Competitive Connection July 23, 2007

A look at the competition
Closing the gap to Toyota
Detroit automakers hope to close the labor gap with the Japanese, but Toyota keeps moving the goalposts.
But Toyota is a moving target. As it rolls out new plants in North America (it now has 13), it is implementing pay schemes for new hires that could keep the pay gap as healthy as ever.
In the past Toyota paid its U.S. factory workers close to the same hourly rate as domestic automakers. Now, Toyota has decided not to pin wages at its new plants to the domestics' wages. Instead it is aligning them with the prevailing manufacturing wages in the state where a new plant is located.
Workers at Toyota's truck plant in San Antonio, for instance, started last year around $15 per hour, growing over the next few years to $20 and more--still well below Georgetown's $30. The same will be true for workers at a Toyota plant under construction in Tupelo, Miss. The 21,400 workers at its existing plants won't face pay cuts, but Toyota is exploring revising its pay system to make it more performance-based. –Source: Forbes, July 23, 2007
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A look at the competition
Ford counts the ways to raise cash
With an expensive do-or-die turnaround plan in progress, Ford continues to examine all of its options to raise cash as the competitive environment grows increasingly difficult.
Volvo is "a profitable operation for them and they would not be selling it unless, in my opinion, the North American situation is worse than expected," David Healy, an automotive analyst with Burnham Securities Inc., said Monday. "If they're going to salvage the company, North America has to be profitable and they maybe need another cash transfusion."
David Cole, chairman of the Center for Automotive Research in Ann Arbor, said Ford is having a tough time in a marketplace that has gotten more difficult, with even Toyota boosting incentives.
"I expect it to be a tough quarter. I don't see any real bright spots," Cole said of Ford.
While Ford's savings stood strong at $35 billion at the end of March, the company is expected to burn through $17 billion of that through 2009.
The turnaround plan now calls for closing 16 plants, eliminating 44,000 jobs -- many through expensive buyouts -- and revamping the entire product lineup.
Ford's expected cash burn leaves just $18 billion as a cushion, in case of an unexpected sales downturn. Given all their fixed costs of plants and employees, automakers can easily burn through billions in a slump.—Source: Detroit Free Press, July 18, 2007
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A look at the competition
U.S. quality improving
Profits have been lacking and new car sales have been tepid, but American automakers are making a comeback on the quality front.

In June, Ford Motor Co. grabbed more individual awards than any other automaker for the first time since 1998 in J.D. Power and Associates' annual initial quality rankings. Ford's feat was followed by General Motors when the August edition of Consumer Reports magazine recently hit newsstands.  The magazine rated the new-for-2007 Saturn Outlook (starting at $27,500) among its top-rated sport-utility vehicles in tests of midsize and full-size SUVs.

"The Saturn Outlook is the most competitive volume model from General Motors in years," said David Champion, director of automobile testing for Consumer Reports.

Champion said domestic automakers have improved vehicle reliability issues in the first few months of new-car ownership. But he added that U.S. car companies need to establish a reputation of long-term reliability – critical to consumer acceptance.-Source: The Sacramento Bee, July 17, 2007
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A look at the competition
Honda turning to incentives
Honda is piling on the incentives this year - a sharp turnabout from its usual ultra-stingy approach to offering spiffs.

In June, its average payout per vehicle was $1,221, according to Edmunds. "That's an all-time high" for Honda, says Alex Rosten, an analyst for Edmunds AutoObserver, which tracks factory incentive spending.  One year ago, its $705 average was just a little more than one-fourth of the industry norm.

"Everybody thinks Honda has it so easy," says Jeff Conrad, vice president of advertising for American Honda. "But it's competitive for us, too. This is a year that has cost us a bit more. We still do not believe in incentives, but we do what we have to do to meet sales targets."

Several things are behind Honda's incentive push. Some aging models, such as the 2007 Accord and Pilot, soon will be redesigned. Some entries such as Honda's minivans and SUVs, are in sluggish segments. And Honda is still feeling its way in the pickup market, where the Ridgeline is struggling a bit.

Archrival Toyota also is relying on incentives. Toyota Division spent $1,567 per vehicle in June. By comparison, per-vehicle incentives for the industry totaled $2,422 per vehicle.--Source: Automotive News, July 16, 2007
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