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reytsmanAs I was reading the discussions on these pictures, one idea seem to keep raising to the top. The idea that crisis of Detroit was brought over by the crisis of the automotive industry. This excuse was so common, that I started to ask myself "is it real" "did I miss something", was this reality or was it just made from substance that always floats.
We all heard stories about stupid Detroit automakers, that were completely unprepared for the oil crisis, and that sneaky Japanese easily overpowered them, because Japanese actually knew what they were doing. But no one really mentions that while those bright sneaky Japanese were cornering the car market, dumb American companies took control of the rapidly growing truck and SUV market. Nor do they mention the fact that car market cornered by those ingenious Japanese automakers has been steadily shrinking and only recently started to somewhat stabilize. At the same time American companies were quietly taking advantage of the rapidly growing market of pick-ups and SUVs enjoying significantly higher margin of profit per vehicle.
We all heard stories that those terrible American companies don't sell small efficient cars because they are utterly incapable of creating a decent one and bribed by the oil industry. But no one really mentions the utter failure of Honda Insight that demonstrated that apparently there aren't that many people willing to pay money for car that seats two and has virtually no trunk. Neither do people talk much about Toyota Echo, that showed that cars smaller than Corolla don't really sell (while corolla has moved into the mid-size mild luxury sedan division). Toyota Prius does sell, but is it the car or the hybrid hype? Now days all it takes is a hybrid sticker to get a line of people wanting to buy one, with GM's own Vue hybrid being the prime example. When put in prospective it appears that whoever at General Motors made a decision to kill EV1, electric two seater from the 90s, deserves a standing ovation for prevention of waste of development time and money on something that won't sell.
We all heard stories about "superb quality of Japanese cars". That might be true if we talk about Toyotas, but really let's compare old toyota vs. old buick, those who owned old buicks can confirm that those cars are pretty much indestructible. In reality if we compare average honda with average pontiac, the differences are not that big. However what is a lot more important is that majority of owner of toyotas, hondas and other nissans, regularly visit the dealership for scheduled maintenance. Majority of ford chrysler and chevy owners might visit Uncle Eds for an oil change twice a year and call it good.
In modern world toyota passenger cars are good, really good. American car companies might have fallen behind by a generation in comfort and durability. But in modern world _one_ generation is about two years, so chances are, buying a brand new American car you are getting better quality that you would get three years ago buying a Japanese vehicle.
Than is there a crisis at all? Is it real? What's causing it?
Looking the GM results for the last quarter makes you wonder about that even more.
Let's start with manufacturing. Toyota and Honda are opening more plants in US and they appear to be fairly profitable, so looks like the country is not a factor. Toyota and Honda are opening more plants in Southern States and around Michigan. At the same time General Motors are opening new plans in Mexico or Michigan. Why? The answer is very very simple and short, only three letters - UAW. Japanese companies will have nothing to do with those letters and it's not because their workers are underpaid, but rather because to Japanese idea of paying people who make no product, but drive fancy cars to expensive offices while at the same time interfering with firing of John Smith who came to work two hours late high as a kite and smelling of whisky, seems somehow strange. Due to the fact that our dearly beloved governor will not guaranty foreign companies protection from UAW, foreign companies bring new R&D centers to Michigan and keep the manufacturing around Michigan. Obviously small suppliers leave Michigan to stay closer to the production plants. Now let's look at American companies. UAW contracts are done and singed, according to those contracts you can't just close a plant without putting a new one in the same place. But times have changed new plants are designed to make a number of different vehicles with ability to shift production to meet the demand for the more popular models. So in modern world one new plant replaces two old ones. Opening two new style plants to replace two old style plants doesn't seem like a great idea. Building two old style plants makes even less sense, but there is no way out once you've promised to UAW to build your plants here. Based on the contract you have to build two, so you might as well build two old style plants rather than build two fancy new style plants and have obscene amount of extra capacity that you have no need for. So once the dust settles Americans end up opening two plants while Japanese can do the same job with just one. Then you have to make two different cars with four different engines to make sure that both of your plants are doing something. This spreading of resources drives cost of development high, makes UAW happy and rich, while hurting the state of Michigan because for every 1000 UAW workers that keep their jobs, Michigan looses 1500 jobs that small suppliers move out of state closer to new style Japanese plants since selling 10,000 pieces to one plant is a lot more profitable than selling 4,000 pieces to two different plants.
Of course you could just close down the old useless plants, put 10,000 people out on the street and than all of the sudden uncovered from the current "crisis cloud" the real American automotive industry will appear, looking like a tired donkey loaded with management of UAW, workers - of the UAW, unneeded factories, unnecessary cars, extra developers, old pension plans, highly paid but not very bright executives, and finally on top of that we would see the press, wiping the donkey with a stick shouting, "faster! faster! you are so old and dumb that you will die at any moment".
We all heard stories about stupid Detroit automakers, that were completely unprepared for the oil crisis, and that sneaky Japanese easily overpowered them, because Japanese actually knew what they were doing. But no one really mentions that while those bright sneaky Japanese were cornering the car market, dumb American companies took control of the rapidly growing truck and SUV market. Nor do they mention the fact that car market cornered by those ingenious Japanese automakers has been steadily shrinking and only recently started to somewhat stabilize. At the same time American companies were quietly taking advantage of the rapidly growing market of pick-ups and SUVs enjoying significantly higher margin of profit per vehicle.
We all heard stories that those terrible American companies don't sell small efficient cars because they are utterly incapable of creating a decent one and bribed by the oil industry. But no one really mentions the utter failure of Honda Insight that demonstrated that apparently there aren't that many people willing to pay money for car that seats two and has virtually no trunk. Neither do people talk much about Toyota Echo, that showed that cars smaller than Corolla don't really sell (while corolla has moved into the mid-size mild luxury sedan division). Toyota Prius does sell, but is it the car or the hybrid hype? Now days all it takes is a hybrid sticker to get a line of people wanting to buy one, with GM's own Vue hybrid being the prime example. When put in prospective it appears that whoever at General Motors made a decision to kill EV1, electric two seater from the 90s, deserves a standing ovation for prevention of waste of development time and money on something that won't sell.
We all heard stories about "superb quality of Japanese cars". That might be true if we talk about Toyotas, but really let's compare old toyota vs. old buick, those who owned old buicks can confirm that those cars are pretty much indestructible. In reality if we compare average honda with average pontiac, the differences are not that big. However what is a lot more important is that majority of owner of toyotas, hondas and other nissans, regularly visit the dealership for scheduled maintenance. Majority of ford chrysler and chevy owners might visit Uncle Eds for an oil change twice a year and call it good.
In modern world toyota passenger cars are good, really good. American car companies might have fallen behind by a generation in comfort and durability. But in modern world _one_ generation is about two years, so chances are, buying a brand new American car you are getting better quality that you would get three years ago buying a Japanese vehicle.
Than is there a crisis at all? Is it real? What's causing it?
Looking the GM results for the last quarter makes you wonder about that even more.
Let's start with manufacturing. Toyota and Honda are opening more plants in US and they appear to be fairly profitable, so looks like the country is not a factor. Toyota and Honda are opening more plants in Southern States and around Michigan. At the same time General Motors are opening new plans in Mexico or Michigan. Why? The answer is very very simple and short, only three letters - UAW. Japanese companies will have nothing to do with those letters and it's not because their workers are underpaid, but rather because to Japanese idea of paying people who make no product, but drive fancy cars to expensive offices while at the same time interfering with firing of John Smith who came to work two hours late high as a kite and smelling of whisky, seems somehow strange. Due to the fact that our dearly beloved governor will not guaranty foreign companies protection from UAW, foreign companies bring new R&D centers to Michigan and keep the manufacturing around Michigan. Obviously small suppliers leave Michigan to stay closer to the production plants. Now let's look at American companies. UAW contracts are done and singed, according to those contracts you can't just close a plant without putting a new one in the same place. But times have changed new plants are designed to make a number of different vehicles with ability to shift production to meet the demand for the more popular models. So in modern world one new plant replaces two old ones. Opening two new style plants to replace two old style plants doesn't seem like a great idea. Building two old style plants makes even less sense, but there is no way out once you've promised to UAW to build your plants here. Based on the contract you have to build two, so you might as well build two old style plants rather than build two fancy new style plants and have obscene amount of extra capacity that you have no need for. So once the dust settles Americans end up opening two plants while Japanese can do the same job with just one. Then you have to make two different cars with four different engines to make sure that both of your plants are doing something. This spreading of resources drives cost of development high, makes UAW happy and rich, while hurting the state of Michigan because for every 1000 UAW workers that keep their jobs, Michigan looses 1500 jobs that small suppliers move out of state closer to new style Japanese plants since selling 10,000 pieces to one plant is a lot more profitable than selling 4,000 pieces to two different plants.
Of course you could just close down the old useless plants, put 10,000 people out on the street and than all of the sudden uncovered from the current "crisis cloud" the real American automotive industry will appear, looking like a tired donkey loaded with management of UAW, workers - of the UAW, unneeded factories, unnecessary cars, extra developers, old pension plans, highly paid but not very bright executives, and finally on top of that we would see the press, wiping the donkey with a stick shouting, "faster! faster! you are so old and dumb that you will die at any moment".
