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Ford shutting down 10 plants
Ford management once again exposes their forward future oriented long term thinking (or NOT!)
Ford Motor Co. said Friday it would temporarily halt production at 10 assembly plants between now and the end of the year, blaming high gas prices for pushing many consumers away from its pickups and SUVs and toward higher-mileage models.
"We know this decision will have a dramatic impact on our employees, as well as our suppliers," Chairman and Chief Executive Bill Ford said in an e-mail to employees. "This is, however, the right call for our customers, our dealers and our long-term future."
The new production schedule will result in temporary shutdown this year at assembly plants in , Ontario; Chicago; Wixom, Mich.; Louisville, Ky.; Wayne, Mich.; , Minn.; Kansas City, Mo.; Norfolk, Va.; and Dearborn, Mich.; Ford said.
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Re: Ford shutting down 10 plants
To bad for the workers. my birth father worked in an assembly plant for twenty years until they moved the plant to Mexico. I hate ford's personally. I always thought the ford-flip over repair daily was true. I would be glad to see less SUV's and trucks on the road. Here in the DFW area the SUV and Truck drivers seem to drive like they are invincible.
If those workers do get other jobs they will probably be like my father making much less than they were assembling cars. My father is still getting severance pay to live off of, but that will stop eventually. He is really to old and set in his ways to get a new profession. This really is an adapt or die job market.
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Re: Ford shutting down 10 plants
again the unspoken bottom line seems to be that it's virtually impossible for automakers to pay US union wages, provide US union benefits, pay US taxes, pay US energy and environmental compliance costs etc. and still turn a profit if faced with head-on foreign competition. Until very recently (i.e. the introduction of the Nissan Titan, Lexus LS430 etc.), the lack of foreign competition in full sized pickup trucks and full sized SUV's was able to provide enough profit margin for US automakers not only to cover the actual costs of producing full sized pickup trucks and SUV's in the USA but also to 'subsidize' the development and production of other models (ex. Ford Focus).
However, now that rising fuel costs and a wide assortment of foreign brand full size pickup trucks and luxury SUV's have come onto the scene as competition ... and have essentially killed the one 'golden goose' market segment that was propping up US automakers for the past several years ... IMHO it's pretty much a given that the US auto industry is now headed towards a similar fate as the US TV / radio / VCR industry. Fortunately, 'American Content' tariffs will still keep a good number of assembly plant jobs and 'low value parts' (like body panels, brakes, springs) supplier jobs going in the USA ... with 'high value parts" like engines and transmissions now likely to be shipped in from overseas facilities.
To this end, US automakers have recently been investing heavily in Asian partnerships and new Asian factories. Thus the 'tin foil hat' crowd would tell you that Ford has planned to cut back at US pickup truck and SUV plants for quite a long time now, and has been investing in new production facilities in the Phillipines, Thailand etc. which ... 'coincidentally' ... will just happen to be ready to start production at the same time these US plants will be closed ! Like the 'Titanic's rudder being put hard over, it has taken a long time between the point where US automaker boards of directors have made binding decisions to cut US production costs in favor of investing in offshore production, and the point where US plants are shut down and US union jobs are lost. However, that point is now arriving ... with the timetable having been accelerated a bit by the huge recent increases in the price of gasoline.
(snip)"The [Ford Phillipines] facility will produce 100,000 engines over the next five years valued at about US$100 million. Start-up activities will be undertaken in the first quarter next year, with full production to begin before the end of 2006."
(snip)"Last week, Ford President and Chief Operating Officer Jim Padilla announced the acceleration of Ford’s second phase of investment at its Ford/Mazda (AAT) manufacturing facility in Thailand. The second phase investment will be made over three years (2005 to 2008 ) and reflects Thailand’s importance as a major international production hub for Ford’s one-tonne pickup truck."(snip)
(snip)"Two local automakers, including Ford Lio Ho Motor Co. (the local subsidiary of Ford Motor of the U.S.), has already exported locally-assembled cars through their foreign technical-partners' sales channels. The first batch of locally-made Ford Escape and its twin Mazda Tribute sport utility vehicle (SUV) were recently shipped to Japan, Australia, and New Zealand"(snip)
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This really is an adapt or die job market.
Where US autoworkers are concerned, there really is no option available to 'adapt'. While it might be remotely possible for US autoworkers to agree to accept pay and benefit cuts which would bring labor costs more in line with the total costs to US automakers of manufacturing overseas and importing, this is not the whole story. Every US employer still faces the issues of having to pay the 'employer's' share of Social Security and medicare/medicaid tax (which doesn't exist in Asian countries), has to pay local market prices for electricity (which is subsidized/ cheaper overseas due to the permissible use of coal fired electrical generation), has to pay environmental compliance costs i.e. fume scrubbers, chemical waste treatment facilities etc. (which are not required or required to a much lesser degree overseas) etc. These US gov't mandated 'extra costs' are beyond the control of US autoworkers, and are not going to go away no matter what the US autoworkers might decide to do on their own.
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Re: Ford shutting down 10 plants
These things may be true, but as I have written in the past - unions don't show up with good management.
I have worked in Michigan - a real shit hole to work in compared to the rest of the country - and to be "good" management one had to be a "tough" manager. It was really quite the joke and I left the state and it appears that form of management really doesn't work to well eh?
Ford's management paid a lot of lip service to quality and other BS in their commercials. Sure some of their vehicles became a little better - I have to give them that - but they were still selling on class levels.
Take a look at the offerings of some of entry level cars from Ford (and other US car makers) compared to those from the Japanese. Far more bang for the buck - Ford, quite simply, doesn't treat it's customers with any sense respect. Four wheels and some doors is what they provide. The Japanese (and other foreign competitors) at least make the things look a little classy.
Not to mention US cars have a reputation of tires blowing up, gas tanks blowing up, engines catching on fire, oh ... god ... the list goes on and on and on. It is very very rare to see such terrible problems in Japanese cars and the US car makers have to make it up to the purchasing public. Yet, they refuse to do so.
So Mel, you can go on about US environmental standards with fume scrubbers, etc. - but the Toyota plants all around the country face the same regulatory environment as the Ford plants do. This cannot be used as an excuse - Ford has plants inside/outside the US - Toyota has plant's inside/outside the US - yet the both of them are having very different results in the market.
The truth is, Toyota treats it's customers with respect where Ford, et al, have a "give them as little for as much as we can get out of them" mentality. Toyota gives one a little bit more class in the vehicle while Ford seems to try to rip out every little doo-dad they can. And finally people still have a feeling of quality with Japanese cars compared to US car makers. One cannot put out a commercial with "Quality is job 1" and have the public believe it. The US car makers have to try three times as hard or else people won't believe them.
Do the unions have a role to play in all this? Of course they do. I believe they have some pretty amazing pensions and benefits going on too. But there were plenty of pigs at the trough and the result was the american car buyer was standing there with empty pockets on the side of the road flasher's blinking.
This situation Ford finds it's self in has more to do with management than regulatory compliance (because everyone has to deal with it and some are still profiting), more to do with the union (unions are a direct result of management style), more to do with screwing the consumer (one court case showed how car makers figured it was cheaper to pay off hospital bills than make safe cars), and more to do with lack of desirable product on the market (chinsey looking cars.)
Ford is right there with the problem that other american companies have - take for example AOL. AOL is infamous for shitty customer service and for providing the least happy internet experience.
If you ask me, when "management by MBA" became more important than "management by happy customers" - that is when american business started distancing it's self from it's customers and today they are starting to experience what that is about.
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Re: Ford shutting down 10 plants
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If you ask me, when "management by MBA" became more important than "management by happy customers" - that is when american business started distancing it's self from it's customers and today they are starting to experience what that is about.
You definitely won't get an argument out of me re the 'bean-counters' making short-sighted short-term decisions in regard to what the company should be spending money on - in terms of product features or quality control or the costs of building in more vehicle safety vs paying for accident victims' medical care. This is a 'financial system sickness' which the 'tin foil hat' crowd will tell you is driven by hedge funds and institutional investors (almost half of whose assets are foreign money) who are seeking maximum short term returns from company stock they buy. Unfortunately, this 'short term financial sickness' has now reached a level of power where companies that don't follow its teachings wind up being sold down the river (see other threads on organized {naked} shorting).
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So Mel, you can go on about US environmental standards with fume scrubbers, etc. - but the Toyota plants all around the country face the same regulatory environment as the Ford plants do. This cannot be used as an excuse - Ford has plants inside/outside the US - Toyota has plant's inside/outside the US - yet the both of them are having very different results in the market.
check the fine print ... The environmental regulations in effect in Michigan are significantly stricter than those in effect in Alabama. The cost of (to pick an example) electric utilities purchased by industries in Michigan are significantly more expensive than in Texas. The comp and unemployment insurance premiums in Michigan are significantly higher than in Georgia. And obviously property and corporate taxes in Michigan are much higher than in Carolina (especially when the state granted tax concessions to attract the new foreign auto parts plant). I'll grant you that this is more of a 'red state vs blue state' issue than a US vs foreign issue where the imported US auto tariffs are concerned ... because the tariffs create an incentive for all auto makers to maintain 51% (north) American content, but aren't specific as to whether that (north) American content can stem from a blue state or a red state or for that matter from Mexico or Canada.
However, these state to state cost differences can be very significant. Does this create an incentive for a foreign based automaker to construct and operate a new facility in a 'red state' in order to accomplish 51% (north) American content car production versus paying the tariff on vehicles with predominantly foreign content imported from its foreign auto plants - sure it does. But for an established US auto manufacturer who is faced with a decision of keeping a nearly 100% (north) American content plant in operation in a 'blue state' versus opening/expanding a 100% (north) American content plant in a 'red state' versus dropping their content to 51% and importing 49% of future content from newly constructed/expanded Asian facilities, the tariff law poses no additional obstacle for them to maximize cost reductions by maximizing lower cost imported content up to the tariff threshold. The tariffs cut both ways, and while it has provided incentive for Toyota and Honda and VW to open new US plants (in red states), they have provided an equal incentive for US automakers to close 100% content US plants (in blue states) and outsource 49% of their content to Asia.
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Re: Ford shutting down 10 plants
This reminds me of an old thread http://www.stripperweb.com/forum/showthread.php?t=65107
In April Ford said that gas prices would not effect their SUV sales. Once again their management was wrong.
Deogol you are right about Michigan. Living there I felt like I was in a warp. The whole state seems left behind on so many levels. People that have lived in Michigan their whole life think that is how the whole country is. Which is sad.
Unions, in general, are not the problem here. Doing the same thing over and over again expecting different results is. At one time the methods they now use were profitable. That was years ago. Adapt and change with the time. It is something we all have to do.
The first thing the big three could do to improve car production is ban all drugs and alcohol from their facilities. Many plants are flooded with it.
I could continue as I have in other threads, but I won't. This is just a perfect example of how Ford is out of touch with the consumer as Deogol pointed out.
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Re: Ford shutting down 10 plants
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Originally Posted by Melonie
You definitely won't get an argument out of me re the 'bean-counters' making short-sighted short-term decisions in regard to what the company should be spending money on...
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This is afflicting many corporations now, not just the automakers. But I wonder if a CEO can really look ahead 10-20 years anymore when only being judged by the results for the next quarter!
I dunno, maybe everyone in the U.S. who can should buy the Ray Charles CD with the song, "Busted". Then play it in dedication to both the federal & state governments, along with the corporate world, at exactly 10 pm, EDT, next April 15th.
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Re: Ford shutting down 10 plants
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This is afflicting many corporations now, not just the automakers. But I wonder if a CEO can really look ahead 10-20 years anymore when only being judged by the results for the next quarter!
for a fact !!! ^^^ Besides making decisions meant to improve next quarter's 'apparent' cash flow at the expense of future revenues, there is also the issue that almost all capital investments must now show a payback in three years or less in order to convince 'venture capital' to finance it. The good old days of using a portion of operating profits to directly fund long term capital improvements (with say a 10 year payback) simply doesn't occur with public companies these days.
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In April Ford said that gas prices would not effect their SUV sales. Once again their management was wrong.
the 'tin foil hat' crowd would argue that, while gas prices are a factor, they are not the only factor and perhaps not even the major factor. Instead they'd point you towards the fact that the end of the housing appreciation bubble has made it impossible for potential new SUV buyers to extract equity from their homes to pay for the purchase. They'd point out that since the home equity extraction came to an end over the past year that potential new SUV buyers have run up a mountain of debt on their credit cards in order to buy groceries and pay utility bills. They'd also point out that lenders are tightening creditworthiness standards as a result of a steadily increasing rate of personal bankruptcies, making it more difficult for a would-be SUV buyer to obtain financing. Lastly they'd point out that rising interest rates and the effect on credit card payments, ARM payments etc. has taken a big new chunk out of would-be SUV buyer's cash flows too.
But of course, any business that depends on selling product to American consumers can't really come out and be truthful about US consumer indebtedness and risk levels (i.e. explaining that the reason that many consumers can no longer afford expensive cars / trucks / SUV's is really because they are already so far in debt that they can't afford to buy ANYTHING !) ... so high gas prices are as good of an excuse as anything.
PS this isn't just about SUV's !!!
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Re: Ford shutting down 10 plants
These points have been argued to death.
Ford fails to compete successfully. So Ford blames it on people not buying what they produce, rather than not producing what people buy. There are companies producing domestically at much higher than 51% who are doing well.
And Ford could do better. It just can't seem to adjust its corporate mentality to current competitive realities. No multi-paragraph, multi-leveled devolution has convinced me otherwise.
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Re: Ford shutting down 10 plants
The most important factor? Ford makes crappy cars. (I drove a Ford Escort. Bleh!!) This could also be Ford's Karma for not doing a proper recall on the Ford Pinto when it was exploding & killing people (as referred to in the movie "Fight Club.") Oh yeah, and that whole "cheap tires that explode" thing. Hmmm. Is Henry Ford flopping in his grave right now?
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Re: Ford shutting down 10 plants
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Is Henry Ford flopping in his grave right now?
I'm sure that there are more than a few chief executives who are pissing on Henry Ford's grave right now. After all he was the one that 'invented' the idea of 'massively overpaying' US auto workers in the first place ... with the philosophy in mind that it would attract the best people and provide the highest quality and greatest productivity. Unfortunately, all that really happened over the course of time was that US auto workers were massively overpaid !
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There are companies producing domestically at much higher than 51% who are doing well.
OK, please name one of these companies and explain why they are doing well ...
I'll even start things off with Toyota's flagship Kentucky plant ...
(snip)"When Toyota decided to build its first North American plant, executives settled on Kentucky’s Scott County, a dry county with a hard-working rural populace and a pastoral landscape.
“Toyota executives said the topography here is very similar to the area in (central) Japan that Toyota’s from,” said banker Tom Prather, who was then mayor of Georgetown.
Tens of thousands of candidates lined up for jobs, enduring Toyota’s rigorous testing and interview process. Critics say it weeds out nonconformists. Union recruiting drives have failed."(snip)
from
(snip)"The non-union "transplants" in the industry have a number of critical advantages. Business Week estimates that Toyota has a cost savings of $1,500 per car over General Motors because of the difference in retiree benefits alone.
Partly this is simply the result of a younger workforce. But much is also due to the much greater ability of unionized workers to resist being pushed out before retirement age.
Another factor is the benefits themselves. The defined-benefit plans in the UAW plants provide more security but cost the companies significantly more.
Toyota achieves further savings through freedom from the union's work rules, outsourcing restrictions, and safety programs."(snip)
from
then there's something called union labor 'work ethic' ...
(snip)""Let's assume General Motors has a 14% absenteeism rate and we have 5%, and we each have plants of 1,000," says Mr. Benefield. "GM has to have 1,140 at their plant and I have 1,050 to run mine. That's a big productivity difference right there," he says, emphasizing that good process management is the focus of NMMC's strategy -- not wringing every last drop of sweat out of its assembly line workers.
A.T. Kearney's Mr. Mateyka says 14% or 15% is high for an industry average (although some troubled plants have had far higher), but he agrees that absenteeism is a substantial factor in an automotive plant's cost structure. "It really affects how effectively you can run a plant and your cost." NMMC currently has a 4% absenteeism rate."(snip)
from
And of course the taxpayers of the state of Kentucky helped subsidize Toyota's profitability as well ...
(snip)"Are incentive packages improvident? A 1992 study by the University of Kentucky documents the payback for an incentive package worth $147-million given by the state to attract Toyota to its Georgetown site."(snip)
from
and Kentucky's more lenient environmental requirements factored in as well ...
(snip)"Analyzing the significance of environmental regulations is more problematic and has resulted in contrary findings. One reason is cost differences in complying with antipollution regulations varies widely across industries. However, one notable finding is that the location of Japanese plants appears to be more sensitive to pollution abatement than domestic or other foreign owned plants.
While increased environmental regulations may deter firm location in some industries by imposing higher costs [heavy manufacturing i.e. auto- sic], lack of such regulations could deter firm location in other industries due to undesirable living conditions. [high technology i.e. microchips- sic]"(snip)
and let's not discount employer friendly Kentucky courts and determined Toyota attorneys, who have litigated all the way to the US Supreme Court to preserve their right to fire employees who can't perform at optimum productivity levels ... and thus allow Toyota to avoid both productivity drops at their plant by being forced to accomodate 'underperforming' employees, plus Toyota avoids huge disability payment costs to the fired employee(s) out of their own corporate pocket and instead shifts the cost to the US gov't --- see
Granted that Toyota does a lot of things 'right', and granted that Ford does a lot of things 'wrong', but attempting to gloss over the fact that Ford's older unionized plants in blue states operate under a very different business/regulation/cost model than Toyota's new non-union plants in red states gives undue credit to Toyota and unjust criticism to Ford.
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It just can't seem to adjust its corporate mentality to current competitive realities.
Some would argue that Ford's corporate mentality has adjusted very well to competitive realities ... by making massive investments in new production facilities in Indonesia, Thailand, Taiwan and China, and by closing existing production facilities in 'blue states'. However, as I alluded to earlier, the 'Titanic' doesn't turn on a dime as soon as the rudder has been put hard over, meaning that the corporate decisions made several years ago to move quite a bit of future production offshore has yet to fully materialize.
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I didn't gloss over any union things. I said, "There are companies producing domestically at much higher than 51% who are doing well." You asked to name one company, explain why it's doing well, and then launched into Toyota. I didn't see anything you cited that said Toyota isn't producing at higher than 51% and not doing well.
But if workers themselves are happy and vote down unionizing, that would argue in favor of fair labor practices of the manufacturer.
My explanation for companies that are doing well, regardless of domestic content, is that they're building and selling cars that people want to buy for prices that people want to pay.
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Re: Ford shutting down 10 plants
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My explanation for companies that are doing well, regardless of domestic content, is that they're building and selling cars that people want to buy for prices that people want to pay.
... and my reply as always is that certain companies are able to build and sell cars that people want to buy for prices that people want to pay because they enjoy cost advantages over other US auto companies. As the non-union link indicated, UAW retirement benefits alone add $1500 to the cost of every car produced at a UAW plant. Then start adding in union worker pay rates versus non-union adding to labor costs, union worker absenteeism adding something like 10% additional labor cost over and above that, not to mention the additional costs of adhering to UAW work and safety rules (which basically guarantee that employees can't be used flexibly) ... plus blue state higher property taxes, higher energy costs, higher environmental compliance costs, higher comp and disability insurance premiums, plus the lack of state funded 'incentives'. All of a sudden the costs to a non-union auto plant in a red state to produce a particular car are 25-30-35% lower than the costs of producing the exact same car in a union auto plant in a blue state.
These differences in 'mandated' costs guarantee that Ford cannot produce a small car which is equal in content to a Toyota in any of its older blue state plants, offer it for sale at anywhere near an equivalent price, and still break even - no matter what they do. The only way that Ford can hope to maintain a positive cash flow is to cheapen up the content as this is essentially the only cost component over which Ford has direct control. Ford can't even close blue state plants to cut costs, since the UAW contract obligates Ford to pay laid off UAW employees something like 90% of their normal salaries for doing nothing for something like the next year !
However, Ford apparently figures that they CAN regain competitiveness by having 49% of future small car content produced offshore, where even lower Asian labor / benefit / tax / environmental / energy costs versus non-union red state plants will counterbalance Ford's higher cost of assembling the vehicles in their blue state plants.
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Re: Ford shutting down 10 plants
I'm sure the posters here understand legacy costs but they dont care. It seems they buy into the mythology that foreign brands are superior (which is bullshit) and dont see a connection between supporting domestic manufacturers and their paychecks. The jury is still out whether our economy has moved to the point where the US manufacturing base is meaningless and we have truly moved to a pure service economy. Im glad Im nearing retirement age and can leave those problem to my kids.
FBR
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Re: Ford shutting down 10 plants
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.... and dont see a connection between supporting domestic manufacturers and their paychecks. The jury is still out whether our economy has moved to the point where the US manufacturing base is meaningless and we have truly moved to a pure service economy
Yes this is definitely another area where lots of posts appear in other forums in regard to girls complaining about declining dancer earnings potential at a large number of clubs. With the exception of certain big cities which can cash in on the upper echelon of the 'new service economy', i.e. bankers, brokers, attorneys, corp. headquarters types, gov't official types etc., the vast majority of service economy workers don't earn enough to afford a 'middle class lifestyle' that allows for discretionary spending of a few hundred dollars in clubs. And with the erosion of union manufacturing, the typically non-union 'replacement' jobs displaced workers are able to find don't pay enough for them to continue to afford a 'middle class lifestyle' that allows for discretionary spending of a few hundred dollars in clubs either.
IMHO, and in the opinion of some segment of the 'talking heads', the establishment of non-union auto plants in the US some 20 years ago, and irrefutable proof of their viability vs union organizing efforts, vs gov't mandated comp / disability / utility costs etc. some 10 years ago, was the point where all 'old school' US manufacturing industries realized that long term future viability of their companies mandated that they abandon their US operations in highly unionized highly regulated environments. This led to a wave of corporate board decisions being made in the late 90's which gave birth to outsourcing and/or investment in foreign production facilities.
Depending on the complexities involved in making such a transition, some companies were able to implement this within a couple of years while others with more complex 'legacy' issues like the US auto companies are still in the process of implementation. However, the decisions have been made, the handwriting is on the wall, and there will be no going back. The direct effect of this transition will be to vastly reduce the US 'middle class' who formerly benefitted from the high labor cost high paychecks stemming from a heavily unionized heavily regulated US manufacturing environment, and instead leaves behind a few Americans at the top of the globalization food chain i.e. the 'rich' plus a vast number of Americans now at the edge of being 'poor'.
Obviously, this will directly translate to negative effects on dancer earnings potential in clubs that depended on 'middle class' customer spending. Those clubs that are positioned to cater to the 'rich' will continue to do very well. Those clubs that are positioned to cater to the 'middle class' are very likely in for a rude awakening. Unfortunately, in the same manner that the 'rich' comprise a relatively small percentage of all Americans, dancers able to work in clubs positioned to cater to the 'rich' will also only comprise a small percentage of all American dancers.
Like you I'm very happy that I have reached 'dancer' retirement age and can thus avoid this problem, but that certainly doesn't help the thousands of young dancers who won't be able to avoid its effects. However, ultimately, we won't be able to avoid the fallout from this problem either as gov't budget costs of providing benefits to the newly 'poor' continue to accelerate and as gov't tax revenues from the remaining 'middle class' continue to shrink. In terms of these sort of secondary effects, I certainly wouldn't want to be a property owner in Michigan or the Ontario peninsula right now !
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Re: Ford shutting down 10 plants
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Originally Posted by FBR
I'm sure the posters here understand legacy costs but they dont care. It seems they buy into the mythology that foreign brands are superior (which is bullshit) and dont see a connection between supporting domestic manufacturers and their paychecks. The jury is still out whether our economy has moved to the point where the US manufacturing base is meaningless and we have truly moved to a pure service economy. Im glad Im nearing retirement age and can leave those problem to my kids.
FBR
Till the dollar gives out...
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Re: Ford shutting down 10 plants
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Till the dollar gives out...
well, that's a whole 'nuther story i.e. 49% content Japanese car prices increasing by 20% in US dollar price, 49% content German cars increasing by 30% in US dollar price when the exchange rate of the US dollar takes a dump. Of course, if and when that happens US consumers aren't going to be able to buy cars anyhow because they'll be too busy paying $5 a gallon for gasoline, paying 30% higher prices across the board for 'necessities' like food and clothing at WalMart, and paying twice the monthly minimum mortgage payments and credit card payments due to rapidly rising US interest rates.
Still, a 30% 'dump' in the US dollar exchange rate is not going to materially affect the cost advantages of a non-union Toyota plant in Kentucky vs a UAW Ford plant in Detroit ... when 49% of future components for both are actually produced in southeast Asia and actually priced in yen or yuan or bhat !
As to global competitiveness, it is somewhat true that a 30% 'dump' in the US dollar might make US manufactured goods more competitive vs european companies with costs in euros. But US manufacturing costs becoming 30% closer to manufacturing costs in China or Thailand, with typical worker pay rates of $200 a month, zero benefit costs, lower environmental costs, much looser work / safety rules, subsidized gov't utility costs etc. , is still an order of magnitude away from actually being cost competitive.
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Re: Ford shutting down 10 plants
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Originally Posted by Melonie
... and my reply as always is that certain companies are able to build and sell cars that people want to buy for prices that people want to pay because they enjoy cost advantages over other US auto companies.
So Honda comes in, builds factories in Ohio, employees thousands of people, makes cars that are higher domestic content (meaning within U.S. borders) than a number of domestic companies, treats its employees right, the employee vote to keep unions away, and the factories punch out cars and motorcyles that are not low-priced and sell pretty well.
What are they supposed to do? Tithe to GMC, Ford, and Daimler-Chrysler because Honda is successfully competing? What, they punch out cheaper cars? What is the price difference anyway? What does the Civic compare to? The Ford Focus? Chevy Cobalt? I'm not a car guy, so I really don't know, but I think the Civic costs more than either of those.
Here's what started the thread: Ford is closing plants (while Honda announced that it's building a new one) because it says people aren't buying its SUVs. Sorry, I believe that's a moronic market approach on the part of Ford. What I hear for the Ford apology here is UNIONUNIONUNIONUNIONUNIONUNIONUNIONUNIONUNION. I don't have a problem about saying that union intransigence and health insurance costs are big issues for domestic car companies, but I also think that the problems go deeper than union issues as the end-all-and-be-all for domestic car company shortcomings.
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Re: Ford shutting down 10 plants
The end result, Mel, is you cannot make excuses for Ford or the other US auto makers. Everyone is spread out across the US facing the same environmental regulations, everyone is using "economic incentives" from the local government to screw schools out of money, and everyone is using US auto workers in the context we are speaking of.
What is the difference? Management style and management decision making - everything from being "a tough son of a bitch" with workers to making fucking Humvees with 6 mi/gal for soccer moms, jesus christ man!
"What is good for GM is good for the United States" is one form of capitalism.
Toyota has been showing another form of capitalism is a wee bit better I think.
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"What is good for GM is good for the United States" is one form of capitalism.
Toyota has been showing another form of capitalism is a wee bit better I think.
agreed that Toyota's form of capitalism is undoubtedly better for Toyota. It remains to be seen whether Toyota's form of capitalism is better for the non-union workers, better for the Kentucky taxpayers who paid Toyota $163 million in incentives, etc. Hey, at least the region still has jobs that pay enough to raise a family on, right - which is probably more than can be said about Michigan or the Ontario peninsula.
Of course those non-union jobs don't pay enough to provide for 'luxury spending' to financially support a local strip club the way that UAW jobs used to, so with Ford closing UAW plants Michigan dancers don't need to worry about moving to Kentucky ...
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everything from being "a tough son of a bitch" with workers to making fucking Humvees with 6 mi/gal for soccer moms
not to be aggravating, but let's get real here. If the big three attempted to turn into 'tough sons of bitches' at this stage of the game, Delphi has already provided the example that UAW workers would rather strike than deal ... putting the big three in a position of explaining to stockholders why they are getting zero production but still having to pay 90% of regular salaries to union workers on strike. I'm not trying to make excuses for the big three because they allowed themselves to be placed in a union 'vice' in the first place. However, from today's perspective, dealing with the UAW in blue states versus non-union auto workers in red states is an apples and oranges situation.
As far as Humvees go, I'm glad that you brought that up. When GM bought Hummer it was a guaranteed profit center - because Hummer was able to charge the US gov't the full cost with profit margin of producing those vehicles. Likewise original Hummers sold to non-military customers like Gov. Ahnold and other 'rich' people who approached Hummer about private sales not the other way around. The original Hummer continues to be a steady profitmaker for GM ... more so lately because every Hummer hit by an IED or RPG in the middle east leads to another profitable sale for GM.
In a similar vein, the offering of the H2 were a direct result of 'middle class' customer requests for a more affordable version of the H1 which Ahnold could obviously afford but they couldn't - combined with some clever attorney's realization that business tax incentives meant to encourage the purchase of delivery trucks and service vans could legally be employed to get the US gov't to pick up 20-30-40% of the cost of a new H2. With the business vehicle tax break plus rising home prices plus record low interest rates, US consumers were hungry for H2's and GM made a lot of money selling them ... until ...
A) the business tax break was cut off, B) interest rates rose, C) home values stopped rising thus refi money dried up. I still contend that gas mileage and $3 per gallon gas prices are actually quite far down the list of real world reasons that large SUV sales are off, and would also contend that US consumers would still be buying them in droves if the interest rate and home value situation was the same today as it was in the early 00's. Obviously there are some that would introduce political correctness into the large SUV discussion, but if you stick to pure economics the gas price issue is definitely a secondary consideration vs having to pay $10k-$15k-$20k higher out of pockets to purchase one without the income tax break.
I would also mention that while the business expense tax break which was subsidizing US large SUV's at the customer end was cut off, the tax breaks that subsidize Toyota and Honda from the factory end have not been similarly cut off.
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Re: Ford shutting down 10 plants
Mel, I guess I really don't know what you're saying. Honda and Toyota are profitable as American manufacturers, but they shouldn't be allowed to? They should not have struck for the best deals that they could? They should have been forced to hire union people, however grand their working conditions are and unneeding of union involvement?
As for the H2 being immune from gas cost considerations, you and I can claim whatever we want for the reason of the market slowdown, and none of what we say makes it so. I could afford an H2, but when I fill the tank on my present car for $40 once and a half times a week, I'm put off by the thought of filling it for $60 twice a week. When you're talking about rising gas prices equating to a whole new car payment, I think people take notice. As gas prices have skyrocketed, SUV sales have plummeted. A person could develop a multi-paragraph explanation of mutiple reasons why, but they can also tend to conclude the obvious.
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Re: Ford shutting down 10 plants
Quote:
Mel, I guess I really don't know what you're saying. Honda and Toyota are profitable as American manufacturers, but they shouldn't be allowed to? They should not have struck for the best deals that they could? They should have been forced to hire union people, however grand their working conditions are and unneeding of union involvement?
my response was aimed at the post that "what's good for GM is good for the United States". Right or wrong, the union paychecks and cash value of benefits spread around by GM provided the wherewithal for lots of other local businesses to be profitable, from strip clubs to restaurants to corner coffeehouse and bars. Where Toyota and Honda's non-union paychecks and benefits allow their workers to afford the occasional adult cable PPV instead of a trip to a strip club - to afford MacDonalds instead of a nice restaurant - to afford Dunkin Donuts instead of a coffeehouse - and to afford a 12-pak from WalMart instead of a night at the bar. This all comes back to the 'death of the US middle class I guess, with Toyota and Honda assassinating their own little portions of the US middle class who might have worked at a strip club or a nice restaurant or coffeehouse or bar patronized by GM workers, and instead encouraged bargain basement chains to hire minimum wage workers to serve Toyota and Honda employees on a tight budget.
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Re: Ford shutting down 10 plants
Thought I might defuse the rhetoric on these international matters (which get pretty heated, from my experience) with a short defense of Charlie Wilson, who never actually said "what is good for GM is good for the country" :
When asked in his confirmation hearing whether, as Secretary of Defense, he could make a decision that was adverse to General Motors, he said "for years I thought what was good for the country was good for General Motors". His lousy PR instincts let him down, though, because he added the phrase "and vice versa". Good intentions, bad execution.
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Re: Ford shutting down 10 plants
The issue of quality is a non-starter these days (unless you're a European manufacturer). Unions are indeed key to the impending failure of US car manufacturers (paying people to sit in job banks and do friggin' crossword puzzles is piss poor management). But there's a bigger issue here that JZ touched upon: consumer preference.
Look at the Ford Fusion. It's the ONLY car that Ford is producing in its current product line that's actually experiencing sales growth. Why? Because it's a car people want to buy (it's a pretty good car, actually). When American manufacturers start building cars people want, they'll start making money again. Not to be needlessly reductionist, but it's really that simple.