A lot of passion here. Interesting.

This thread started out with a note telling Ford to provide better incentives and it has evolved to union issues and overall quality of manufacturing. Make no bones about it, GM is not a threat to Ford. Those days are long since past. The real threat is Toyota followed closely by Nissan and Honda.

Toyota is VERY profitable in their auto operations (the American companies are not). They are dominating the US car market and coming on strong in Europe. They have invested wisely in China (fastest growing market) and are poised to dominate it. They are way head (by some estimates five years) on their alternate fuel technology.

Nissan was dead on it's back 5 - 7 years ago. Today they are are showing growth numbers in the 30+ percent year over year. Honda is so well diversified that they could shut down their auto business and likely survive.

All of this success on the Jap's part means they have more resources to advance their products. The lack of similar success by the US companies means they will struggle to keep up and likely fall further behind. This is a VERY BIG DEAL.

To day, Chrysler (which is NOT a US company anymore) is the only one of the 'big three' with a vialble Car business. Ford and GM make it on their truck business. Expect gas to go to $3/Gal in the next 12 to 18 months. Think of what this will do to the soccer moms driving the Suburban for two kids... Their next vehicle will likely be a 25mpg mini-van ... which is now dominated by Toyota and Honda.

The reasons for this are many ... poor management (Nasser of Ford), retirement benefits (All three), Union strangle hold on automation ... but the bottom line is they are in big *** trouble.

I bought a F150 (04) and it is the single best vehicle I have ever owned. However, I know 3 different people getting ready to buy a Tundra because they don't have 'faith' that they will get a reliable vehicle from the big three. Two of these people now own a US built truck. The F150 is better than the Tundra ... but in the final analysis ... that doesn't matter.

Here are some hard statistic: May sales (YTD):
Ford (F series) = 335,269 (down 6.4%)
GM (Silverado) = 274,869 (up 1.5%)
Dodge (Ram) = 163,094 (Down 8.8%)
Toyota (Tundra) = 54,217 (Up 28.2%)
Nissan (Titan) = 36,483 (up 36.6%)

The trend is obvious ... remember ... to kill a company you don't have to take their business ... you only have to take their profit. The best example of this is the Ranger ... Two years ago it outsold the Tacoma 3 to one (or something like that). Today, the numbers are as follows:

Toyota (Tacoma) = 63,604 (down 3.9%)
Ford (Ranger) = 49,503 (Down 32.5%)

... Scary

 

Wed. 06-22-05: Ford reduces '05 outlook, cuts jobs:

It gets worse:

http://biz.yahoo.com/ap/050622/ford_outlook.html?.v=5

 

We are led to believe that this "true markeup" number is readily available via many a web sites. But the REAL question, to me anyway, has always been what is the TRUE markup to the Mfg.? An F-150 has HOW MUCH material cost in it? And how much labor cost, OH, and variable cost? I'd love to hear from some one of authority who has hand-on knowledge of this question. I think everyone point of views about how the "Big 3" should conduct their businesses would be more "on the money" if we all knew what the REAL costs are in the automobile industry.

 

The problem is, while the materials and labor, shipping, etc. are a small amount of the sale price of the vehicle, the long term cost that do not show up in this analysis, are what are bankrupting GM etc.
The long term costs of pensions medical and other benefits far out weigh other costs. Management has traditionally never thought more than to the next year when negotiating contracts, and labor has traditionally never cared if any benefit or contract would bankrupt the company long-term.
Now the chickens are coming home to roost, and the management people and union leaders are mostly long retired to luxury lifestyles.
That has been the 'time bomb' in the process that has been predicted for years.
Chris

 

Chris is pretty much right (in a very brutal form of honesty). I had the pleasure of sitting next to a financial analysis (on a long plane flight) that focused on the automotive business. I don't know if you know much about this type of person but in general they are a) extremely smart and b) study EVERYTHING about a subject and c) are usually right.

His analysis of the automotive business as best I can remember it (it was a while back) was:

1) Nasser had spent much of Ford's capital on the exotic brands and ignored the core (FMC). They were way behind on the investments in automation, design and evolving technologies necessary to be comeptitive.

2) All the American companies are greatly handicapped with on-going liabilities (i.e.. benefits) that greatly reduce their competitive profile.

3) Foriegn competition is winning on both market share and margin.

4) Expect the trend in sales to be away from the current cash cows (large vehicles with large margins) towards efficient lower cost vehicles.

With that having been said ... the 04 F150 is the single best vehicle I have ever owned

 

Just read the link IsLander provided ....

[snip]
Ford earned $1.2 billion in the first quarter, but the company has said it's bracing for tougher times ahead because of lower vehicle production, rising health care expenses, decreased demand for some of its profitable trucks and SUVs and other factors.
[end snip]

Looks like there is a little truth in this thread.

 

My buddy owns a big Chevy store in upstate, NY. On a $45,000 diesel 4X4 HD 2500 SC, he's making about $135 all said and done. There is $10,000 of discount right now on that truck. I can buy one (same as you can) right now for $34000

 

Bobri,
Ford is planning on introducing more 6 speed and CVT transmissions into their lineup over the next five years. That will help with gas mileage, emissions, and power ratings.

 

Well, there is a little more profit than that. There are a few little secrets in business, I will just mention a few as I don't need grief from the dealers that post here.

There are many ways to get paid, besides cash on an invoice. Some examples are fantastic perks for your best salesmen, little things like Hawaiian cruses, paid for by the vendor.
Never shows on a dealer invoice...

Year end and quarterly sales bonuses for the owner. Never shows on a dealer invoice.

The maker buying advertising for your dealership.
Never shows on a dealer invoice.

Allowing you to hold 3-5-12 million dollars of inventory, that you only pay for when you sell the vehicles. Never shows on the invoice.

The ability to sell before you pay can turn a money loser into a money maker.

Simple example, if you own a business, and do 100k a month in sales, and you have 200k in your inventory, you try to get your vendors to give you 90 days to pay.

In theory you sell your entire inventory every 60 days. But you don't have to pay for it until another 30 days has elapsed.

You roll the money into investments. That simple example would pay about 4-5k a year, that is NOT in your gross sales.

The old Wal-Mart adage, the later you pay, the richer you are.

I used to work for a company that turned the average stores inventory in 60 days. But because it was a big company, we had virtually all our merchandise on a 180 day pay...
We would sell a SKU three times, before we had to pay for it. Think about it.

There is a lot more money in businesses than shows on a simple PL statement.

Another thing, simple rule of business, you must get back your capital in a fairly short time(there are formulas, and banks sorta insist you meet those criteria).

You go into the red, even if you are too stupid to understand this, (not bloody likely) your bank/finance partner will be there to explain it to you when they take the keys.
Not too many dealerships closing down. Do you really think a guy (or a bank) is going to invest 1-7 million dollars in a business that returns him chump change?
Not gonna happen.
The owners average very bright, very savvy. And there is a line a mile long wanting to buy dealerships.

Now every big business man I ever knew howled about losing money, complained bitterly about being broke, and one day retired into million dollar + houses, with Porches, airplanes, etc.
A few actually went broke. And then did something else. Credit the franchise owners with some brains.

Chris

 

Good points all.

When I said the Employee Discount was a joke, I meant that -at least here in Texas- the car lots are full of product and all the dealers have been offering huge savings and discounts for some time.

The prices I've seen advertised now are substantially the same as were offered before the "Employee Discount" program.

I imagine though that the average office water cooler conversation might go something like "Did you hear GM is offering the employee discount to everone?" And cause someone who had not been thinking about buying a car to actually go out and buy one thinking they are getting a extra special deal.

Its a good trick to pump up sales in the short term, but like most management decisions its extremly short sighted and focused on just the next quarterly results. The big 3 should be working on raising prices now, not lowering them.

One of the Japanese companies even said recently in the news they wanted to help the US auto market by raising prices on the foreign product....so that the US makers could raise prices as well.
Very considerate of them....but what does GM do? Lower prices again to try and make the 'numbers' for the next quarterly report and try to get their stock price up.


I'm not disputing your Chevy friends statement of $175 on a car, but what about the dealer holdback? Isn't that around 2% back from the factory? And I know my dealer tacked on all kinds of fees and charges to the purchase of my Screw that went straight to his bottom line. I hate those fees.

 

Where did you get this sotra of info? I currently work at the only plant making the CVT and as of today(6-23) we are laying off 65 people, which isn't a lot but still if you have info saying that ford isn't backing it up. They are talking about 135 by the end of year. Which to you means nothing, but to me who makes the CVT that would be all of the CVT workers.
If you've read or seen anything on this transmission then you know about the complexness of it. I will say that ford hasn't done well marketing it, which i feel they should. From having drove a Ford 500 with a CVT in it i loved it!! Also the 6 speed in the transmission that is "killing" the CVT off... Just a lil info from someone making a CVT!

 

My replies are inline...I ran a Ford Lincoln Mercury Jaguar dealership here for 11 years so I know a little about dealerships and how they get paid....

 

If you paid those fees, then I can't help you. I don't pay anything other than the DMV fees and tax. These giant sales and hard discounts are doing nothing but holding up a rapidly sinking ship. The trade values reflect that. There are soooooo many used cars out there that you can't get anywhere near what you ought to get on trade. Discounting has to come from somewhere. You can't have big discounts and expect to get decent trade value..it doesn't work that way.

 

Um, I was a zone manager for a well known autoparts change. I had the Tri-State area California/Nevada/Arizona for a few years, but I didn't own the chain…

Kinda makes a difference.
And auditing spreadsheets was part of my job description...and defending them in chart meetings etc.

I know the regional vice president made more on perks from the vendors than my rather decent salary and annual bonus. On paper, he made less salary than I did.
But I was stuck driving a mid range Mercedes, he had two Ferraris...

The owners had lots of money... Yet we made very little front end profit.
I guess they were just um, smart savers, like Mrs. Clouseau in the Pink Panther...

Not starting a war here, but I know what I am talking about. I was on the small end of that gravy train for years.
I kinda doubt the owner would keep a franchise that only made him less than a decent salesman makes a year.

So that would imply they sold about 2000 new cars a year. Pretty good sized dealership, wouldn’t you think?

The place I bought my Ford, the land alone cost them 6,000,000 up front. I suspect that they had a reason to build it… They have about a dozen big dealerships and are building another one. Might not be starving to death...
I have never talked to a business man that wasn't being 'torn to pieces' by expense, taxes, regulations, etc. Losing money all the way to the bank.
Oh well, let us just agree to disagree.
Chris

 

I know you're knowledgable, but a dealership franchise and an autoparts change are different animals.

Things are very different now. I don't doubt that there are deals out there to help the owners, but the majority of that fluff is gone. FOr good.