Tuesday, November 11, 2008

Automotive Myth-Busting

Here's an interesting combox discussion of automaking. I'll excerpt a couple of things which are significant.

As to the "pension/healthcare cost" myth:

1) “GM’s current labor costs are $73.26 per hour” and “The cost is $25 to $30 per hour more than the labor costs of Asian rivals such as Toyota and Honda that have plants in the U.S. The creation of the VEBA could eliminate as much as one-half to two-thirds of the gap virtually overnight.”

To be wild and crazy, take the $30/hr difference, cut it in half (because the VEBA was agreed to), and you have $15/hr * $34 Hr/car = $510/car max. Not thousands. Are people actually expecting that breaking the UAW or moving a plant south would suddenly turn a $23k car into a $19k car? As much as the UAW has made my life difficult at times, some honesty is due in the discussion.

Hmmmmmmn. Actual numbers, instead of marketed hype? Shocking!!

2) I would love to spout off on all of the urban legends of this business, like quality differences (1 - Who do these people think makes all those parts you touch when you sit in the vehicle? - hint: it isn’t the company whose logo is on the outside of the car. 2- How many of those companies would people guess there are out there who do this work? hint: not nearly as many as there are car companies)

Offhand, I can think of TWO companies which supply 'all those parts you touch': Johnson Controls and Lear. Quality complaints about engines and trannies (and most under-the-hood big-iron parts) are, indeed, the property of the name-on-the-logo. But not the windows, mirrors, seats, and dashboards.

3) I want to draw the best comparison I can for the people who complain about product mix...Let’s say you and I had decided that there is profit in the market for a “healthcare special mobile” focused on the soon to be old boomers, complete with O2 tank holders and storage in the doors for folding walkers. We’ve spent the last year crafting plans for 72 units/hr production (~126k units) of the Nuclear Fusion Grandfather (NFG) Edition that is factory fueled for life. No gas, no maintence, no emissions, and you don’t have to worry about forgetting to stop for gas on the way to Florida. We have already hand built one, the design is complete, and we know that it meets gov’t regs. If we commit to it tonight, the earliest we could possibly put it on sale is 2013 and each one will have to sell at our target average of $x until the end of 2017. No turning back.

That should settle the "SUVs SUCK, Why Did GM Keep Making Them?" crowd of industrial illiterates...

But it won't.

I'm not a UAW lover; there are plenty of ways by which that Union has created costs (think "rules," which are similar to "regulations" in Gummint-ese.) And I'm not sure that The Bigs have to have a 4-year product cycle from concept-to-production. But there are realities that some simply fail to recognize...

Here's the best snark, related to my earlier post:

The point is, even when you know how the business works, it takes big brass balls to steer a car company (obviously bigger than a certain soon to be failed, in-over-their-heads, financial brain trust has),

Can you spell "C-E-R-B-E-R-U-S"?

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