"First, labor only accounts for only about 7 percent of the cost of a car. So, if you cut that to 6 percent, you’re going to make a bit more money, but this is not the biggest expense that an automaker has."
This doesn't pass the smell test. I remember that back in the day, we were told that health care costs were a sizable chunk of each American car produced, by those selling single payer.
I pulled up some numbers and in 2004, health care costs were claimed to be $1,525 per car for GM. Throw in pension benefits of $675 from the linked article, and we're at $2,200 in just health care and pensions per car. If the average car costs $25,000 to build, we're already at 8.8% before adding in wages. Assuming all other labor costs are equal to pension and health care benefits, we're at $4,400 for labor and 17.6% of the production cost.
http://www.americanprogress.org/issues/2007/05/health_numbers.html
Moreover, not all cars are created equal, and the guys building the Focus and the Cobalt were probably not being paid less than the guys building the F-150 and Silverado. The Big 3 were always beaten up for never producing great regular cars, like the Civics and Accords, especially a few years ago. If a car is going to sell for $15,000, at $4,400 per car labor costs are 29.3% of selling price. If the competition is able to keep labor costs down to, say, $3,000 per car, they can spend a little extra money on their models and still have higher margins (or margins period).
So, it's not all that surprising to see GM/Ford/Chrysler rode high on the SUV/Truck hog and didn't invest much in regular cars until the mid 2000s when oil started to head north - the margins almost certainly weren't worth the investment.
By the way, the average annual operating margin for GM in the 2000s was -0.5%, so it looks like cutting costs by a percent of two might have made a real difference, though I'm not an expert here so maybe it would have been far too little to save the day.
http://www.fivethirtyeight.com/2009/03/gms-problems-are-50-years-in-making.html
I'd agree management is partly to blame.
Management (past management that is) offered the UAW far too much in compensation.
In addition, I haven't read a whole lot of good things in general about management at the Big 3 during the mid 2000s, particularly at GM and Chrysler. So the blame is not only with labor, though labor seems a bigger part of the problem than this guy suggests.
"And yet while Ford certainly struggled for a while, they got through this and have been making good money for some time now."
Ford survived by slashing costs, having enough cash on hand to handle pretty severe losses while also having the good fortune to have gotten some decent product into the pipeline a while back.
Diddums. Casey Affleck admits that he ‘went broke’ filming his fail movie with Joaquin Phoenix. The movie, I’m Still Here, was filmed over two years and was revealed to be a fake documentary-style movie that Affleck thought anyone with two working eyes and ears would be fooled by. The film showed Phoenix, who would have made interesting material without the pretentious/ staged nature of the movie, doing coke/ hookers and getting pooped on. Or, as I like to call it ‘Wednesday’. That’s some mid-week pAArtying and moviegoers agreed. Affleck’s movie went up against his big brother’s movie, The Town (which topped the US box office and opened on Rotten Tomatoes to a 93% fresh rating), and only took $96,658 in its opening weekend. Sucks to be the less talented brother, and there’s something I never thought I’d say of these two. Speaking to The Telegraph in the UK, Affleck says he came clean about the hoax everyone knew about so as not to permanently damage Phoenix’s reputation. The movie was supposed to be a cynical look at Hollywood and its trappings. Not poop.
Casey Affleck has admitted that I’m Still Here, his hoax documentary about Joaquin Phoenix, was a “planned, staged and scripted work of fiction” that nearly bankrupted him. Affleck said the project was an essay on celebrity culture. “It was pretty much all within the realm of possibility: people use prostitutes, people use drugs, especially in Hollywood. We didn’t take it so far that it wasn’t believable,” he told The Daily Telegraph. “Having something at stake is a great motivator and once this thing became public for me that was very helpful because there was no question: I had to see it through, no matter how long it took. I went broke. I hadn’t worked for more than a year, and I was pouring money into the movie. I had to stop for a month to do The Killer Inside Me. If I hadn’t, I wouldn’t have been able to finish the film – I was out of money. There was a lot at stake financially and, if we had left [the hoax] there, it would have been very damaging to Joaquin’s career.”
Casey Affleck, Joaquin Phoenix: I’m Still Here mockumentary movie trailer.
Google reports 19 acquisitions in 2010 - and more planned | <b>News</b>
Google has confirmed 19 acquisitions since the start of this year, making 2010 its biggest ever in terms of buy-outs. 28...
Enslaved DLC detailed <b>News</b> - Page 1 | Eurogamer.net
Read our news of Enslaved DLC detailed. ... Enslaved developer diary #3 Monday. Enslaved - first 15 minutes 15 September, 2010. Latest News. Move demos flood PS Store . Enslaved UK pre-order deals detailed ...
Google New: It's Google <b>News</b> About New Google Stuff In One Place
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robert shumake
Google reports 19 acquisitions in 2010 - and more planned | <b>News</b>
Google has confirmed 19 acquisitions since the start of this year, making 2010 its biggest ever in terms of buy-outs. 28...
Enslaved DLC detailed <b>News</b> - Page 1 | Eurogamer.net
Read our news of Enslaved DLC detailed. ... Enslaved developer diary #3 Monday. Enslaved - first 15 minutes 15 September, 2010. Latest News. Move demos flood PS Store . Enslaved UK pre-order deals detailed ...
Google New: It's Google <b>News</b> About New Google Stuff In One Place
In terms of blog networks, no one ever seems to talk about Google, but they actually have one of the biggest. The search giant has well over 100 blogs devoted to everything from general company news to niche things that only webmasters ...
"First, labor only accounts for only about 7 percent of the cost of a car. So, if you cut that to 6 percent, you’re going to make a bit more money, but this is not the biggest expense that an automaker has."
This doesn't pass the smell test. I remember that back in the day, we were told that health care costs were a sizable chunk of each American car produced, by those selling single payer.
I pulled up some numbers and in 2004, health care costs were claimed to be $1,525 per car for GM. Throw in pension benefits of $675 from the linked article, and we're at $2,200 in just health care and pensions per car. If the average car costs $25,000 to build, we're already at 8.8% before adding in wages. Assuming all other labor costs are equal to pension and health care benefits, we're at $4,400 for labor and 17.6% of the production cost.
http://www.americanprogress.org/issues/2007/05/health_numbers.html
Moreover, not all cars are created equal, and the guys building the Focus and the Cobalt were probably not being paid less than the guys building the F-150 and Silverado. The Big 3 were always beaten up for never producing great regular cars, like the Civics and Accords, especially a few years ago. If a car is going to sell for $15,000, at $4,400 per car labor costs are 29.3% of selling price. If the competition is able to keep labor costs down to, say, $3,000 per car, they can spend a little extra money on their models and still have higher margins (or margins period).
So, it's not all that surprising to see GM/Ford/Chrysler rode high on the SUV/Truck hog and didn't invest much in regular cars until the mid 2000s when oil started to head north - the margins almost certainly weren't worth the investment.
By the way, the average annual operating margin for GM in the 2000s was -0.5%, so it looks like cutting costs by a percent of two might have made a real difference, though I'm not an expert here so maybe it would have been far too little to save the day.
http://www.fivethirtyeight.com/2009/03/gms-problems-are-50-years-in-making.html
I'd agree management is partly to blame.
Management (past management that is) offered the UAW far too much in compensation.
In addition, I haven't read a whole lot of good things in general about management at the Big 3 during the mid 2000s, particularly at GM and Chrysler. So the blame is not only with labor, though labor seems a bigger part of the problem than this guy suggests.
"And yet while Ford certainly struggled for a while, they got through this and have been making good money for some time now."
Ford survived by slashing costs, having enough cash on hand to handle pretty severe losses while also having the good fortune to have gotten some decent product into the pipeline a while back.
Diddums. Casey Affleck admits that he ‘went broke’ filming his fail movie with Joaquin Phoenix. The movie, I’m Still Here, was filmed over two years and was revealed to be a fake documentary-style movie that Affleck thought anyone with two working eyes and ears would be fooled by. The film showed Phoenix, who would have made interesting material without the pretentious/ staged nature of the movie, doing coke/ hookers and getting pooped on. Or, as I like to call it ‘Wednesday’. That’s some mid-week pAArtying and moviegoers agreed. Affleck’s movie went up against his big brother’s movie, The Town (which topped the US box office and opened on Rotten Tomatoes to a 93% fresh rating), and only took $96,658 in its opening weekend. Sucks to be the less talented brother, and there’s something I never thought I’d say of these two. Speaking to The Telegraph in the UK, Affleck says he came clean about the hoax everyone knew about so as not to permanently damage Phoenix’s reputation. The movie was supposed to be a cynical look at Hollywood and its trappings. Not poop.
Casey Affleck has admitted that I’m Still Here, his hoax documentary about Joaquin Phoenix, was a “planned, staged and scripted work of fiction” that nearly bankrupted him. Affleck said the project was an essay on celebrity culture. “It was pretty much all within the realm of possibility: people use prostitutes, people use drugs, especially in Hollywood. We didn’t take it so far that it wasn’t believable,” he told The Daily Telegraph. “Having something at stake is a great motivator and once this thing became public for me that was very helpful because there was no question: I had to see it through, no matter how long it took. I went broke. I hadn’t worked for more than a year, and I was pouring money into the movie. I had to stop for a month to do The Killer Inside Me. If I hadn’t, I wouldn’t have been able to finish the film – I was out of money. There was a lot at stake financially and, if we had left [the hoax] there, it would have been very damaging to Joaquin’s career.”
Casey Affleck, Joaquin Phoenix: I’m Still Here mockumentary movie trailer.
robert shumake
Google reports 19 acquisitions in 2010 - and more planned | <b>News</b>
Google has confirmed 19 acquisitions since the start of this year, making 2010 its biggest ever in terms of buy-outs. 28...
Enslaved DLC detailed <b>News</b> - Page 1 | Eurogamer.net
Read our news of Enslaved DLC detailed. ... Enslaved developer diary #3 Monday. Enslaved - first 15 minutes 15 September, 2010. Latest News. Move demos flood PS Store . Enslaved UK pre-order deals detailed ...
Google New: It's Google <b>News</b> About New Google Stuff In One Place
In terms of blog networks, no one ever seems to talk about Google, but they actually have one of the biggest. The search giant has well over 100 blogs devoted to everything from general company news to niche things that only webmasters ...
robert shumake
Google reports 19 acquisitions in 2010 - and more planned | <b>News</b>
Google has confirmed 19 acquisitions since the start of this year, making 2010 its biggest ever in terms of buy-outs. 28...
Enslaved DLC detailed <b>News</b> - Page 1 | Eurogamer.net
Read our news of Enslaved DLC detailed. ... Enslaved developer diary #3 Monday. Enslaved - first 15 minutes 15 September, 2010. Latest News. Move demos flood PS Store . Enslaved UK pre-order deals detailed ...
Google New: It's Google <b>News</b> About New Google Stuff In One Place
In terms of blog networks, no one ever seems to talk about Google, but they actually have one of the biggest. The search giant has well over 100 blogs devoted to everything from general company news to niche things that only webmasters ...
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