[QUOTE=JonBoy,Jan 10 2006, 01:16 PM]Also, I would like you or Corey (Corey being an accountant can probably explain it better) to explain how you can operate continually on a loss while still supposedly making a profit on each vehicle.

I understand what the article says, that they make a variable profit on the vehicle (selling price of vehicle - cost of parts and labour = variable profit), but that's like saying that I can build engines profitably for $30 but because the technology was given to me by aliens from Mars that have since retired and need money to maintain their spaceships and condos on Venus, I actually...hmm...lose money.

 

GM is certainly on hard times these days. However, compare the first 30 years of Honda's life to the first 30 of GM. Well GM became the world's largest maker in it's first 30 years and their was a lot MORE competition back then.

 

[QUOTE=rockville,Jan 11 2006, 06:27 AM]GM is certainly on hard times these days.

 

[QUOTE=Chris Stack,Jan 11 2006, 06:41 AM]Third, Honda overcame a lot of the "racism" and prejudice of their foreign cars to succeed, GM didn't have to do that.

 

I am a practicing CPA and Chris you are basically right. The big issue here is that GM is losing money, but if they didn't sell a lot of cars, they would lose even more money. Why? Because fixed costs don't change when volume of production goes up or down.

So, GM has these crushing fixed costs, but they are making a variable profit on each vehicle made. Meaning the cost of direct parts and direct labor to build a car is MUCH less than the eventual selling price of that vehicle. That marginal profit is applied to their fixed costs and their net is a loss. But, if they didn't sell that extra vehicle, the net loss would be much, much worse.

They need to figure out a way to eliminate the legacy costs and become more competitive with the labor costs of the foreign manufacturers. Without doing so, they will continue to lose. Toyota, Honda, Nissan are not any better than GM, they just have the luxury of lower labor costs allowing them to put a few more bucks into material quality, particularly interior build-out.

As a possible scenario of what will eventually happen to GM and Ford, just take a look at United and Delta airlines. They had to go to bankruptcy court to dump their pension obligations on the government in order to get their overall labor costs in line with the discount carriers. They were also able to wrangle out significant salary cuts as well.

 

Not meaning anything other than just adding some food for thought.

 

A comment about the overhead costs. Last year, GM on average lost money on every car. However, it

 

[QUOTE=QUIKAG,Jan 11 2006, 07:19 AM]...Toyota, Honda, Nissan are not any better than GM, they just have the luxury of lower labor costs allowing them to put a few more bucks into material quality, particularly interior build-out.

 

[QUOTE=rockville,Jan 11 2006, 07:47 AM] A comment about the overhead costs. [B]Last year, GM on average lost money on every car. However, it

 

Yes, GM dropped the ball when they negotiated too weakly against the UAW in the past. They made their bed and are now having to lie in it.

Some of you guys are in for a rude awakening yourselves when you realize that your jobs just got outsourced. This is a global economy, kids, and American companies are going to bear the brunt of bad news because we've all be wallowing in economic success for so long. Our standard of living is vastly higher than the majority of countries in the world. When the foreign competition can make a product for pennies on the dollar and dump it via export on our shores and undercut anything we can make domestically, we're all up shit creek.

It wasn't a big deal for GM to throw money out the window in the past because they had so much of it. Now, it's a global economy and the foreign makes are kicking a** and taking names.

Chris, your comments about domestic lovers being oblivious to the fact that GM/Ford are going to have to make major changes to the way they compensate their labor is short-sighted. While, some Detroit boys are going to be storming mad when their $100hr salary/benefits package is slashed, it's reality and it's going to happen. They're going to have to deal with it.

My dad got fu.cked in the ass by Delta airlines where he was a pilot for 17 years, but luckily he bailed and got something before they went into bankruptcy. Trust me, I see both sides of this coin, Chris. It's a shitty deal all around, but it's reality.

All I hope for the rest of you is that you have a job that is unique and skilled enough that someone from Asia, Africa, or South America can't take it away.