The problem is much more complex than that. There are several issues that killed the US auto industry. Here are some:
a. Bad union contracts
The worst was in the early 90's when GM's Robert Stempel
negotiated the jobs pool whereupon you could get laid off
and still collect something like 90% of your pay. He
effectively turned a variable cost into a fixed cost, and
it was copied by all the domestic automakers.
b. Shrinking Market Share
By making vehicles people did not want, their market share
shrunk. The bad contracts meant it made sense to continue
to produce cars even though people would not buy them.
They were dumped on fleets to keep the factories going,
as there was really no savings in shuttering factories to
cut down on supply.
This dumping killed resale value, which drove up the total
cost of owning a big 3 vehicle. People got smart and
figured out the depreciation was costing them a ton of
money and switched to imports, who did not dump to fleets.
c. Quality
This has been an issue for 40-years, but the institutionalized adversarial relationship between management and the workers meant it was an uphill battle. The situation was not helped by the accountants who often times figured it was cheaper to spend $2,000 per vehicle on warranty claims than fix the problem. This kind of short sightedness was rampant in the domestic companies.
d. Quarter to Quarter thinking
The Japanese think long term. The Americans think quarter
to quarter. The disparate goals resulted in disparate results. Honda built a plant in Marysville, Ohio in the mid 1980's to get around protectionism. Initially they shipped knock-down kit cars that were assembled at the plant, actually producing a car that cost more to make here than in Japan. Gradually they began adding local content as their suppliers followed them to the USA. Now a typical Honda often has more US content than a typical "domestic" car, and is more profitable.
e. Cars were made for Focus Groups, not Customers
The bureaucrats at GM would assemble a demographic group and ask them "would you like this in a car" or "would you like that in a car" and you'd come away with a Pontiac Aztec. Accountants, not car people, were making the calls. The Japanese figured out a long time ago the trends started in California and had their design studios there, and those were the designs that sold. Sheesh, the Beach Boys could have told you that in the early 60's.
f. Conceding markets
Ford figured in the late 90's they couldn't make money selling cars, so they decided to pretty much focus on trucks. Well, that worked for a few years until the Explorer problem, and now it's going to bankrupt them because people want cars now.
Meanwhile, Toyota, Nissan, and Honda have been filling out their product lineups so they could be one stop shops for their customers whether they wanted an ultra economy car or a full size pickup, and they make money on all categories of vehicles.
g. Economies
Honda has built their car business on about 5 platforms.
I think GM had 24 at one time. The economies of scale
you get from modular builds off shared platforms are huge.
Honda has the Fit platform, the Civic, the Accord, the
Odyssey, and maybe one more. Everything comes from those
platforms for Acura and Honda. Toyota has a couple more, but their volume is larger. Many parts are shared amongst
platforms. These guys get it. The domestics are still
working through this problem the Japanese figured out
over 20-years ago.
h. Work Rules
When a plant can only build a certain type of vehicle in
an assembly line fashion rather than a modular build using
a shared platform, it adds huge costs. The Japanese use
more modular builds, the domestics have virtually shunned them.
i. Pooled marketing, fewer brands
Toyota has 3-brands (Toyota, Scion, and Lexus). Honda
has two (Honda, Acura). GM has 8 (GMC, Pontiac, Chevrolet, Buick, Cadillac, Saturn, Hummer, Saab).
GM is being passed by Toyota this year in market share, and one reason is because they are supporting almost 3-times as many brands for the same market share.
Basically, many of the issues GM and Ford are facing are the result of diminished market share, and many of the reasons for this are listed above. If GM still had a 50% market share there's a good chance I wouldn't be posting this and we wouldn't be having this discussion.
You've drunk the Kool Aid if you think Chrysler, GM, and Ford's problems are about health care. It's about they couldn't get a clue in 1978 what to do, and they still don't have a clue 30-years later.
Disclosure, I was involved in a research project on Chrysler 30-years ago and also did one on Ford in the early 80's, which included interviews with people in their headquarters. While that may not qualify me as an authority on what's going on today, I think it's relevant to the issue at hand, as I have remained in touch with the industry through the years. |
