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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: i-node who wrote (446199)	1/8/2009 10:43:09 PM
From: Tenchusatsu	1 Recommendation Read Replies (2) \| Respond to of 1578023

Inode, I recently talked with a friend of mine from Detroit, who among other things was greatly upset at the media portrayal of the Detroit auto industry. One thing he mentioned was that fixed costs were pretty high relative to variable costs. Sounded like semiconductors to me. Anyway, with those conditions, you would have to "make it up on volume." This is assuming, of course, that the variable costs were greater than the ASPs. I wasn't able to press him on the details, but he considered labor to be a fixed cost. This is because you can't really send workers home when production needs to be slowed, except when you do plant shutdowns. So the bottom line here is GM isn't really losing money on every car they sell. It's just that the fixed costs mean the break even point for unit sales are well beyond what the market will demand. I'm not sure what percentage of the fixed costs are labor-related, but I can probably imagine it to be rather high. Tenchusatsu