Competitive Connection

February 25, 2008

A look at the competition
Ford and the buyouts
Ford, which is aiming to return to profitability in 2009, offered all of its U.S. factory workers buyouts and early retirement incentives it says represent the last and best offers for employees to leave the struggling automaker. An earlier round of buyouts cut almost 34,000 workers from Ford in 2006.
Some 12,000 Ford factory workers -- or about 22 percent of its blue-collar work force -- are eligible to retire.
"We upped the ante this time for a reason," Joe Hinrichs, head of global manufacturing. Ford wanted to convey the message that workers would not see a similarly sweeping set of packages again. "We want to be able to use our cash for another reason."
Hinrichs added that Ford would look to actively promote the relative opportunity the buyouts represent for workers at a company still losing money in its home market.
"We certainly communicate openly that the company is still losing money in North America," he said. "This is the last time we intend to go enterprise wide, so we want people to consider it seriously for that reason."—Source: Reuters, February 19, 2008
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What others are saying . . .
Patriotic pitches aren’t working
It might be that “green” marketing doesn’t leave room for the red, white and blue. Or perhaps the idea is just in a lull. But whatever the reasons, the use of “Made in America” themes in car marketing seems to be at a generational low these days.

“Consumers buy a product because they want that product and the benefits of it, such as quality, design and engineering,” said Toyota marketing executive Steve Sturm. “And if it’s built in America, that’s just another part of the product proposition. It’s not the first or second premise but part of the overall proposition.”

Only 17 percent of consumers in a TNS research company survey said they were influenced positively by whether a vehicle is union-made. That finding illustrates the clear fracture in the traditional tight relationship between domestic manufacturing and union workforces.

“Of the companies gaining market share, none of their plants are unionized,” noted Lincoln Merrihew, senior vice president of TNS. --Source: Edmunds.com, February 18, 2008
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A look at the competition
The cost of similar vehicles at Chrysler
Chrysler executives have said they need to drop one-third to one-half of the vehicle models in their product lineup.  The model line is riddled with overlap and uncompetitive vehicles. Chrysler management has said it must shrink to 18 or 19 vehicles.

There's no need for both the Chrysler Town & Country and Dodge Grand Caravan minivans. Chrysler executive Jim Press recently told dealers that launching both minivans cost the company $100 million more than a single model would have. That figure is probably looking only at marketing costs.

When you add the engineering, purchasing and manufacturing cost of building and buying parts for two models versus one, the tab is probably considerably higher.--Source: The Detroit Free Press, February 18, 2008
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What others are saying . . .
Car prices are rising
Detroit's bad numbers just keep on coming. The Big Three's domestic vehicle sales, market share, and employment rolls have all been declining steadily for years–and now a looming recession threatens to dampen the financial performance of U.S. automakers even further.

But one vital statistic is improving, and it could represent a bit of hope: Car prices are rising. After accounting for rebates and other deals, the average vehicle sold for a record $29,230 in December, according to Edmonds.com.  On average, 2007 prices have been about $1,000 per car higher than in 2005.

That may not sound like an enormous amount, but General Motors, Ford, and Chrysler collectively sell more than 8 million vehicles a year. So every additional $100 per vehicle translates into more than $800 million in extra revenue. The price increase may also be an indication that the companies, which have been slashing production, are finally getting the supply of cars closer in line with demand–an important step toward long-term viability.

Consumers also have been embracing more expensive products. GM, for example, has a hit with its new Cadillac CTS sedan. Not only are sales up so far this year, the car's average sale price of $37,000 is $8,000 more than that of the old CTS, which went out of production last year. The company's Buick Enclave sport-utility vehicle has a sticker price of $37,000–a full $14,000 more than the Rendezvous, which it replaced.

While the price increases are a small piece of welcome news for American car manufacturers, they could evaporate if Asian carmakers start hiking U.S. vehicle production. But with a recession coming, there is no indication that they plan to do so.—Source: Business Week, February 18, 2008
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To read previous editions of the Competitive Connection or to access other information about manufacturing and labor at GM, visit http://www.gmmanufacturing.info