How G.M. Plans to Spend Your Money

I’m curious to know how many buyers of GM cars are going to come from Mexico, China and South Korea. Are they depending on the markets were they make them to buy them? Because I hate to be the one to break the news but, Americans with out jobs won’t be buying them. Unless of course they want to continue repros indefinately.

I wonder what John Kerry will think about this. Seems one of the centerpieces of his campaign, other than defending a tall tale that he went “75 klicks above the Do Lung bridge”, was preventing outsourcing.
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And by the way, what have Dems done since 2006 to stop outsourcing?

Makes perfectly good sense . . . if you swallow the philosophy that, by definition, what’s good for Wall Street is good for the American worker and the American economy.

Yeah, but afguy, who’s in charge of this now? And let’s not forget to whom “Wall Street” contributes a boatload of cash. “Wall Street” ain’t exactly warm to the GOP.

and afguy, isn’t the idea that, at some point, we have a viable GM that does not rely on routine injections of taxpayer cash? If their labor costs are going to stay the same, then something’s gotta give, right? Looks like that something is job-creation in the US. By the way, can someone explain why labor costs aren’t the primary reason why Honda can build cars in America at a profit, but GM cannot?

Maybe it means the costs of the American labor market are completely out of whack and the single best thing the Obama administration could do to promote job growth is institute universal health care and retirement.

I agree. This isn’t a partisan political issue. It’s a greed and power issue that, if anything, has been decidedly bi-partisan for a number of years.
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Their hooks are definitely “reaching across the aisle” and they are financially supportive of ANYONE who can be influenced.
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In case you haven’t noticed, we are hard on corrupt politicians of all colors.

GM’s F@$%&d! Too many products, too many dealers, weak brands, mediocre CSat scores, no stand-out products in the mass market. Building them in Korea and knocking maybe 2% off the cost of the product is like using your finger to plug a hole in a dyke; a stopgap at best. This decision probably means that GM expects to sell more of its products there in the future.

Sean D actually makes a good point. Canada can compete for job-creation because the government takes care of healthcare, so it’s a backdoor subsidy (if you want to look at it that way) for manufacturers.
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Problem is, of course, that the Canadian healthcare system, for people who actually work hard, ain’t so hot.

Of course, Sean D. doesn’t answer why Honda can build cars here profitably and GM cannot.

…why Honda can build cars in America at a profit, but GM cannot?
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I grew up a Chevy fan… took a lot to sour me on them. I happen to think that Honda and Toyota sell cars in NA because they make darn good cars, because they learned and applied Mr. Deming’s instruction in “Total Quality” to their manufacturing processes.
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The irony is that WE taught them how to make really good cars and then forgot the lessons ourselves. I think we started to re-educate ourselves but events overtook the industry.
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If you’re expecting me to reflexively leap to the UAW’s defense, don’t hold your breath. I worked in the Saturn plant at Spring Hill, TN when they were building it as a contract (non-union)worker. As previously stated, I’m kinda of the “a pox on both their houses” belief when it comes to unions and management.
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I see the need but have also seen the abuses on both sides.

Direct labor costs account for 5-8% of the cost of a car. GM and the others need to make better cars so they can sell them for more.

A couple of points
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1. China is a big emerging market for car sales.
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2. In order for most big car companies to compete they are going to have to sell globally.
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3. The question shouldn’t be whether or not GM has jobs overseas. The question should be will they add jobs here.
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4. We are loaning GM money so they stay in business and we don’t lose 3 million jobs. Regardless of which jobs they send overseas we still can’t allow those 3 million people to get tossed out into the job market during this recession.
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From the article
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According to the figures shared with lawmakers, the percentage of GM’s U.S. sales of cars built in the United States dips from 67 percent in 2009 to 61 percent in 2012. Yet the company projects that by 2014 the percentage will rebound to 66 percent.

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snip

But company officials and industry analysts have long argued that, even putting aside the issue of labor costs, it makes logistical sense to build some cars in other countries, even if they are destined for sale in the United States.

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Take, for example, the Chevrolet Spark, a tiny car that GM sells in South Korea and elsewhere in Asia. In the next few years, the company plans to send some of those cars — which are built in Changwon — to the United States for sale.
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But since only about 5 percent of the car’s market will be in the United States, the manufacturing will remain in South Korea.
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Analysts who study the auto companies and their global operation warn against allowing political passions to obstruct GM’s efficiency.
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“If we start making political decisions with the auto industry, we’re going to be in tremendous trouble,” said Michael Robinet, vice president of global vehicle forecasts at CSM Worldwide.

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Bottom line this is about GM being viable period. If the best way for them to stay in business is to add some jobs overseas, it shouldn’t be a political football. Because the alternative is GM goes out of business then whole communities will be affected.

Honda doesn’t have the legacy costs. And it has a better product.

Notice how other posters keep coming back to the “they make a better product” point.
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For the record, my wife told me to go out and get a decent car to drive to work (teenage son is getting my old one). I bought a used 10 year old Lexus because it DID…NOT…RATTLE…AT…ALL! Toyota has had a reputation for indestructable drive trains for years.
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THAT’s how you build loyal customers. Build a car that they will feel good about buying, even if it’s that old.
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A word of advice – bury that concept of “planned obsolescence”. It’s kinda incompatible with getting your loyal customer base back.

I wonder what John Kerry will think about this. Seems one of the centerpieces of his campaign, other than defending a tall tale that he went “75 klicks above the Do Lung bridge”, was preventing outsourcing.
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No, no, you’re doing it wrong. That’s 2004′s playbook. Try this:
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“Barak HUSSEIN Obama and his buddy Will Ayers are trying to end the embargo against Cuba so that they can outsource AMERICAN JOBS to the Communists. I wouldn’t be surprised if Hugo Chavez is in on the deal, too.”

Honda can build cars here profitably and GM can’t for a variety of reasons.
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1. No legacy labor costs. GM has more retirees they have to pay for than active workers.
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2. For years, Honda was ahead of GM on best practices and efficiency. It’s actually cheaper to produce high quality cars than low quality cars because of reduced warranty and defective costs.
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3. Market segmentation. GM, because of its legacy labor costs can’t build small cars as cheaply as Honda. So it can’t compete in the cheap fuel efficient car market. So it got hit really, really hard by the spike in gas prices.
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4. Unionization. Honda’s plants aren’t union. GM’s plants have been union for decades, and the union labor contracts are still influenced by a time period where there was less competition and more inefficiencies that were passed along to the consumer in the form of higher costs.

So, Sean, wouldn’t the answer be, if making GM viable is the singular goal (rather than preserving the outdated labor cost structure and making GM viable), figuring out how to reduce said legacy costs, rather than subsidizing the outsourcing of American jobs. Look, I get why companies outsource. It’s inevitable. But should the American taxpayer be subsidizing it, when there could be less of it if labor costs were brought in line? And should Dems be ok with this, given their stances?
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http://www.weeklystandard.com/weblogs/TWSFP/2009/05/pelosi_claimed_no_knowledge_of.asp
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Just another example of the situational principles of Democrats.

I think the big deal between GM and the UAW is that the UAW gets a huge shareholding in return for taking on some of the pension and healthcare burden. I’m curious to see how the UAW reacts when they have skin in the corporate game.

It will be interesting to see if the courts go for flipping the secured and unsecured debt in BK. That, up till now, has been a big-time no-no.

Things to bear in mind.
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People with jobs are reliable consumers. People without jobs are unreliable borrowers. If Mexican workers are willing to do assembly jobs at 7 dollars and hour I can’t think of any good moral reason not to encourage them to do so. That the cars assembled in Mexico are made from parts that are purchased from other US companies is a factor that people tend to forget. It isn’t just about keeping GM afloat. It’s about the vendors further up the supply chain as well.

Paul, damn right. The only thing I’d add though is that the auto components business really is global. Even if Visteon (US company) is supplying electronics systems to GM, they will be buying Japanese LCDs, German Microcontrollers etc.

Tempting as it is to leap, arms flailing, into the “Somehow it must be the Democrats’ fault” swamp, I think I’ll just content myself with making an observation and a suggestion. Here in Maryland, GM has been running ads promising to take care of customers like never before. Presumably that means actually offering customer support, which can only be a step in the right direction. We can’t afford to buy cars right now, but if we could, the promise of customer support would definitely be a factor, because unlike Toyota, Honda, Hyundai, Nissan and etc., GM cars have historically made that necessary. My suggestion, for what it’s worth, is for GM to try to focus on a sort of market niche: Porsche and its European fellows have the hot, sexy car bit locked up, the Asian manufacturers pretty much own the dependable, durable car market, and Ford leads the world in the “burst into flames” model niche. Perhaps GM could corner the “unbelievably ugly, poorly designed and badly built” portion of the market now that AMC is long-dead and Chrysler is about to follow them into the junkyard of American automotive ingenuity. It would be a new path for them, but I’m sure their crack management/public relations team could set new standards in this area.

Just another example of the situational principles of Democrats.
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spob,
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Above is a pretty good example of why most just consider you a reflexive, right-wing troll much of the time. You come up with some good points then throw in a phrase like the above when the conversation really didn’t call for it.
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Is this some kind of Tourette’s condition with you? Something you really can’t help doing?

Happy weekend one and all! TTFN.

Just adding balance to the leftie tilt of an MSM blog . . . .
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I mean really, can Nancy Pelosi lecture anyone about anything given her baldfaced lies . . . .

I mean really, can Nancy Pelosi lecture anyone about anything given her baldfaced lies . . . .
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I guess the answer is, no, you really can’t help yourself.
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You want to be taken seriously here, spob? Grow up and start communicating like an adult with serious ideas to discuss. Otherwise, you’re just a slightly more civil version of QH/Hulagate.

afguy
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Not. Gonna. Happen.

sgwhite,
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Yeah. I know.
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But, at least, now he can’t make the argument that “no one ever tries to listen to what I say.”

afguy
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And yet he WILL make the argument. Reality has nothing to do with it.

But since only about 5 percent of the car’s market will be in the United States, the manufacturing will remain in South Korea.
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okay, why is there an assumption that americans aren’t in the market for the same kind of small cars that people overseas are? Personally, I’d love a cheap small car — in fact, when I bought my last car, “price” was my #1 consideration (and I wound up buying a foreign car, because it was the best deal I could get–although the dealership is 20 miles from my home), and I don’t think I’m all that unique.
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and you know what really kills me? Moreover, when Chevy does finally start making it available here, it will be a four-door model….despite the fact that the car is being made available a year earlier overseas in a cheaper two door model, and the Spark is essentially a version of the Chevy Beat (http://www.autobloggreen.com/2007/04/04/new-york-auto-show-chevy-beat-concept/) — a two door “concept car” that consumers favored over two other (four door) concept cars. (see links for the “groove” and “trax” concept cars at the link above).
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especially in “uncertain” economic times, GM should stop assuming that there is no US market for the kind of small, inexpensive, “basic transportation” vehicles that are all the rage overseas.
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Two thoughts:
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1. If I were still paying US taxes, which I’m blissfully not, I wouldn’t want a dime of my teacher’s wages being “garnished” to support Wall St, Detroit, or Obama’s continued insanity in Af-Pak-Iraq. In other words, less socialism for the wealthy and more for the hardworking people continuing to get bent over and shafted without fail. If these bailouts were supported by ruling GOP, most dems would be equally up in arms, venting, rightfully, about populism. The GOP alternative, of course, is absolute nonsense, but please no one tell me the WH or our beloved congress is striving to enact a progressive new deal.
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2: When all the Chinese and Indians do buy cars, from whatever auto maker, the planet is going to die anyway, so perhaps keeping GM jobs at home isn’t all that important in the overall scheme.

GM should stop assuming that there is no US market for the kind of small, inexpensive, “basic transportation” vehicles that are all the rage overseas.
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plukasiak,
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GM has been assuming that it knew what the American car-buying public has wanted for years. It assumed we wanted cheap cars and that we would have no problem replacing then every few years.
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They got the “cheap” part right for a number of years. I have always thought that the quality of their new cars was not the worst problem for GM – it was the apparent quality of their used cars.
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People wanted the option of keeping them because they might have liked them, not having to replace them after they paid them off because they were in the process of falling apart.

They got the “cheap” part right for a number of years. I have always thought that the quality of their new cars was not the worst problem for GM – it was the apparent quality of their used cars.
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GM did not concentrate on the “inexpensive” car market — rather, they concentrated on the mid-range and higher-end market, and made them cheaply.

plukasiak,
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You got my point. That’s the definition of “cheap” that I meant.
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They did make “cheap” cheap cars, too. I give you the late, unlamented Vega/Sunbird and Monza (of which I had the misfortune to own both) as examples. Alignment shops working on the front-end wouldn’t even guarantee the work once you got it out of the door, the steering was so weak on both.
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Is there a stronger product quality description than “crap”?

hey afguy, when you disown sgwhite for his approval of the Jena Six assault, then I’ll consider your request for civility worthy of discussion–
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Even when completely on-topic, I get savaged around here (which I don’t care about in the slightest, btw). So, I am supposed to play nice in the sandbox–doubtful.
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And don’t forget, I’ve pwned a lot of you guys in here on many a topic. Just ask sg about Austrian. Ha ha ha ha.

On a tangential note – do you know what car company I really want to see eat sh!t? Cadillac.
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After seeing their ads for the new Escalade Hybrid, that gets all of 18 MPG, I think they need to be consigned to the trash heap.

Well, India has a $2000 car now…

http://www.time.com/time/world/article/0,8599,1896894,00.html?xid=rss-topstories

even considering higher US wages (and safety standards — the Nano has no air bags) its easy to imagine something like the Nana being sold here for under $5000…

I have to agree with the general sentiment of the commenters. The direct result of globalization is that it is nearly impossible to have an exclusively “American” business anymore. There was simply no way the auto bailout was going to benefit Americans exclusively. And that really wasn’t the point behind it. The vast majority ARE going to be American jobs and towns saved. The fact that this debate is happening on both sides of the 49th Parallel should have made that fairly obvious by now.

Like I said, spob, we’ll start to take you seriously when you start adding something constructive to the conversation.
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Just a hint – keeping a running list of those you’ve supposedly “pwned” isn’t part of the description of an adult. You might take that big chip off of your shoulder over the big bad bloggers who said something bad to you – that might help too.
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Until then, there’s a box of Legos over in the corner with your name on it. Just don’t put the pieces in your mouth – I hear they can choke small chidren.
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Enjoy.

On a tangential note – do you know what car company I really want to see eat sh!t? Cadillac.
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Cliff,
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Cadillac has been living off of its reputation (and old customer base) for years.
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When I think “innovation” and “fresh ideas”, theirs isn’t the brand that pops to mind.
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Too many car makers have been treating their customers as a “marketing” exercise for year. It’s a LOT cheaper to convince the public that you’re making good cars sometimes (through a slick ad campaign) than it is to pay for the R&D to actually do so.
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That thinking has finally bitten them is the a$$.

“And don’t forget, I’ve pwned a lot of you guys in here on many a topic.”
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Hey, don’t leave me out, spob! I whole-heartily endorse sg’s views on the Jena Six. I personally think you are a one-man racial divide all to yourself, anyway.
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Personally, when one has such an inverted view of Civil Rights as yourself, was never alive during that time, and really, knows nothing about it except what other misguided white* people tell you, I’d say that you really have nothing to bring to the Civil Rights table other than hatred.
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Ahyuh! BTW, You really kicked my arse on Global Warming, didn’t ya…
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Ahyuh! Ahyuh!
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*There is no such thing as “white”. The various “white” lineages histories don’t accrue to one another.

That is all.

I actually like some Cadillac products. They’ve done very well with their trucks and SUVs, and considering they are targeting the luxury class, I’m not going to hold it against them for intoducing gas guzzlers into the market.

*There is no such thing as “white”. The various “white” lineages histories don’t accrue to one another.
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I have a very good friend with a Scandihoovian surname who described her lineage as a Heinz 57 with a n—– in the woodpile. Ethnicity in the United States (and more and more so Canada) is such a mishegas as to call the notion of “white” laughable. Heck 150 years ago the IRISH were considered less than human! Now we celebrate St. Patrick’s Day with gusto. We are a forever evolving culture that has changed drastically from our English/Germanic roots. It is a huge strength, not a weakness.

I wonder if we can find a way to outsource management to Mexico, South Korea and China? That would save a bundle.
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Anyway, I’m pretty sure that auto manufacturing jobs could be replaced with a robust, native, pitchfork industry.

Ahh Shep, in order to outsource Autobiz management jobs to China, Mexico, Korea etc. they’d have to undergo the 15 year management training scheme (or “how things are done academy”) first. The career path of an auto exec is clearly defined from college onwards; you have many years of varied postings to different business areas teaching you exactly how to conform and how not to rock the boat. I think the Chinese will excel at this, so maybe it’s time for a change in attitude from the American companies.

Good point. They’d also have to learn that running an auto manufacturing business is all about proper bean-counting procedures rather than managing the human experience of making, selling and buying a major lifestyle product. And also that the people who actually, you know, build the cars, have relatively nothing important to add to your understanding of the process.

THIS IS WHY THE AUTO-BAILOUTS SHOULD NOT HAVE HAPPENED. If a company does sucks and therefore has trouble maintaining business, then they deserve to go under. It’s GM’s own fault that they failed to see the writing on the wall about gas mileage. It’s plain and simple: if their product was as good or better than their competitors, then they would be alright. But it’s not. Why are they getting killed by Japanese car companies? Because their product is better. (I mean in terms of sales, obviously employee issues have to do with things as well). By the way, I think it’s absolutely OUTRAGEOUS when people suggest it’s unpatriotic to not buy American.

And Cliff: “After seeing their ads for the new Escalade Hybrid, that gets all of 18 MPG, I think they need to be consigned to the trash heap.” Hahaha, I’ve seen those commercials, and all I can do is laugh. My car get 24 city/ 34 highway, is not a hybrid, AND was built ten years ago. (American or Japanese? Take a guess).

Whoa, bad typo there. In the 2nd sentence, should’ve been “If a company’s product sucks…” And “gets” instead of get at the end.