Handwriting Is On Wall In Detroit, With Foreign Cars Vastly Preferred

IBD Editorials ^ | July 29, 2008 | CONSTANTINE KAMBANIS, RAGHAVAN MAYUR AND BERT HOLLAND

[Kaslin]

Auto-industry insiders over the years have often blamed Detroit's mounting problems on mediocre management, poor technological leadership and a lack of vision for the future.

While the successful foreign firms relied on technological innovation, a thorough study of the market, clever marketing and high quality, Detroit's Big Three automakers relied on massive economies of scale, price discounting, zero-percent financing, rebates and volume fleet sales, all of which led to erosion of vehicle resale values.

What were customers to do? Buy highly rated "foreign" cars with high resale values or steeply discounted American vehicles with lower resale values?

The answer is in the numbers. From 1992 to 2007, the number of imported passenger vehicles more than doubled, and Toyota Motor Co. is now the world's largest automaker. According to a new joint study by TechnoMetrica Market Intelligence and Auto Futures Group, the No. 1 brand Americans will consider buying is Toyota.

Our study also shows that when it comes to brand power among customers, Toyota and Honda owners are — on average — four times more likely to promote their brands to friends than Ford owners are, and three times more likely to promote their brands than GM or Chrysler owners.

This does not bode well for Detroit, where the Big Three are at crossroads. Already bleeding from declining sales, increasing incentives and heavy lease losses, they must at the same time find the resources to retool their lineups, remake their images and shore up their market values.

[jospehm20]

You can add any French car to that list also.

[VaBthang4]

"My 1986 Accord was great for the first 110K miles. After that, it ate me alive. My 1998 Accord was great for the first 125K miles. After that is was a huge money pit."

Initial reaction...either you are an awful driver or you're full of sh*t.

[eyedigress]

The name could imply German envy. :^)

[Tamar1973]

I’ve never met a Ford owner who had a good experience. OTOH, most of my friends who own Toyotas, Honda, Hyundais or Mitsubishis love them.

[Azzurri]

My Mazda was built in Michigan and my Toyota was built in Kentucky. Gonna tax those too?

Ford owns a controlling interest of Mazda.

[Greysard]

Yes, the UAW are bastards. But they're OUR bastards.

Yes, I hate to run a marathon with that cannon ball chained to my foot, but it is MY cannon ball!

The fact is that UAW kills the industry (and itself) by replacing free labor market with a socialist utopia where you get your pay regardless of your work. Even worse, you are *not allowed* to work better than others. No surprise that the industry is circling the drain. Read "Airframe" for a horror story of union's "work actions" and outright murder on the job. It's fiction but it's not far from real life.

And for a story, I had some Dodge Shadow in 1990s. On one cold, snowy night the head gasket blew, engine overheated and I barely made it home. Upon dissection the mechanic gave me a lump of cast metal and said "this is casting debris, it's not a chipped piece, it was in the block all along and broke off only now." It blocked the coolant flow, caused local overheat and the gasket burned up. I don't even want to think about the cost of that repair. Chrysler hasn't seen a cent of my money since then.

[jwparkerjr]

Forcing people to buy an inferior product only worsens the problem. Right American car makers have an incentive to improve their product, all though you wouldn't know it to look at how they've behaved since the dawn of the oil crisis in the early 1970’s.

Where would the $20,000 go, who would get to decide how to spend it?

The problem is not too many Americans buying foreign made cars, the problem is that part of human nature that makes us seek out the best deal for our money. When it's your money you're spending you tend to be a great deal more selective. That's the problem with government, the are spending OPM (Other People's Money), they are completely dissociated from the constraints placed on most of us when we spend our own hard-earned money. It's just money, actually votes, to them and there's always been more where that came from.

What benefit is there from forcing drivers to buy inferior cars by driving the cost up on a better product?

[jwparkerjr]

You don’t play the horses, do you?

[Soul of the South]

Agree. Recently car shopping I found that at foreign brand dealerships the price negotiation was straight up. At the American car brands (all GM, Ford) it was smoke and mirrors. I ended up buying a Saturn but the buying experience was horrible. The salesman went back and forth with the sales manager, even though I walked in with the invoice price and made a straight offer. We finally got to my price and then when reading the documents before signing I found they had reduced the rebate by $500. When I pointed out the switch, the finance guy claimed it was an accident. All of this gamesmanship for a straight cash transaction with no trade. Two and a half hours to complete a cash transaction. A few years ago when I bought a foreign car it took 30 minutes to negotiate the deal and take delivery.

US car manufacturers have made substantial progress on the quality and value of their products. However, they won’t regain market share until they fix the dealerships. In the internet age, most consumers are savvy. In a ruthlessly competitive market, you can’t win by not fixing the customer experience on the showroom floor.

One other thought. OnStar is a great feature that GM should be able to use to gain competitive advantage. They need better marketing.

[Soul of the South]

One US automaker has a career aircraft executive in the leadership role. On September 6, 2006 Ford CEO Bill Ford was replaced by Alan Mulally, a top Boeing executive. Mulally was president of Boeing’s commercial airplanes division and had been passed over for the Boeing CEO job when Boeing went outside the company to hire Jim McNerney, the CEO of 3M as its CEO.

[TnGOP]

Here is where I stand on this: 1984 Accord - Over 275K miles with no major problems 1986 Accord - bought used and drove to over 200K 1987 Accord - bought used and ended with 225K+ Currently, I have a 2000 Accord 2 dr EX with over 230000 miles. We had to put an axle on it, and the electric window regulator, but it's still in good shape.

I also bought a Honda Fit in November to save gas (I was driving a Ford Aerostar that I inherited)I save $225 a month on gas - over 60% of the payment. It's manual, quick, and more fun than I imagined! Honda simply makes good cars.

However, I've saved the best for last. I have a 1988 AMC Jeep Comanche with over 400,000 miles on it. I did blow the engine (My fault), and replaced with one from a junkyard, and it's still going. I rarely drive it now, and am in the early stages of getting it back in mint condition. It was made in Canada!

I highly recommend a Honda to anyone looking for a great car! LLook at the Fit if you need something small but roomy. I took the family (4 of us) to Florida in it, and we were all comfy. Vic

[redangus]

Had a similar experience back a few years ago. I was buying a new GMC pickup truck. I was writing them a check, no trade, no financing. The salesman started that crap with the sales manager. I told him to bring the manager into his office which he didn't want to do. I asked him how badly he wanted to sell this zoot suit new truck. He went and got the manager. I told them I had gone on line knew what the truck was worth and what I was going to pay for. I was giving them their reasonable profit. The SM actually got to the point of haggling over $50 on a $30,000 truck. I had to get up and threaten to leave before they agreed to sell me the truck. I think they see it as a game to win. I mean come one $50 on a $30,000 truck.

I must say though that my wife who is a Toyota devotee and has had just as bad experiences with some Toyota dealers, one of whom who wouldn't give her her keys back after they drove her trade.

We have found that the best way to buy a car is to deal with the Internet Sales staff. You do all the negotiating on line or by phone and in some cases they will actually bring the car to your home and do the paper work in your kitchen. We have bought both of my wife's recent Toyotas that way. I bought my Tahoe that way and though I had to go to the dealership everything was signed sealed and delivered when I got there.

[boogerbear]

They aren’t my bastards. They’re part of the problem. If you want Americans to buy more American cars the path isn’t pricing out the foreign cars, which just rewards the American companies for poor performance and gives them a reason to over price their cars, the path is to let the free market inspire the car makers to compete. They need to make cars that are better than the competition, period. If they can’t do that then they should go out of business, period.

[VOA]

When I can get 300,000 miles on one car and only 150,000-180,000
on another....which one am I gonna choose.

I can't recall anyone I know getting more than 100,000 miles out
of an American vehicle.
Except for one of my brother's friends that had an aged Ford Pinto
that crossed the 100,000 mile mark.

Unfortunately, he had to have some part replaced (water pump?)
which seemed to be a disturbance to the equilibrium of the motor...
which ended up with "multiple-organ failure" within about 1,000 miles.

I'm sure there are plenty examples of 150-180K American cars
out there...I guess most people I know won't put up with their
American cars when they start having problems at 50-80K and usually
just sell/trade-in for something new.

[VOA]

“
the japanese hired deming and paid him for his expertise.
“

I remember in a statistics class that when the Japanese had their
eyes opened by Deming and the concept of statitical sampling...
they freaked out when a review of WWII data showed they’d built,
hauled into the air, and dropped a crap-load of dud bombs.
And that proper sampling would have alerted them to this major problem.

[IamConservative]

I guess most people I know won't put up with their American cars when they start having problems at 50-80K and usually just sell/trade-in for something new.

That's a lot of it for certain. If you cannot maintain your own car, the costs of shop labor will eat you up.

There are many Ford Powerstroke, GM Duramax and Dodge's w/ Cummins engine in them out there with 500K miles on them. Some of the 5.9 Cummins engines in the Dodge have gone over 1 million without major engine work. However, you do need to be a good mechanic to keep the truck around the engine in one piece.

[ken21]

that’s funny!

[awake-n-angry]

Two years ago I had to sell my 1981 Honda Squareback Station Wagon, with 491,000 miles (original) because I needed room in the driveway. I sold it for $250 to a man who wanted it to pull his motorcycle trailer around. I saw him driving it around the other day and just waved and smiled.

Can’t imagine someone telling a similar story about American made car built after the late 60’s.

[buccaneer81]

Ford owns a controlling interest of Mazda.

I know, but I can only assume the engineering was more Mazda than Ford. My car was assembled by UAW workers in Flat Rock, MI, but my understanding is that the engine and transmission were imported.

[buccaneer81]

Unfortunately, he had to have some part replaced (water pump?) which seemed to be a disturbance to the equilibrium of the motor... which ended up with "multiple-organ failure" within about 1,000 miles.

Funny you should mention that. The direct successor to the Pinto was the Escort. I bought a new 1986 Escort, it ran well for 105,000 miles (had some fit & finish issues) but then the timing belt and water pump went. Got them replaced, but the end came about three months (5000 miles) later.