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Why Auto manufactures are in trouble

B

buickanddeere

Well-known Member
Couple more reasons.
Ever calculate the financial bath auto manufactures were taking on lease returns? Somebody paying $5000 over two years on a $40,000 vehicle. Then leasing something new again. Leaving the manufacture with $35,000 owing on a vehicle worth 15-20 thousand.

Ever count how many duplicate and overlapping models of consumer vehicles there are?
All that is required is are econo box, mid sized, large/taxi/police and a sporty car. A small and large truck. A small and large van. That's eight.
Holden (GM) in Australia was going bust until they went with one chassis and three options. A two door, a four door and two door pickup thing.
Parts inventory was slashed, cost per unit construction went down.
 
Most leases around here on a 25,000$ vehicle seem to be about 400$ a month, so 4800$ year, with a minimum of 4 years, so 19,200$ paid in. The buyout was 10-15,000 after the lease.

I tried the math many times and only came out with the leases screwing me over!
 
Auto companies sold junk products for expensive prices and it finally caught up to them. Japanese will be the same in a few years when there is no competition.
 
Yeah, but look at how many people have done leases with the idea that they'll trade the vehicle back in after a couple of years and lease a new one!
Could never see how you could save any money that way, but guess with some, that doesn't matter.
 
I agree Ken. They don't lose money. The only benfit is most young people will lease just so they can drive a new car with lower payments then buying. In the end they pay more then if they bought it. Proof, just ask my neice that leased a Jeep. HOLY COW!
 
I did the math on a Dodge pickup for lease in a local newspaper ad, once.

Lease payments collected over the term of a five year lease and then selling the vehicle at projected book price, added up to the dealer collecting some $35,000 on a pickup that cost him probably $18,000.

A buddy of mine leases a new Lincoln every three years to keep up his company's image. For him, it's a deductible expense. That's about the only situation where a lease works. For a private individual, they suck.

When I was in sales, we'd have people come in all the time and make a deal on a new car. Then they'd say, "I still have a year to go on the lease on the car I'm driving. How do I get out of that?" We'd have to break the news to them that they couldn't. Once you sign the lease, you're stuck with it to the final payment. And if you go over the allotted miles, you really take it in the shorts.
 
You would think that if the CEO was being paid
2 mil a year or more he could run the company
well enough to avoid asking me for a bailout.
 
just a question what u going to do with the dollar u save today that tomarrow is worth say 75 cents i have never seen a brinks truck following a hearse yet so i choose to enjoy life if i have no money when i die who cares larry
 
What else can a person buy that depreciates as fast and as much as a new vehicle. Never bought new and never will. I have bought one year old vehicles and let someone else loose the big bucks first year. Maby other people are finally realizing this.
I bought a new IH tractor in the late 70's and sold it for close to what I gave for it 15 years later.
 
With a lease, the big thing that suckers people in is the fact they can have a nicer car than they could afford to purchase. With most leases, you pay about 3/4 of the price of the vehicle, and in the end after you pay hundreds of dollars per month for x years, you get nothing.

Because they are not paying for 100% of the car, the lease payment is lower than purchasing it. However, what people seemed to overlook is that they are paying for the new car depreciation, plus giving the lease company a profit. The price they pay with the miliage restrictions makes a car lease a really bad deal. Then the lease company gets a valueable low miliage used vehicle to sell in the end. You are forced to pay for everything to fix the car all up like new for the lease company, even down to excessive tire wear, or even scratches so they can sell it for maximum profit.
 
I'd rather have the 75 cents tomorrow than owe 75 cents on something I wouldn't even get in the end. Funerals are expensive Larry, they'll even charge your family a good price for the cardboard body box for the crematory, which is the absolute cheapest route.

True you never know when your going to die, but I'd rather put my money into things that will give me value rather than take away.
 
You would think. If they need the money for retooling, maybe they're not getting it because credits locked up, but because they're a bad investment. But a bad investment doesn't mean anything to the tax payer.
 
I can explain from experience.
My wife and I got a new 2004 Jeep Liberty.
The sticker on that Jeep was $22,500 in 2004.
We decided to lease it at $255/month. With $1000 down. This was a 15K mile/year lease and after 3 years it would be $9000 paid to xler + the $1k down. So----after 3 years the Jeep is to be sold for $12,000 and I am sure it was. Also keep in mind that the car companies are sure to make their money back on the lease turn ins. I know of a guy that used to transport cars/trucks after the lease contracts were up and those vehicles went all over the country. I agree that too many models exist too.
 
I bought a new Chevy 3/4 ton van in late Oct. of 2006. I now have 275,000 miles on it, and have not made one repair, and more than half of those miles have towed a 17' enclosed trailer with about 8,000-12,000 pounds in it, plus cargo in the van, about 5,000 more pounds than it's rated for. About 20 trips from Indiana to California, across big mountains and hot dessert. Other trips through Colorado. Very tough conditions.

Original transmission without a fluid change runs perfect. Only on 2nd set of tires. Original brake pads are still on. Factory must me using ceramic now. Original spark plugs, serpentine belt, everything. Not one single problem. Just changed the oil often and use Lucas in the oil, fuel, tranny, and rear end.

I'd say GM makes one helluva vehicle.
 
(quoted from post at 18:00:40 11/16/08) What else can a person buy that depreciates as fast and as much as a new vehicle. Never bought new and never will. I have bought one year old vehicles and let someone else loose the big bucks first year. Maby other people are finally realizing this.
I bought a new IH tractor in the late 70's and sold it for close to what I gave for it 15 years later.
Click to expand...

New cars are as outrageous in price as John Deere tractors and CAT equipment is. It's insane. :shock:
 
As long as the resale value is above ~65% after 3 years, they make very good money. If they can stick ya for milage, even more so. I know people who always lease, never could see it myself. There are too many models / brands. The problem is, if you get rid of a brand, like Oldsmobile, it costs billions in lawsuits. Car dealers have done a real good job at the state level, of getting franchise laws written to protect them from the OEM's. Pulling a franschise might seem to be a business decision, but it ends up being a legal issue. The other issue is that the system worked for many years. Chevy,Potiac,Olds,Buick,Cadillac and Ford,Mercury,Lincoln, and Chrysler, Dodge,Plymouth. 80 or more years of working, hard to change. To some degree it still works.
 
Some years ago a friend of mine worked at the Ford Engine Plant in Cleveland Ohio...He told me there was $1,700.00 added to every full sized car manufactured, to cover alcholism and drug adiction problems of some employees of the plant.... Startling isn't it ???
 
Amazing isnt it!! I mean I could run the company into the ground and they would only have to pay me 1 million...well ok...I would do it for 500K....
 
Amazing isnt it!! I mean I could run the company into the ground and they would only have to pay me 1 million...well ok...I would do it for 500K....
 
275000 miles on a 3/4 ton isn't all that unusual. But if your only on the 2nd set of tires, I'd sure like to know what brand they are.
 
I believe that is the "media" number for employee health care, not just the AA programs. That number includes retirees.
 
Yup, you look at the number of Ford or Chevy dealers and then look at the number of Toyota or Honda dealers. The difference in number of dealers is astounding. Pretty hard to stay in business if you have to keep a dealer in every little town, or in every community in every city.
 
Don't know why you can't do simple math. Deere is every bit as competitive on new price.
It's the used re-sale price of Deere that is higher than brand X.
Makes fans of brand X awful cranky.
 
It's physiological leverage to get the peons to work harder and try to climb the corporate ladder.
It's cheaper for a company to pay outrageous wages to a few high profile wages to motivate the masses.
 
People started taking leases because they were the "in" thing to do,however,buying is much wiser for the consumer.Something else people don't realize is it's not the manufacturer who is taking the gain/loss on a lease.The credit company is totally in charge of all credit or lease sales.The manufacturer may offer incentives through the credit company which they pay for,but all purchases/leases are strickly the credit company problems.Of course most all manufacturers have a credit company arm,but they are strickly a stand alone company.The credit companies make money or they are out of business.So the manufacturers aren't in trouble because of leases.Just low/no sales.
 
Yep, the financial divisions of the different automakers really took a bath when they over-estimated the residual values of SUVs. With SUVs in big demand, finance companies like GMAC thought giving high residuals was a safe bet and a sure way to sell expensive SUVs. Now, if you try to lease a vehicle the dealer is likely to shake his head. You can lease, but the residuals are so low and the interest rates so high that you're better off buying than leasing.

As for reducing models, well, did you ever hear of a brand called "Oldsmobile"? The old-timers tell me that it was once the oldest car brand in the US.
 
I grew up in a old world family, and anything you paid for, you took care of, paid it off, and make it last like it was the last one made. Except for a small mortgage left on the house, everything else is paid for. (and no matter what happens, you'll pay taxes till you die!)
 
No, not too unusual. But he the guy I was responding to said the Big 3 are making low quality vehicles, so I just wanted to let him know what my experience has been.

The originals from the factory were Bridgestones, and they lasted about 130,000 and they weren't completely shot, but with the distances I travel I didn't want to go any further on them. Now I've got Goodyear All-Terrains and they're about due to be replaced. Someone told me Chevy changed the suspension to a "6 point", and that seems to help the brakes and tires last longer. Don't know much about that. I know the guys driving the Dodge Sprinters get almost 200,000 miles out of their tires.

A lot of the other guys that have the same van, or the 1 ton, seem to have tranny problems by now, or rear end. I'm surprised with all the towing I do that I haven't yet. I think the Lucas helps a lot.

Take Care
 
Unions, Union wages, Pensions and health care for the retires.

Product liability lawsuits for frivilous claims

Products that people couldn't afford once gas prices caught up with them.

Foreign car brands made in the South seem to be doing OK. Dont believe they are union.


Gene
 
Yes it does seem outrageous, but in truth the $40,000 is really just a fictional number the public uses to compare ownership to lease value.

Take the GM Suburban for example, the retail worth of the vehicle may be $40,000 but in reality it cost roughly less than half that to produce it.

Once the vehicle is turned in we could expect that this 2 or 3 year old vehicle would sell for $25,000 which again is still more than the original cost to produce it.

Of course the future projected worth of the asset is subject to market fluctuations, but all in all, the market has been rather stable until we got hit with $4.50 gallon gas.
Click to expand...
 
Not sure that's completely true. Take a look at the older Magnum tractors. 10,000 hour tractors selling for top dollar.
 
Thank those Union workers GM, Ford, and Chrystler use. Sounds like they did a great job of putting your van together. I am sure you appreciate there efforts and the value they add to the products you buy, and that you are more than happy to pay a little more and buy a union product.
 
Most dealers are franchisees...independent businesses not owned by the manufacturers themselves. So the franchisees who can't make ends meet simply go belly up, and the folks who financed them [may or may not be GMAC, FMCC, or Chrysler Credit, or the local bankers] are the ones who take the hit.

Just having franchisees in every podunk little town doesn't cost the manufactured squat. Dealers have to buy prescribed signage, have buildings to meet manufacturer's specs--specs which change from time to time, driving some small dealers out. If the dealer qualifies, he may get some manufacturer co-op bucks for advertising, but for the most part the cash flow is a one-way street, FROM the dealer TO the manufacturer.
 
Never mind the list price of the vehicle. It's the residual value that matters. If a leasing company underestimates the residual value, they make money when they sell the car at the end of its lease. But if they overestimate residual value they lose money. These are very real dollars.
 
"Products that people couldn't afford once gas prices caught up with them."

Don't know what this means. Fuels were artificially jacked up in a short period of time and people could no longer afford a vehicle that they could afford when they bought it. Like their houses they were suddenly upside on their vehicles too.
 
Hi B&D,

Back about Oct 2006 I remember reading articles that analysts were screaming at GM too cut there debt load.

GM balance sheets were showing green every place in the world other than the USA. So did GM use the USA for all there debt on the books so the rest of the world operations would look good???

At that time GM had inquired of the SEC about delisting off the NYSE. That one was a shocker for me.

T_Bone
 
In reality what happened around here about 10 years ago with Ford was basically a declared war on 'independant' dealers. They did all they could to make life miserable for them... increased overhead costs for various things they 'had' to have at each dealership. The ones that complied simply found themselves a few years further down the road when Ford comes and says 'we want 25% of your business' or we revoke the franchise.
One old guy that was a dealer for over 50 years said enough is enough. The sign came down.
Funny thing is that he was one of their largest volume dealers in a wide area. A country dealer at that. His 'crime' was that he undercut the pricing of the company stores in town and got the sales.
Sadly the joke was on Ford because the people that dealt with the old guy in the country won't go to town to buy from the schysters. That's why they went to the woods in the first place... That eternal wisdom handed more business to the jap dealers.

Rod
 
(quoted from post at 22:04:06 11/16/08) Thank those Union workers GM, Ford, and Chrystler use. Sounds like they did a great job of putting your van together. I am sure you appreciate there efforts and the value they add to the products you buy, and that you are more than happy to pay a little more and buy a union product.
Click to expand...

So, who do we thank for the "lemons" coming out of GM, Ford, or Chrysler??
 
Relative bought a 2000 montana for 40 thousand. Has had new engine,fuel system put in. This vehicle has all the extras but none of them work.Garages call this vehicle their favorite. Very poor design. Relatives now buy Japanese autos and guess what no problems.
 
Well Red,

I'll buy that you got 275,000 miles on your truck, heck I'll even buy that you got 500,000 miles on your truck.............

What I won't buy or what I'm skeptical of is the original brakes, spark plugs, fan belt, and no transmission service ALL while driving in severe conditions...........pulling a 12,000 lb trailer through the desert and mountains definitely qualifies as SEVERE service............

As for the tires, I guess everybody has their idea of what "wore out" is. Some go by the specifications of the manufacturer, other go by whether they can see the cords or not..............I'm inclined to believe you may be one of the latter??

No offence, it just doesn't add up............
 
I'd hate to have to keep your log book legal. You put on more mileage than most OTR drivers I know. Lucas is great for all fluids, but What type of BS tire are you using?
 
Good design I suppose, but those engineers that designed it were in a professional union, and you have to admit that the UAW members built it very well. Even when you bought replacement tires you bought a Union made product. I admire your comittment to, and belief in, the Union worker. We drive Toyotas and Nissans and buy the cheapest tires Costco sells. Probably some import from China built by prison labor.
 
Nope, can't afford to be out on the road pulling loads like than with badly worn tires. When I changed the first set, they were down to about a 16th inch tread left. Ones I have on now are about the same, just in time for new ones before snow.

I've pulled the brakes off myself 3 times now thinking each time that they had to be ready for new ones, even had new ones ready to put in. But when I held them up to the old ones, they were the same. I find it hard to believe too, but it's true. The last time I started to see some wear on the rotors, and I've heard that ceramic will wear rotors before they do. Might be true.

Everything else is true. I have nothing to gain by lying, and I'm not that kind of person. I'm surprised too, and thankful.

I'm going to put plugs in and a new belt this weekend, just can't stand to drive it anymore with the old ones. My last van blew some coil packs, but it was used when I bought it. I've heard the computer will compensate for resistance in old polus by sending more voltage through them until the coils go.

As far as the tranny, I've never had it in the shop. About 20,000 miles ago I dropped the pan and put a new filter in, but that's it. The only thing I can figure is that Lucas is helping a lot. It's Chevy's newer transmission, I guess they made a better one. Runs on Dextron 6 now. Expensive stuff, but must be a little better. Not burnt at all.

Attaching link to photobucket with pics of my van, trailer, and other things I haul.
Van Pics
 
Bridestones were on it from the factory, now I have Goodyears on.

I don't keep a log. In Indiana under 10,000lbs. is unregulated. I know, I know. That's why I quit long hauling and went back to work where I was before, at a local courier company. DOT never got me, but was lucky. Got pulled over a few times out West by state patrols looking for drugs or illegal immigrants, but they let me go without a word once they looked inside. I got all my work from UShip.com, don't know if you've heard about it. Was doing ok until fuel went over $3.00, over $4.00 and I was finished.
Some of my Hauls
 
Well,

That's darned impressive! Most people are happy to get 100,000 miles out of a set of plugs..............and the brake life is absolutley amazing as well!

You must have got a van built on the right day of the week! ;)
 
You are correct, driving imports is typical of Califoranians, and the rest of the country as well. Imports now have over 50% of the market. But I have to wonder, if I drive a car made in TN or AL why is it an import ? If it is a Dodge made in Mexico or a Ford made in Canada why is that demostic ? Also why do the US manufactures do so well overseas? Buick almost controls the market in China. Ford sells bunches of Escorts in Europe, GM does well also except they call them Opals. GM is # 1 in South America. I think it is our fault, the American consumers. We went on a SUV & 4X4 truck buying spree that made no sence. Most spent there time on asphalt driving to school, the store and church and never left the pavement. Detroit sold us what we wanted to buy. Then we, the collective American consumer, bought overpriced houses we could not affort, borrowed heavly agains them, are now being foreclosed on and are not buying anything. So after spending all the borrowed money on trucks, houses, wars ect, now there is no money to borrow. Also in CA I have a F250, a Jeep 715, and a Harley. My farm in ND has a fleet of US built vehicals. Unlike your van, everything is paid for. I think having no debt is patrotic. It makes America much stronger.
 
Spotted Horse, I was just having a little fun with Indiana Red. He is a highly conflicted individual. He seems to hate Unions, yet only buys Union made products. He has a similar love-hate relationship with the government.
 
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