Competitive Connection
May 29, 2007
What others are saying . . .
Local Paper in San Antonio picks GM
With all due respect to fans of Ford, Dodge, Toyota and Nissan pickups, I'm convinced that for 2007, General Motors builds the best light-duty, full-size trucks.
That was my belief even before the newest generation of the Chevrolet Silverado was introduced for 2007. This redesigned Silverado, considerably better than the already great truck it replaced, just reinforced my view.–Source: San Antonio Express-News, May 23, 2007
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What others are saying . . .
Change or die: It's our choice
They won't say so publicly, because they can't just a couple months before national contract talks begin, but this summer's bargaining between the United Auto Workers and Detroit's automakers is hurtling toward a fundamental choice:
Will the union and its three employers fashion yet another incremental multiyear contract that more or less embraces the status quo?
Or will they craft what's being called, at the highest levels of the industry, a "transformational deal" that would help General Motors, Ford and Chrysler close the gap (on their own soil) with the likes of Toyota , Honda, Nissan and Hyundai and free up cash to be reinvested in new cars and trucks?
"It's incremental versus transformational -- that's what it's all about, or we don't have a prayer," says Sean McAlinden, chief economist for the Center for Automotive Research in Ann Arbor.–Source: Detroit News, May 23, 2007
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A look at the competition
Toyota is worried about its competitive edge
Toyota believes it has lost some of the competitive edge in North America and is initiating several continuous improvement activities detailed in the following areas:
· Plan to send 30,000 NA workers back to basic training via their Global Production Center (GPC). It covers workers in the United States, Canada and Mexico and could be extended to cover workers in Japan. Toyota is focusing on standardized work steps to reduce waste, lower costs and increase productivity. Its basic training teaches the fine details of on-the-job skills, such as operating wrenches and handling paint guns, etc.
· Consolidate parts suppliers and reorganize parts procurement system to increase development and production efficiency.
· Eight new Toyota North American Vice Presidents have been identified to ensure the consistent application of best manufacturing practices.
· Localize additional Powertrain components in order to maintain targeted North American content levels.
· Back off wage parity at NA new plants. San Antonio started its unskilled hourly workers at about $15.50/hour last year. After three years, the rates will increase to about $21/hour. At Tupelo, Miss., wage would grow to about $20/hour. Similarly, Nissan pays workers under $22/hour at Canton, Miss. The new Hyundai on-site engine plant will pay workers about $13.50/hour. --Source: Toyota’s "FY 2007 Financial Results" presentation and Automotive News, May 9, 2007
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What others are saying . . .
People buy cars, not companies
What does it matter to ordinary car shoppers who owns Chrysler? Cerberus clearly is hoping that consumers will reward the company if it decides to spend less money on fire-sale marketing and runaway health care, and instead invest in making vehicles that are more efficient, safer, longer lasting.
Why should consumers care? Because restructuring the health-care burden would free up capital for research and development, leading to better technology and improved quality for future models, says David Cole, Center for Automotive Research.
In theory, if Chrysler had another $500 to $1,000 to invest in each car – about what it spends on healthcare now -- it could offer more standard safety equipment without drastically raising the sticker price. In the coming years, auto makers face intense pressure to invest in new technology and fuel-efficient vehicle designs.—Source: The Wall Street Journal, May 21, 2007
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A look at the competition
Transplants in China
While Japanese automakers are going strong in many parts of the world, there is one important market where they have lagged significantly behind rivals in Detroit and Europe: China.
Japan's top three automakers – Toyota, Honda and Nissan – entered the fast-growing Chinese market nearly two decades after the market leader by sales, Volkswagen, and years after the No. 2 car maker, General Motors. One reason: the Japanese companies have been too busy focusing on the lucrative U.S. market, where they can sell more expensive cars at a higher profit margin.
Now, as demand for cars slows in the U.S. and the battle in the global auto market shifts to emerging markets, Japanese car makers are making a big push to catch up in one of the auto industry's hottest markets. If this growth keeps up, China could surpass the U.S. as the world's biggest car market by 2010.
Japanese automakers don't have as much brand recognition in China as rivals like GM. –Source: The Wall Street Journal, May 18, 2007
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What others are saying . . .
Big three build great cars but costs are dragging them down
The Detroit-based automakers have the talent and know-how to compete in the USA, the toughest automotive market in the world. Yet the Big Three face a cost disadvantage of an estimated $2,000 to $2,500 per vehicle, not including exchange rate considerations, compared with their overseas-based competitors. This inherent cost disadvantage results, at best, in razor-thin profit margins or more steep losses. The present business model is not sustainable. –Source: USA Today, May 18, 2007
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Then and Now
Gas prices & household income
U.S. families paid $1,000 more on average for gasoline last year than in 2001. The average U.S. household paid $2,277 for gasoline in 2006, up 78% from 2001, according to estimates from the Consumer Federation of America and Consumers Union, the publisher of Consumer Reports.
From 2001 to 2005, the most recent data, median household income rose more than $4,000, nearly 10%, to $46,326, according to the Census Bureau.--Source: USA Today