Another Reason American Car Makers are Nearly Broke

iggieDecember 6, 2008

There are many reasons the big three are having problems, golden parachutes, sweetheart union contracts etc. They also have to contend with legend generated by foreign cars. Many think these cars run forever with no problems, while not true as long as people believe it a problem is created for the US auto industry. I wonder if any of the people saying don,t help them, let em sink, have considered the overall effect? No matter who steps in to fill the void the end result will be money going out of the US economy. Any nations economy is like a huge jug of water if continual spoonfulls are taken out and none put back the container eventually empties. If the US trade inbalance is not corrected and soon, all the discussions about the worth of foreign vehicles to US made ones will be a moot point, all will be parked. Our only need for transportation will be a way to get to the free soup kitchen as we won,t have any jobs to drive cars to or money to buy gas. No economy can continue to take the hits ours is taking and not sink.

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"No economy can continue to take the hits ours is taking and not sink.

But iggie, this economic downturn is global, not just here in the US, and the car industry is just one cog in the wheel. The demand for all manner of goods and services is down worldwide and until credit is freed up, there won't be much change and people won't be buying foreign cars either. If the big 3 get their loans, they're still going to cut jobs, close plants, dealerships, parts manufacturers and retailers, and will be back before Congress asking for more. If there's no oversight on what they might get, we'll see the same kinds of things that contributed to this juggernaut. Look at the banks bailout - instead of freeing up credit, the banks just went crazy buying up other banks.

I don't have any answers for this and it's been years since I've been in economics classes, but enjoy "cheap" gas now because at $40 a barrel someone will discover it's not worth pumping out of the ground... if you're old enough you'll remember waiting in long lines for what little gasoline was available. That didn't teach us much with regard to increasing fuel efficiency or seeking alternative sources - what were the big 3 doing then? When crises pass, we kind of just collectively say "phew" and go on our merry entitled way. We've had plentiful, we've had cheap for so long we're used to it and now we're stunned -nay, outraged - to see it all eroding.

The bigger crisis coming is going to be food.

    Bookmark   December 6, 2008 at 12:56PM
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To continue the 'water' analogy, the real problem with Congress giving the auto makers bailout money is that they were late to the well. Wall Street got there first, and my-oh-my, didn't they receive a deluge of cash!

    Bookmark   December 6, 2008 at 2:09PM
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I haven't bought an American car since 1986--I kept that one for 7 years. My purchases since then were a Toyota that ran for 12 years before it was totalled in an accident and a Honda that is at 5 years without a hiccup. I'm not betting $25k that American cars are now better than the ones I owned in the 70s and 80s.

Purchases of foreign cars do send *some* money out of our economy. But we have opportunity to purchase cars from Toyota and other foreign companies that are manufactured in the US, as I have done.

    Bookmark   December 6, 2008 at 4:48PM
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I'm not betting $25k that American cars are now better than the ones I owned in the 70s and 80s. --

you are wrong mary_md7 - do your research!

    Bookmark   December 6, 2008 at 7:21PM
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The debate over aid to the Detroit-based automakers is awash with half-truths and misrepresentations that are endlessly repeated by everyone from members of Congress to journalists. Here are seven myths about the companies and their vehicles, and the reality in each case.
Myth No. 1: Nobody buys their vehicles

Reality: General Motors Corp., Ford Motor Co. and Chrysler LLC sold 8.5 million vehicles in the United States last year and millions more around the world. GM outsold Toyota by about 1.2 million vehicles in the United States last year and holds a U.S. lead over Toyota of nearly 700,000 so far this year. Globally, GM in 2007 remained the world's largest automaker, selling 9,369,524 vehicles worldwide -- about 3,000 more than Toyota.

Ford outsold Honda by about 850,000 and Nissan by more than 1.3 million vehicles in the United States last year.

Chrysler sold more vehicles here than Nissan and Hyundai combined in 2007 and so far this year.
Myth No. 2: They build unreliable junk

Reality: The creaky, leaky vehicles of the 1980s and '90s are long gone. Consumer Reports recently found that "Ford's reliability is now on par with good Japanese automakers."

The independent J.D. Power Initial Quality Study scored Buick, Cadillac, Chevrolet, Ford, GMC, Mercury, Pontiac and Lincoln brands' overall quality as high as or higher than that of Acura, Audi, BMW, Honda, Nissan, Scion, Volkswagen and Volvo.

J.D. Power rated the Chevrolet Malibu the highest-quality midsize sedan. Both the Malibu and Ford Fusion scored better than the Honda Accord and Toyota Camry.

    Bookmark   December 6, 2008 at 7:24PM
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Hi iggie,

Who's going to be able to afford the soup for that "free" soup kitchen to which you referred?

Campbells had a large plant nearby that's been there for years: they're closing it.

A canning plant for fruit (the last one, I think) in our Niagara fruit-growing belt is being closed ... a local farmer is pulling out 48 acres of peach trees: they're clingstone ... and they need freestone for the fresh basket-fruit market.

Local farmers are tearing out their apple trees: cheaper from Washington, shipped by diesel-fuelled truck ... or China. Can't find workers to pick the apples, also.

Good wishes for continuing to have a job.

ole joyful

    Bookmark   December 7, 2008 at 4:17AM
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American auto makers sell 45% of the autos bought in the US the other 55% are sold by 17 other makers. The tale that foreign made cars run forever etc is simply a myth, some do preform and last, they also breakdown. Go to any import dealer and look at the cars in for major repairs, usually they have a backlog and a wait for service is required. I owned an 84 Ford Crown Victoria that had over 250 K miles on it and was still running when I got rid of it. I did have some repairs, an alternator, timing chain and a water pump at about 150K nothing else other the usual things brakes, hoses etc. Next I owned a 2000 Pontiac grand Prix, got rid of it in 05 had 110k miles, my only repair was a serpentine belt, brake pads, and some taillight bulbs. The fact is US made cars are equal to the imports and in many cases superior, also when you buy a foreign brand even the ones assembled in the US the lions share of the money generated goes out of the US economy. No way can this country continue to support the billions in trade inbalance this is costing and not drop to third world status. The present mess will continue and get worse if the brakes are not put on this free trade debacule. Free trade is fine as long as it is fair, but no way can a US worker compete with products made by skilled craftsman who earn 6o bucks per month. Call it protectionialism or what you want, but something has to be done to level the playing field.

    Bookmark   December 7, 2008 at 10:13AM
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I agree with you iggie. But you can tell by reading mary_md7's post that it is a tough perception to change.

    Bookmark   December 7, 2008 at 1:15PM
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I do believe we need to make the loans to the US automakers. But I am confused as to how they got in this mess. Clearly they have dominated the market in SUVs & trucks--just looking down my street illustrates this. And it does appear that the "quality" issue is equal in many of the larger sedans--but I see fewer of those overall, and Toyota/Honda seems to have a lock on that around here--is it just perception, or did those makers really offer more value for the dollar for too long? Reputation is priceless, after all.

I did have a high school friend who went to work in the mill right out of school & retired with full benefits after 20 years--at the age of 39. This has to be having a big impact even now.

I have only ever been a subcompact to compact buyer. Every time I researched (as I am doing now) the various brands and offerings, the US makers have seemed to continue to think of this market niche as one for the throwaway "econoboxes" as they used to call them in the 70s. I would conclude, after test driving, that Toyota/Honda/Mazda offered more value for the money --better ride, handling, fuel economy, fit&finish, etc. The American cars tended to have more window dressing. And they often were not even interested in developing their own product but offered us rebadged products from other companies. Even now, as I look at the ratings for models I am interested in, the Ford, for example, is equal to the Japanese models for the first 3 years or so, then they drop off the cliff for needing repairs. I asked a coworker about her PT cruiser--she "loves it"--but when I asked about repairs--it has needed a lot for 3 years old, when in my opinion it should not have needed any! None of the last 3 cars I have owned have needed anything beyond routine maintenance up to 150k miles. I am sure that the current demand for economy cars will be transient, but those of us who always prefer them are not an insignificant market either,and have grown steadily, and the big 3 did not go after us seriously.

    Bookmark   December 7, 2008 at 2:43PM
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tishtoshnm Zone 6/NM

If I were really concerned about fixing the trade imbalance, I would largely focused on reducing my consumption of oil if I truly hoped to impact it.

New or almost new cars are really expensive. I have owned both American and Japanese and in fact we have 1 of each right now, a 2001 Ford F150 supercrew and a 2008 Camry. We got the new Camry when the last one was totalled in an accident a great car. Before these 2 we had a Dodge Neon and a Chevy Cavalier. The head gasket kept breaking on the Neon, not a cheap thing to fix and it turned out that it was a design flaw. Dh will never consider purchasing a Dodge again. The Cavalier had many problems with the alternator. His parents Malibu had many many problems. I don't gamble and therefore we bought a car with a trusted reputation. I cannot afford to make a car payment and hefty mechanic bills at the same time.

If the companies continue to improve, when it is time purchase a new vehicle, we may consider another Ford but only time will really tell.

    Bookmark   December 7, 2008 at 11:04PM
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I don't think Mary_md7 was off with her opinion regarding American made cars. If indeed American cars are so well made, the Big Three should be swimming in money instead of begging government for a bailout.

In the 80s we had a neighbor who owned a Ford. Every other month we had to give her a ride to drop off her car at the dealership for repairing. After two great Toyotas, we decided to try an American made car, so we got a Dodge Mini Van. When it was 18 months old, without any pre-warning the transmission gave up on a busy 6-line California highway, it almost killed us. The transmission broke down again the next day after the car came back from dealerÂs repair shop.

When we shopped for our first SUV, a Toyota salesperson asked us to drive an used Ford Explore, and a much older used Toyota 4 Runner. After the drive, the decision was made since the ride in the older 4 Runner was a lot more solid and quiet. We were not fooled by the sales pitch; the ride in the Explore felt the same as in our friendÂs Explore.

Since the minivan, we have never owned another American made car. In each research when purchasing a new vehicle, none of the American models had ever made to the list. We did drive American rental cars when we flew to distance cities. Regretfully to say, for the uncomfortable ride, constant rattling, counterintuitive interior design, and fuel inefficiency, none of these cars can match any of the foreign made cars we own.

Low labor cost has nothing to do with our automobile purchase decision. We buy foreign made cars for their reliability and quality, not because of they are cheaper. Just as we love the quality and workmanship of high end American made furniture; we are willing to pay a lot more for them than for any inexpensive, poorly made importers.

I am puzzled as why the same American auto workers produce quality Toyota, Honda in the U.S., but sub par Big Three products. Over the years, reading reports after reports about Big Three's incompetent, absurd operation and management, I am constantly amazed by the fact that these executives can still hold their jobs.

    Bookmark   December 8, 2008 at 1:51AM
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"Go to any import dealer and look at the cars in for major repairs, usually they have a backlog and a wait for service is required."

Absolutely NOT my experience with either Toyota or Honda. A friend does have this experience--with his expensive Beemer.

    Bookmark   December 8, 2008 at 7:56AM
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Why I'm not impressed by numbers stats when viewed in perspective:

GM offers 48 models in the US; Toyota offers 16. If GM doesn't outsell Toyota, they're even more pathetic than I thought.

Ford outselling Honda is not a surprise. Honda is a very small mfg in Japan, hardly anyone drives one. The company long ago made the decision to concentrate on the US market: they were one of the first to introduce models that were US-designed and aimed solely for export, such as the Accord and the entire Acura line.

JD Powers survey is INITIAL car quality (first 30 days only). It has nothing to do with reliability. The reliability of US cars has improved, but they still lag behind the Japanese.

Depending upon where you live, you may indeed find a Toyota or Honda shop full - because their dealer/repair network is much smaller than the Big 3, so they tend to concentrate where the sales are. IOW, the coastal areas, especially in the West, you have no problem finding repair shops who will take you quickly.

In our experience, we've had far more trouble with the 1996 Buick Regal than with any of the Fords we've owned over the last 30 yrs, including the original Escort, the original Contour, and a 1995 Taurus. Our 2003 Hyundai has been almost trouble-free, and the few minor things (door lock failed, seat cushion got stuck and wouldn't fold down) were quickly fixed by cheerful service reps or covered under the extended warranty we purchased.

If I had more money to burn, I'd go back to Acura, because our old Integra was the most fun to drive with fabulous Recaro-like seats - but the Hyundai has been a great compact SUV and reliable performer. Plus, it came, as Hondas/Acuras do, with virtually everything on the mid-level model: tinted glass, intermittent wiper, air conditioning, luggage rack, an outrageously good stereo system, etc. etc. The only option I purchased was ABS with traction control, a necessity for a 3800-lb. vehicle - all of which came in well under $20K. Neither the Honda CRV, the Toyota RAV4, nor the Ford Escape/Mazda Tribute could be purchased for anywhere near that price.

I'd judge the Hyundai and the Ford to be equal in quality, but Hyundai wins on features for equal price.

We plan to replace the Regal next year - we always keep two cars. I'd love half a dozen different cars, ranging from a Mini-S to an Acura MDX to (should I suddenly win the lottery) a Bentley Continental GT. But in terms of return for the money, the best bet will be a used 2005/6 Ford Taurus, when reliability was fairly high and of course, resale-wise it's a steal because nobody wants one any longer. Plus, they don't sell well in San Francisco because the car's simply too big to park anywhere; garages are at a premium around here.

I have test-driven the Focus and really like it, but let's face it, a V4 just does not have the pep and durability of the standard Detroit V6. Living in the hills and possessing a "lead foot" makes a V6 the minimum to keep me happy.

    Bookmark   December 8, 2008 at 12:41PM
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so much for better quality, my 08 impala has spent 22 days in the shop since new, its out now but still isn`t right. on the othe hand my wife`s 03 hyundai, 6 hrs in the shop since new. so nothings changed, they still build junk. they deserve to go under, good riddence.

    Bookmark   December 11, 2008 at 12:33PM
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