I had a blog all ready to go tonight, honest. Something about the effects of deflation and inflation on our economy. Guess that'll be tomorrow.
I went to a tech conference this evening after work. Saw all sorts of the latest technology, wasn't half bad. It certainly kept me busy and out of trouble. Saw a USB key that you could run over with a bobcat and it would still work. It also had a bonafide self destruct device in it that could be triggered remotely. Very James Bond.
Speaking of, I'm tempted to go check that movie out sometime in the near future. Despite my lackluster interest in the last film, I am curious to how this one has turned out.
More tomorrow...
Thursday, November 27, 2008
Thursday, November 20, 2008
Why Detroit’s Success or Failure Affects All of Us (You too, import drivers!)
I know some people who are salivating at the concept of the three domestic auto companies folding into bankruptcy. These are people perhaps once burnt by the purchase of a problem-stricken Ford Pinto, or “brand fanatics” of the type I’ve only seen in the high-tech field as well (obsessive devotion to Sony or Apple comes to mind). They believe that nothing the American manufacturers can do is right, nothing the import companies can do is wrong, and are quite unwilling to look at or listen to evidence to the contrary.
Without a bailout, GM and Chrysler look like they are certainly headed into bankruptcy. Ford seems to have slightly better financials, but may not be much further behind. This has been due to an abysmal year in sales, first caused by the run-up in fuel prices and the abandonment of the SUV market by consumers, and now by the US recession, which is hitting all auto manufacturers quite hard. The US market was already in bad shape, but imports are starting to take a hit, with Mercedes recently announcing that it was going to have a one month halt on production on certain models, because they have too much inventory.
Let us quickly look at what could happen if the “Big 3” become no more. I’m going to disregard the affect on the companies’ employees and suppliers, as drastic as they are, THAT part is being well covered in the news. I will start with an anecdote from personal experience.
Once, I had a boss who seemed to be a little bit of a brand fanatic. Computers always had to be the same brand, and cars had to be selected from a pool of one or two brands that he had settled on being “the best”. While giving him a lift to the shop to pick up his car from maintenance, he noted that my “Ford” was relatively high mileage. At the time I had a little over 200,000 kilometres on my Mercury Cougar. I said that I would be driving my Mercury until the wheels fell off, as I couldn’t afford an import, and had no interest in the current round of “affordable” domestics, at the time the Cobalt, Pursuit, Focus, or….nothing, as Chrysler had discontinued the SX 2.0 and had yet to introduce the Avenger to replace it. He recommended I look into the Mazda 3, which was on his short list of brands approved for intelligent purchasers’ consumption. I shrugged it off, mumbling something about not being overly fond of the 3’s looks either.
He wasn’t aware of it, and I thought it wise not to point it out, but at the time (indeed, until some time in the very near future), Mazda was and is Ford. The Mazda 3 IS a Ford Focus, with a different shell. They are the same platform. Mazda is more than 33% owned by Ford, which is the largest share, and the controlling interest in the company. Mazda 6’s are built in a partnership plant in Michigan, which is 50% owned by Ford. They are built alongside the Ford Mustang, in fact built on the same assembly line that used to build the Mercury Cougar, and before that the Ford Probe/Mazda MX-6 (both the same car as well). Ford is currently trying to sell their stake in Mazda to help their capital situation, but it is a situation that proves how much a spider web the domestic and import market has become.
Here’s a rundown of companies that would somehow be affected by the bankruptcy of the “Big 3” that most would not expect:
Mazda is already being affected. Ford’s stake will be sold, and while they have promised that they will continue to share facilities and development work, if Ford collapses, that may go as well. Fanatics will say that Mazda helps Ford, and not vice versa, but remember that the 3 IS a Ford Focus, not the other way around, and it replaced the final generation Protogé, a car that was very far from perfect.
Volvo is owned by Ford. They are currently in negotiations to possibly sell this division to a car company in China.
Ford has already sold Jaguar and Land Rover to Tata Motors in India. It will remain to be seen whether or not quality suffers from these desperate moves. Ford also hacked off its Aston Martin arm a little while ago.
The “GM Lineup” is quite extensive. Opel, Vauxhall, Daewoo, Saab are all GM companies, as are a few others. General Motors is still the WORLD’S largest automaker measured by sales. That’s a fact, no matter what a Honda or Toyota fan will tell you. Speaking of Toyota, GM and Toyota have long had agreements and co-operation on development costs of vehicles. The Toyota Matrix/Pontiac Vibe is one example that comes to mind.
The only Chrysler product that people may not associate with Chrysler is Jeep.
So that’s what would happen to some other companies, names many probably didn’t realize were part of the Big 3. What else could happen in bankruptcy? Parts. Millions of people are driving Big 3 cars worldwide. Bankruptcy could affect the availability of parts for cars that are still in service. While some other company would likely rush in to buy the remainder of the US companies, they may not have the same commitment or obligation to supplying parts for older models. So millions of people with their Cavaliers, Escorts, Neons, and so on may be forced to shelling out for a new car, even if they can’t afford it. A side effect of this will be an increase in ridership on city buses. At least every dark cloud has some silver lining.
Finally, in some defense of Detroit, they don’t make a bad product, it is a bit of a misconception. Most modern domestic cars are very reliable, and the smaller ones have excellent fuel consumption ratings for their class. I believe the Malibu recently beat out the Camry in several reviews, and those cars are neck in neck for gas mileage. Not like the gas guzzling Accords, Altimas and so on are much better on fuel. The Big 3’s reputation came from decades of an act that took forever to clean up, but they seem to have done so. If you don’t buy bottom of the line, build quality seems quite solid as well. Jetta’s feel just as “plasticky” and “cheap” as the Big 3’s offerings, and I have personally seen much newer examples (seen two) in the shop far more often with electrical problems than any domestic car I have personally owned or heard about through a friend. The Big 3’s problem was catering to the SUV craze, which the North American culture DEMANDED, for the longest time. They built big gas guzzling trucks and vans to be used by yuppies carting their families around, when station wagons or large sedans would have made much more sense. Also, they have severe management issues and contracts and pensions that are difficult to keep up with. The heart of the financial problems of the Big 3 is probably their high rate of pay, benefit packages, and retirement plans. With problems like those, they may never be successful in the long term.
I’m not saying Detroit deserves a bailout. Even if they get one, I hope management has to face the music and have their huge salaries slashed to nothing like the CEO of Chrysler in the 80s-that would be some fair. What I am saying is the loss of the Big 3 would have an effect on millions of people. The employees, the suppliers and their employees, the average people driving their cars, even those buying imports. Even if you buy Hondas or Hyundais, what do you think will happen when the lower cost competition is gone. Because like it or not, Cobalts and Avengers and Focuses keep the cost of Civics and Accents and Sentras down.
And how's that "Ford" doing, nearly 3 years later? 270,000 kilometres and still going strong, with not a rattle in the frame.
Without a bailout, GM and Chrysler look like they are certainly headed into bankruptcy. Ford seems to have slightly better financials, but may not be much further behind. This has been due to an abysmal year in sales, first caused by the run-up in fuel prices and the abandonment of the SUV market by consumers, and now by the US recession, which is hitting all auto manufacturers quite hard. The US market was already in bad shape, but imports are starting to take a hit, with Mercedes recently announcing that it was going to have a one month halt on production on certain models, because they have too much inventory.
Let us quickly look at what could happen if the “Big 3” become no more. I’m going to disregard the affect on the companies’ employees and suppliers, as drastic as they are, THAT part is being well covered in the news. I will start with an anecdote from personal experience.
Once, I had a boss who seemed to be a little bit of a brand fanatic. Computers always had to be the same brand, and cars had to be selected from a pool of one or two brands that he had settled on being “the best”. While giving him a lift to the shop to pick up his car from maintenance, he noted that my “Ford” was relatively high mileage. At the time I had a little over 200,000 kilometres on my Mercury Cougar. I said that I would be driving my Mercury until the wheels fell off, as I couldn’t afford an import, and had no interest in the current round of “affordable” domestics, at the time the Cobalt, Pursuit, Focus, or….nothing, as Chrysler had discontinued the SX 2.0 and had yet to introduce the Avenger to replace it. He recommended I look into the Mazda 3, which was on his short list of brands approved for intelligent purchasers’ consumption. I shrugged it off, mumbling something about not being overly fond of the 3’s looks either.
He wasn’t aware of it, and I thought it wise not to point it out, but at the time (indeed, until some time in the very near future), Mazda was and is Ford. The Mazda 3 IS a Ford Focus, with a different shell. They are the same platform. Mazda is more than 33% owned by Ford, which is the largest share, and the controlling interest in the company. Mazda 6’s are built in a partnership plant in Michigan, which is 50% owned by Ford. They are built alongside the Ford Mustang, in fact built on the same assembly line that used to build the Mercury Cougar, and before that the Ford Probe/Mazda MX-6 (both the same car as well). Ford is currently trying to sell their stake in Mazda to help their capital situation, but it is a situation that proves how much a spider web the domestic and import market has become.
Here’s a rundown of companies that would somehow be affected by the bankruptcy of the “Big 3” that most would not expect:
Mazda is already being affected. Ford’s stake will be sold, and while they have promised that they will continue to share facilities and development work, if Ford collapses, that may go as well. Fanatics will say that Mazda helps Ford, and not vice versa, but remember that the 3 IS a Ford Focus, not the other way around, and it replaced the final generation Protogé, a car that was very far from perfect.
Volvo is owned by Ford. They are currently in negotiations to possibly sell this division to a car company in China.
Ford has already sold Jaguar and Land Rover to Tata Motors in India. It will remain to be seen whether or not quality suffers from these desperate moves. Ford also hacked off its Aston Martin arm a little while ago.
The “GM Lineup” is quite extensive. Opel, Vauxhall, Daewoo, Saab are all GM companies, as are a few others. General Motors is still the WORLD’S largest automaker measured by sales. That’s a fact, no matter what a Honda or Toyota fan will tell you. Speaking of Toyota, GM and Toyota have long had agreements and co-operation on development costs of vehicles. The Toyota Matrix/Pontiac Vibe is one example that comes to mind.
The only Chrysler product that people may not associate with Chrysler is Jeep.
So that’s what would happen to some other companies, names many probably didn’t realize were part of the Big 3. What else could happen in bankruptcy? Parts. Millions of people are driving Big 3 cars worldwide. Bankruptcy could affect the availability of parts for cars that are still in service. While some other company would likely rush in to buy the remainder of the US companies, they may not have the same commitment or obligation to supplying parts for older models. So millions of people with their Cavaliers, Escorts, Neons, and so on may be forced to shelling out for a new car, even if they can’t afford it. A side effect of this will be an increase in ridership on city buses. At least every dark cloud has some silver lining.
Finally, in some defense of Detroit, they don’t make a bad product, it is a bit of a misconception. Most modern domestic cars are very reliable, and the smaller ones have excellent fuel consumption ratings for their class. I believe the Malibu recently beat out the Camry in several reviews, and those cars are neck in neck for gas mileage. Not like the gas guzzling Accords, Altimas and so on are much better on fuel. The Big 3’s reputation came from decades of an act that took forever to clean up, but they seem to have done so. If you don’t buy bottom of the line, build quality seems quite solid as well. Jetta’s feel just as “plasticky” and “cheap” as the Big 3’s offerings, and I have personally seen much newer examples (seen two) in the shop far more often with electrical problems than any domestic car I have personally owned or heard about through a friend. The Big 3’s problem was catering to the SUV craze, which the North American culture DEMANDED, for the longest time. They built big gas guzzling trucks and vans to be used by yuppies carting their families around, when station wagons or large sedans would have made much more sense. Also, they have severe management issues and contracts and pensions that are difficult to keep up with. The heart of the financial problems of the Big 3 is probably their high rate of pay, benefit packages, and retirement plans. With problems like those, they may never be successful in the long term.
I’m not saying Detroit deserves a bailout. Even if they get one, I hope management has to face the music and have their huge salaries slashed to nothing like the CEO of Chrysler in the 80s-that would be some fair. What I am saying is the loss of the Big 3 would have an effect on millions of people. The employees, the suppliers and their employees, the average people driving their cars, even those buying imports. Even if you buy Hondas or Hyundais, what do you think will happen when the lower cost competition is gone. Because like it or not, Cobalts and Avengers and Focuses keep the cost of Civics and Accents and Sentras down.
And how's that "Ford" doing, nearly 3 years later? 270,000 kilometres and still going strong, with not a rattle in the frame.
Subscribe to:
Posts (Atom)
