies are doing a better job than they are given credit for in the MSM. However, he does not talk about how they got into their current problems. GM and Chrysler need to make tough decisions and change their cost structure quickly to survive. Congress and the Washington liberals will only make things worse once they appoint a board with a political agenda to oversee the companies but not make the necessary cost savings. These politically appointed boards will force the auto companies to make bad decisions and ruin the companies once and for all.

6 posted on 12/17/2008 5:51:01 AM PST by detective
[ Post Reply | Private Reply | To 1 | View Replies]

To: Liberty1970
Interesting, but...

The JD Powers awards are based on self selecting respondents to surveys, so the results should always be taken with a grain of salt.

I wonder how many Big Three cars are sold to employees or those eligible for employee purchase plans (notwithstanding the current frenzy of “employee pricing deals” available now)? At one point I remember hearing something like 25%. I don't know if this number is even close to correct, but it illustrates a bit of a captive market. Of course, for fair comparison the non-UAW companies included too.

How many Big Three cars are sold to fleets ( rental car companies, company fleets, etc.)?

Sure there are cult followings for some cars. Big deal. Charles Manson also had a cult following. I often wonder if some Corvette owners might be overcompensating for other, ahhhhh, short comings.

Finally, the consumer seeks the best value to them for their car dollars. Fit and finish are important, quality, milage, durability, style and design are important (on varying scales) are all important. Also important is the honesty and integrity of the dealer representatives matter (I had a Chevy dealer tell me not too long ago I did not have to get the “finish protection package” because I obviously (”you're white”) had good credit. He went on to say the $1300 dealer add was just a wax job.)

So, Detroit is losing market share. There are a number of reasons that people are less inclined to buy their products. The solution? Make and sell stuff people want to buy with their limited car and truck dollars. Ultimately, the buyers are going to seek what they the best value for their $$$. And it would appear that Detroit is not measuring up in the market place.

On the bail out: let them do what every other company should do. Raise cash in the equity or debt markets. Otherwise declare bankruptsy.

7 posted on 12/17/2008 6:06:00 AM PST by starlifter
[ Post Reply | Private Reply | To 1 | View Replies]

To: detective
I agree with him that US auto companies are doing a better job than they are given credit for in the MSM. However, he does not talk about how they got into their current problems

The Big Three lost the American consumer's trust back in the 1970's. It was something they never should have toyed with, and something they will never get back. When it comes to a manufacturing a product that the consumer has to take out a 4 year loan to pay for, the end result has to be fulfilled satisfaction. Anything short of that is going to turn existing customers and potential customers away. These companys need to go away and reincarnate as someone else's creation. Turning the Big Three into a government organization is only going to take care of the UAW employees who have only added to the problems of the Big Three for the last 50 years.

8 posted on 12/17/2008 6:19:58 AM PST by Dixie Yooper (Ephesians 6:11)
[ Post Reply | Private Reply | To 6 | View Replies]

To: Adder

>>Dunno...seems passing strange that Toyota and GM sold almost the same number of vehicles and Toyota made around 17billion while GM lost 38billion.<<

Yes, and the author didn’t mention that.

Another thing not mentioned is that even if a restructuring relieves the auto companies of their obligations to pay retiree benefits, the taxpayers are still on the hook.

The PBGC, which is another one of those “semi-government” corporations, would cover UAW retirees up about $50K a year for pensions, but the PBGC itself probably had significant investment losses lately, like everybody else. If the PBGC itself went bankrupt, (and IMO that would be likely if it had to cover the UAW pensions), although the PBGC is not funded from tax revenue today, what do you think the odds are of another bailout?

The PBGC does not cover medical benefits for retirees, so there would be another bailout in the future.

Plus, with all those unemployed UAW people, tax revenues, child support payments, etc. etc. would be reduced, so I predict we are going to be sick when we hear the word word “bailout.”

Tommy Lee Jones played a sheriff in the movie “No Country for Old Men. After he saw the bodies from a drug deal massacre, a deputy said, “It’s a mess, ain’t it, sheriff?” The sheriff answered, “If it ain’t, it’ll do till the mess gets here.”


9 posted on 12/17/2008 6:45:08 AM PST by ding_dong_daddy_from_dumas (I want to "Buy American" but the only things for sale made in the USA are politicians)
[ Post Reply | Private Reply | To 5 | View Replies]

To: Dixie Yooper
“The Big Three lost the American consumer's trust back in the 1970’s”

You are right. In the late 1970’s the quality of American cars, the brand loyalty and the market share declined. This is when the UAW leadership became much more leftist and militant. THe UAW went overboard protecting bad employees, preventing new investment and lowering productivity. In the late 70’s the UAW pushed for the 4 day work week, 20 years and out, paying people 95% of salary and benefits not to work and “shop floor democracy” etc. At the same time they got big increases in wages and benefits. Chrysler would have gone bankrupt in 1979 had it not received federal loan guarantees, closed many plants, lowered wages and greatly reduced their workforce. Ford and GM closed many of their plants in the early 1980’s.
The UAW still maintains the culture it established in the late 1970’s. In the 1980’s Roger Smith at GM tried to change that culture by establishing Saturn, closing the unproductive plants and diversifying into other industries by buying EDS and Hughes. His actions which were ridiculed by Michael Moore in “Roger and Me” kept GM viable until recently. GM sold off EDS and Hughes at huge profits which financed the money losing UAW part of the business.

10 posted on 12/17/2008 6:48:34 AM PST by detective
[ Post Reply | Private Reply | To 8 | View Replies]

To: Liberty1970
All I know is that in my first 10 years of car ownership, I bought from the big 3. Those cars lasted me less than 5 years a piece. In the past 10 years, I've gone Honda. I've owned 2 of them that were/are still running fine after many more years and many more miles.

Bottom line is value. When the big 3 can build me an efficient car that will last me 200k in miles, carry my kids and stuff, I'll buy it.

11 posted on 12/17/2008 7:03:00 AM PST by joethedrummer
[ Post Reply | Private Reply | To 1 | View Replies]

To: detective

Since buying a new 1978 GMC, all 7 of my auto purchases since have been either German, Swedish or Japanese. That’s more than $150,000 dollars over 30 years from just one consumer. Unless forced by the government, I will never buy another car from any of the big three or the UAW. If you want me to be proud to own something that’s expensive and made in the USA, then don’t make me ashamed to own it.


12 posted on 12/17/2008 7:06:49 AM PST by Dixie Yooper (Ephesians 6:11)
[ Post Reply | Private Reply | To 10 | View Replies]

To: Liberty1970
“The Big Three build crappy quality.” Says who? According to J.D. Power’s Vehicle Dependability Survey, Mercury and Cadillac brands are rated ahead of Toyota. Buick and Lincoln are ahead of Honda. Ford is ahead of Infiniti. Chrysler and Dodge are ahead of Mini, Scion and Volvo. In fact, of the 10 brands at the bottom of the list, eight are imports. J.D. Power data show the Big Three have closed the quality gap.

J.D. Power measures quality in the short term. It might be as low as one year. I admit that the Big 3 have closed the gap there. However people expect more now. What are repair costs at the five year mark? I had a Saturn that (other than warranty repairs on known poorly designed brakes), was pretty good the first four or five years. Then it started going into the shop more and more often. Nothing was huge, but little things like a leaking radiator, failed clutch hydraulics, failed alternator, leaking sunroof, failed ignition switch, some pin in the transmission snapping twice, etc. etc. put a drag on my wallet that my Mazda from the 1980s never did. Other than maintenance on wear items over eight years, the only thing it needed were a thermostat and an exhaust pipe. Essentially it didn't go into the shop except when I scheduled it to.

The Big 3 have gotten past the Vega era of cars rusting while still in the factory or snapping in half for no good reason, but they (in general) haven't caught up with the Japanese. Are the Big 3 making decisions to save a few bucks on parts when building the car? Are the counting on aftermarket parts and post-warranty repairs as being a profit center for themselves and their dealers? Do they have too many brands so that the Cadillac has to be better than the Olds which is better than the Buick which is better than the Pontiac which is better than the Chevy, so the Chevy must be intentionally 4 noticeable steps worse than their top line? (Yes, I know they are dropping brands. Good! It has been way too long.) Some of their trucks prove that they can make a long lasting, high quality vehicle. The question is why don't they do that for everything?

13 posted on 12/17/2008 7:18:56 AM PST by KarlInOhio (11/4: The revolutionary socialists beat the Fabian ones. Where can we find a capitalist party?)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Liberty1970

Thanks for posting this. I have argued most of these points. I don’t understand how people remain so ignorant about this industry. You can google anytime and find the truth.

One good point this article misses is the millions-perhaps billions of dollars given to transplant auto makers by the south in order to have transplants in their states. They are using taxpayer money and some of it is federal. How is this free market? This is bailout essentially. They are helping foreign manufacturers to drive out American industry-disgusting.


14 posted on 12/17/2008 8:04:49 AM PST by bronxboy
[ Post Reply | Private Reply | To 1 | View Replies]

To: Adder

The 38 billion loss is the result of restructuring costs...they have been seriously restructuring. This cost money. The economic tsunami caught them at a bad place in this endeavor.


15 posted on 12/17/2008 8:05:56 AM PST by bronxboy
[ Post Reply | Private Reply | To 5 | View Replies]

To: bronxboy
There is a lot of irrational hatred (as opposed to the rational hatred, like I have :-) ) of the Big 3, that explains a lot of mythology.

One nice thing that I take advantage of is the poor resale value of Big 3 vehicles. Since I no longer buy new, I get used vehicles at a big discount by going domestic. There is no difference to speak of quality-wise (I am a quality engineer), so I save a boatload of money based via other people's prejudices and misconceptions.

16 posted on 12/17/2008 8:08:09 AM PST by Liberty1970 (Democrats are not in control. God is. And Thank God for that!)
[ Post Reply | Private Reply | To 14 | View Replies]

To: starlifter

There is rumor about quality and then there is truth...see below. Please note for years,Toyota vehicles were assumed to be wonderful and were not even tested.

‘But perhaps the biggest news among Asian automakers was the problems Toyota Motor Corp. had with reliability and recalls. Though down to 573,554 recalled vehicles from 657,308 in 2006, the Japanese company this month recalled about 10 percent of its Tundra pickups and earlier this year recalled more than 500,000 of its Sequoia SUVs. That’s significant because Toyota has been pushing hard to break into the highly profitable large vehicle market.

In October, Consumer Reports demoted Toyota to third from first in its vehicle reliability rankings, dropping the Camry, Tundra and Lexus GS from its list of recommended vehicles. The magazine said it would no longer automatically recommend Toyota vehicles that had been redesigned.

“This is a big issue for us,” Toyota spokesman Bill Kwong said, noting that the 2005 recall total, 2.37 million vehicles, was “really glaring.”


17 posted on 12/17/2008 8:11:26 AM PST by bronxboy
[ Post Reply | Private Reply | To 7 | View Replies]

To: Liberty1970

I like saving money as well. I posted about Toyota quality above.


18 posted on 12/17/2008 8:12:19 AM PST by bronxboy
[ Post Reply | Private Reply | To 16 | View Replies]

To: KarlInOhio

See below how Toyota is viewed in terms of quality.GM quality is higher. Also, Toyota buyers tend to replace their cars faster...In this downturn with people keep all cars longer, Toyota owners are going to be in for expensive repairs on some of these cars-parts are really expensive as compared to a Us car.


19 posted on 12/17/2008 8:15:13 AM PST by bronxboy
[ Post Reply | Private Reply | To 13 | View Replies]

To: Dixie Yooper

I’ve bought 3 Fords since 1976 at a much lower cost. They do get used every day. However, there is something to be said about the latest styles and owning ancient vehicles has it’s style draw backs!


20 posted on 12/17/2008 8:24:40 AM PST by e_castillo
[ Post Reply | Private Reply | To 12 | View Replies]


Navigation: use the links below to view more comments.
first 1-2021-27 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
General/Chat
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson