Ford, one of the symbols of American production, reported the companies worst losses recenly. Analysts have blamed the companies focus on big SUV's and trucks, which consumers are beginning to equate with big prices at the gas station, for its recent failures. But is there more to it than that?
As an American under 30 I do not really recall the "Golden Age" of American production. Everyone I know either works in an office or serves office workers food at lunch time. I own and drive a Ford, and it appears to have been built with anything but quality in mind. What ever happened to the mythical age of high quality goods,industry driven by innovation, and lifetime guarauntees.
America is more than capable of building goods that consumers want and that will last, and for a reasonable price. Ford is just one of many companies who is all too willing to sacrifice quality for profit. Our cars decay in a matter of years and then we are back at the lot, taking out another loan. You can buy a home for the price of 4 or five new cars.
Unless you work in the city, you likely rely on your car to make a living. So we are locked in. But we don't have to be locked into buying poorly made goods. We should make companies like Ford understand they can enjoy our support by returning to a focuc on reasonably priced, quality goods. Oh yeah, and better gas mileage couldn't hurt either.
What do you think?
recommend
Facebook
Twitter
bookmark 
print
Comments: 35
Ford ignored the car buyers demand for qaulity, and suffered for it. The were too arrogant to consider that other brands could supplant them as a market leader.
Ford is not an indicator of american manufacturing, it is an object lesson in the power of capitalism to bring superior products to market, and crush businesses that do not have a culture of excellence.
I do wonder why some people are so quick to condemn unions for demanding a decent wage when it is the CEO's of major corporations who are being payed unprecedented amounts.
1) The REASON Ford's losses are so high is because of UNION buyouts. They have taken massive one-time losses to downsize. HALF TAKE FORD BUYOUT
2) Ford and GM have 5 retirees for every 2 people on the line. They pay benefit costs for all 7. Toyota and Honda plants in the US, where most of their cars are made, have no retirees.
3) Has anyone been to a Toyota or Honda dealership lately? Where are the small cars? They sell them, but all I see at my Honda dealer and the Toyota dealer next door are BIG PICKUP TRUCKS and BIG SUVS. Guess what? they are losing money on those too.
4) GM and Ford have done a great job of building flex-fuel vehicles. In 5 years when cellulous Ethanol really kicks in more of the American fleet will be able to take advantage of E85 or even E40. You cannot buy a flex-fuel Toyota, Honda or Nissan.
The criticism of quality is accurate, but so is the criticism of the union structure that diverted money from quality improvement and skewed sales toward higher profit vehicles.
The dirty secret is that obscene CEO compensation exists because of unions, not inspite of them. Union pension funds own over 35% of all corporate stock. If AFSME wanted to end obscene CEO compensation, it would happen this afternoon.
The dirty secret is that these pension funds LOVE those CEO's and keep electing the board members to support them.
Just to give you a clue as to how much money is involved. As of 2004 civil service union pension funds held $2 Trillion in assets.... That is trillion, with a 'T'.
Flex fuel vehicles seem a bit silly to me. Creating a vehicle first and a fuel second is odd. Until cellulose based ethanol is produced, ethanol is really just a subsidized boondogle. Toyota deserves alot of credit for pioneering hybrid engines with the Prius. It works.
I have read with interest the argument about union's roles in the demise of Ford. Bottom line, the union did not design the vehicles, management did. Several years ago, an earlier CEO of Ford told a shareholder's meeting that it was important to keep in mind that the SUV boom would not last forever and they needed to be ready when it ended. Well, they were not ready. I think that there may be some basis to say that health care costs of american car workers are a drag on profitability. Well, if the government took care of it that would solve the problem. Again, if management had a problem with paying all those health care costs they could have refused to sign the contracts, explaining that bankruptcy could be the eventual result. But they signed.
I believe that the quality of American carmakers has improved alot over the past twenty years. But the japanese still have the reputation for the most reliable cars. It will be interesting to see if Toyota can hang onto that quality perception when they are the largest carmaker on the planet. They have had more recalls in the past couple of years. I think that ford and GM have been guilty of following the public rather than leading. All those commercials of SUVs climbing mountains were just dumb. Nobody every drove those suckers up mountains. They cost too much to risk rolling them over.
I said nothing about Honda and Toyota's fleet economy. What I said is that they are pushing big trucks and big SUV's just like GM and Ford.
Creating a fuel that the fleet cannot run on -- seems odder to me. I know of few economics who would advocate creating supply without a demand on the horizon. In five years when cellulous Ethanol kicks in, the fleet and the infra-structure will be in place.
The Prius is a great car, why is it not a flex-fuel car?
Ethanol is not a boondoggle; it is what is currently making the air in your city breathable.
The car is the least expensive part of the process. The plant is everything. The UAW was a continual drag on the ability of American carmakers to redesign their plants for flexibility. Management designed cars that their current plants could produce.
The UAW is not the only reason Detroit is suffering, but it is a major reason that cannot be brushed away by romanticism.
I think it more a failure to react and plan quickly to changes in the market than anything else. People are still buying cars and trucks, the current designs are just not meeting peoples needs, especially in the "car" market. They still build the number one selling vehicle (car or truck) in America- the F-150 pick-up. So you see in the truck market, they have designed something people want. I don't hear people talking about the poor quality of those. We own a 2003 Ford Explorer and I really don't see any quality issues with it, and my wife loves it.
Competition gives us the consumer what we want, so if Ford is in trouble, then go buy one for loyalty, but most people don't do that anymore. Blame whoever you want, but it is up to them to turn it around or perish.....
I looked at the article that Greg Schiller gave us a link for and used to push the idea that unions are at fault and found this quote:
"Faced with lower demand for its products, Ford had hoped that 25,000 to 30,000 workers would take one of eight packages so it could reduce manufacturing capacity to better match demand."
Ford wanted the Unions to take the "buyout" options they offered simply because they are failing as a company. With demand low, they cannot afford to build the number of vehicles they once did or employ te number of workers they once did.
I do give credit to Ford for at least offering severed employees an incentive to leave on their own. They could have just as easily layed everyone off without a hint of remorse.
The fact is that Ford is selling fewer vehicles, and making less per vehicle. The fiancials can be a bit opaque because of the complexity of the business, but the cash flow tells the tale. They are taking in less cash then they are spending.
To Walter's point, finacial statements can be misleading, especially with all the extrodinary items . Its easy (and legal) to pull forward expenses and defer income, which can make the numbers muddy. Just look at the cash flow. It cannot be 'managed' like earnings.
Bottom line (from the Ford press release):
'Worldwide Automotive revenue for 2006 was $143.3 billion, compared to $153.5 billion a year ago. Total fourth-quarter Automotive revenue was $36 billion, a decrease from $40.7 billion a year ago.'
Revnue is the cash that comes in the door- and its down.
If you are interested in reviewing the numbers:
http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=F&script=412&layout=-6&item_id=954063
But let's talk about how Ford got to this point.
Toyota developed a system years ago that continually worked to downsize its workforce. They would build a plant then set a goal of reducing labor by 10%, once that was accomplished they set the goal for another 10% reduction and on and on. They could do this because they were not unionized.
This is how they were able to produce small cars at a cheaper price while steadily increasing quality.
The UAW worked to maintain the same workforce no matter what changes were made in the plant, and no matter what the market.
Now who is in the driver seat?
If I were the UAW, Ford and GM, I would look to be unloading all pension and medical benefits for retirees onto a system that taxed the sale of cars, all cars, even used cars.
That has been tried and resulted in the worst product quality, worst environmental disasters, most pollution and worst working conditions known to man.
May I suggest that we study why something did not work before suggesting that we try it again.
If so then, their mantra should be, make the best product, however to do that they must have the best employees, and the best management team. Therefore, it would be good to make good product that people want to buy.
As a female that is sort of mechanically inclined and I used to drive about 30K a year. My criteria for a car were/are focused on: will the car leave me at the side of the road (bad) and do I have to take it for maintenance alot.
Never worried about it with my Honda Accord (252K miles before I sold it for $4k) and now my Toyota Camry.
I missed your point, I agree with you completely.
Are the glories of the industrial revolution gone for good? Not necessarily, once we ship as many jobs overseas and over regulate life in the United States the standard of living will drop until wages on the world stage put America on the bottom so the jobs will then be outsourced from China to the US!
We may still have quality Japanese products available for purchase but the so called proletariat won't be able to afford them!
And my condolences on owning a Ford. I tried one many years ago!
Cynthia,
And what part of the west do you live in that you can get by without a car? I have a grandson who can't drive because of epilepsy and he's always employed but it has to be a service type job near enough his home to ride his bike. We know what those pay! And public transportation - you've got to be kidding!
Greg,
The criticism of unions is understood and in some instances valid. It is because of unions that the living standard in America is as high as it is. Without them this nation would be a second rate nation.
That said, their excesses and abuses are also legendary! Don't throw the baby out with the bathwater. The unions try to give the working person some of the same collective strength that has proven so valuable to mega corporations that dominate the world market to the detriment of the working man today!
Now if someone can refute that with logic and without using "stupid", "idiot" ,"tunnel-fewer", "pink-o" ,"brain-dead" please respond. I've already heard all of those before!
Good comments!