Chrysler Layoffs & Management Stupidity

[cangreylegend]

I'm not surprised and the upper management and sales and marketing are totally to blame here. With rising gas costs and severe environment concerns to come anyone and anybody holding a huge portfolio of hemis and big vehicles and nothing small and efficient and GOOD in the chain RIGHT NOW is in trouble.

The imports are going to eat the domestics alive within 3 years. They could NOT have seen this coming. Management of the big domestics are totally out to lunch and are about to disrupt 10s of thousands of families lives because of their stupidity.

Anyone just picking up leases on big vehicles with big engines face a huge risk of an upside down situation in the end. Read your lease very carefully to understand because the industry haven't factored in what happens when demand shifts in the pricing . It's all in the fine print.

 

[Kestas]

In their defense, the yo-yo gas prices haven't helped either. How does an auto manufacturer know what people will want in 3-4 years? They have to have a crystal ball and know what gas prices will be then.

So whay do you propose that they do? Do they hope for the best, expect prices to remain steady, and design and build profitable SUVs that everyone seems to want and buy, or do they gear up for another crunch in gas prices and put all their money on econoboxes? You can't do both and remain profitable.

We need to artificially elevate the gas prices via taxation to even out this fluctuation and provide some stability in market demand. Unfortunately, we can't trust our government to lower the taxes every time the gas prices spike.

 

[javacontour]

Kestas,

Why can't you do both and remain profitable? I mean if Toyota can build everything from fuel sipping cars to full sized pickups and SUVs and make record profits, there is no reason why other automakers cannot do the same.

Having the ablity to build different sorts of cars is something any carmaker can do. Being flexible enough to shift production levels in short order is where the ablity to do this comes from.

I would think the UAW would see that plants are closed when certain vehicles are no longer made and lobby for very flexible production lines. So that a plant can reconfigure in short order to build the hot car or truck of the day.

The perception I have, and I reserve the right to be wrong, is that things are very rigid on both sides of the equation. If the UAW could pitch the benefits of flexible production to both their own rank and file and to management, it's a win-win for all.

It's got to be cheaper to run 20 factories at close to 100%, shifting production as needed, than it is to run 30 at 66% or some other figure. The folks at the 20 factories know that they will not be layed off simply because their model is no longer built.

If gas goes up and full sized trucks are no longer in high demand, then the factory is reconfigured to build economy cars. While the parts are being routed to the factory, the reconfigure takes place.

Auto makers are inflexible only because they have not figured out how to be flexible.

I don't buy your reasons. I believe I understand them, but it's managing those sorts of things that we expect management to handle, and handle well.

 

[CivicFan]

javacontour, its not that easy to switch production lines. Every single vendor providing the parts have to switch their production lines, too.

I think the solution for car companies is to become more flexible in importing/exporting their products. They could have assembly plants in certain countries putting together vehicles that are in demand in those places. That would mean large gas guzzling vehicles in the US as we usually are rich enough to use a lot of gasoline, and economy cars in poorer locales. This is pretty much true now.

The problem arises with short-term demand fluctuations. If these auto manufacturers could ramp up the production of cars that are in demand and ship them globally, they will be able to minimize disruptions in their cash flows. I think the Toyota or Honda have this capability. GM can do this, too, but they are reluctant or not very experienced in doing so the only examples being the Chevy Aveo from Korea or the GTO from Australia. This way they would still have cars to sell while retooling some of their assembly plants.

 

[javacontour]

I don't think it would be a build trucks one day, and build cars the next. But I don't think it should take years either.

There was an article posted about the Ford engine plant that can run many different types of engines in the same plant. There is some time to reconfigure the tools to run different types of engines, but it's not a build this engine for a year then retool arrangement.

If the plants have the same tools and machines across the board, or at least in more than one place, then it is simply a matter of reprogramming many of the machines, and getting the parts to the right place.

I do understand that suppliers too have to be flexible. But if something similar to this is already working for companies like Toyota and Honda, what prevents other car makers from doing similar?

 

[Kestas]

Designs get stale. You can't just have a design for a small car and put it on the shelf for when the gas prices spike. There are many things that have to come together to economically produce a car that people want to buy. You can't have flexible production - as you say - without incurring costs and seriously cutting into profits.

During the first gas crisis of the mid-70s, most automakers geared up to build econoboxes to compete with the japanese, who were raking in the dough during that gas spike. That's because everybody clamored for fuel-efficient vehicles and they were chiding the automakers for building big V8 vehicles. All automakers listened except Ford. Guess what... later on the gas prices went back down, everybody forgot about econoboxes, and Ford was in an excellent position to meet market demand and make money.

Then came the the price spike of the early 80s. Gas prices were higher (normalized for inflation) than what we had recently after Katrina. Lee Iacocca and Chrysler had this grand plan where all cars would be made from the same platform. They planned to use this common platform by stretching it to accomodate many different types of vehicles. The engines would also be commonized somewhat by adding turbochargers for the performance-minded should gas get cheap. They even predicted that 25% of all engines would be diesel by 1986 due to market demand. Chrysler was paying me (and many others) good money to develop diesel engines so they would be ready for 1986. Guess what... later on the gas prices went down and everybody forgot about econoboxes and diesels. I even remember gas was 66¢ per gallon at one point... at a time when I was making half the salary I'm making now!

During the 90s, automakers all but abandoned the econoboxes to make and sell profitable trucks and SUVs where the japanese couldn't compete. They had an excellent run of 14 years where the automakers were building what the public wanted, and making good money at the same time.

I'm old enough to have lived through ALL of these gas crises, and I've lived in Detroit and seen how the auto companies handle these crises, and it's not a pretty sight.

You can't just simplistically expect the automakers to switch between econoboxes and SUVs with the gas prices, any more than you or I can switch the vehicle we drive or the house we live in to meet the short-term demands of driving or living near work.

I've never been one to defend the management here in Detroit, but I felt compelled to bring up this side of the story, because I've lived through it.

 

[javacontour]

I too am old enough to remember the gas lines of the 70's and the cars available then.

I'm not suggesting that they have designs that are simply on the shelf.

GM, Ford and DC all have smaller, more fuel efficient cars that are built overseas. So the designs exist, today.

Sure, there is some tweaking for emissions and safety standards, but the designs are there.

What I'm looking at is the ability to shift production during a 3-6 month period.

Perhaps that includes building some cars overseas and then producing more at home.

I don't think it easy to do these things, but I don't think it is impossible either.

I'm the St. Louis area, so I've seen what all three are doing. Ford closing the Explorer plant, GM moved Corvette production out of St. Louis, DC builds both pickups and minivans here, GM still has the Wentzville plant that builds full sized vans and perhaps pickup trucks too.

They just build those items.

I've toured the Ford Explorer plant before they idled/closed it. For the most part, people are installing small parts, such as interior pieces and precision work. Most of the work is being done robotically. Frames are picked up and floorpans attached by robots and sent down the line.

I was fascinated by the machine that took wheels and tires at input and "spit out" mounted and balanced wheel/tire assemblies at the other. The workers just keep the machine stocked with wheels and tires.

From what I've seen, if the machines are consistent at all the plants, I don't see why the programming cannot be installed as needed.

Logistics is also an issue, but again, nothing that good management cannot deal with.

 

[CBDFrontier06]

Nissan and Toyota don't seem to be switching back and forth. They make a range of vehicles that suits all situations, and are able to slow the manufacture of one while speeding up the other. From the Prius to the Tundra and all their SUVs and crossovers that mesh between them, they have something for every situation so sales never slump for them. Also, Chrysler surely realized early on that people in the northern states aren't as likely to buy a RWD sedan when there are FWD and AWD competitors available. The 300M and the 300C have a completely different demographic because of drivetrain and fuel economy reasons. Daimler should have planned for that before shoving Chrysler into that realm. Speaking for myself, I'm happy to see more cars being developed as RWD....but I doubt people in Michigan or Wyoming are thrilled about it.

 

[cangreylegend]

What the domestic makers have been doing is this.

OK boys we can only make big pants for whatever reason. So go out there and promote that big is in and is hip. Everybody gets overweight to fit in those pants and the whole population wants to get overweight. Then suddenly the doctors order that the population HAS to lose weight because of health reasons. Being big and being healthy is not sustainable. Meanwhile we still have the lobbyists telling us that obesity does not have serious health issues. ..... and they're still making big pants. Heck advertise those pants more so sales will stay up. Need something new how about slim fitting big pants! Like a hybrid full size SUV!

get the idea? See any analogy.

 

[Kestas]

There'a a lot of truth to that. And people follow the fad like sheep!

Remember how smug all your friends were when they got their SUV?

In some countries it's the opposite. They look on big cars as a waste and too cumbersome for their streets, and liken cars to people who - loosely translated - like to show their big nose!

 

[Hirev]

A fair amount of Toyotas are not exactly fuel economy vehicles yet they are having record sales and making money. I think it has to do with short term thinking vs long term thinking (management and their bean counters).

Repeat customers is something Toyota is good at. I can't think of anyone one who bought a Dodge or Chrysler since the early 70s who bought another one. Seem most Dodge Chrysler customers I know had far to many issues & hassles with their vehicles and dealers to ever buy another one. Seems like they have some nice looking vehicles but just suffer from reliability issues.

 

[Gary Allan]

Aside from many of the points that Kestas made ..keep in mind that CAFE has a lot to do with this. Most of the big three make only marginal profits from the econoboxes and rely heavily on the gas guzzlers that those marginal units allow them to manufacture for profits. Where do they make their profits when no one wants to buy the gas guzzlers

 

[Cutehumor]

I have never owned an SUV before. The only truck I owned was a 4 cylinder ford ranger. I would be in the market for an SUV if they were more fuel efficient. As a compromise, I bought a Pontiac Vibe. The big 3 need SUV diesel/hybrid engines and make it affordable. Toyota has already got a Toyota highlander V6 hybrid engine. Toyota/honda already have a few models with hybrid engines. I don't believe the big 3 have a hybrid engine except for the ford escape.

 

[Gary Allan]

Chevy has one. They make a hybrid pickup that gets 2 mpg more then the none hybrid pickup. You have your choice .bad ..or worse. It does also serve as an on site generator.

Naturally the option probably cost more then 2 years of fuel

They just keep stepping on their ....tripping over it ever time. They don't want to get it. You are constantly routed to exactly what you don't want and what you don't need.

 

[Kestas]

Gary - ironically, it is CAFE that, in part, boosted sales of trucks and SUVs. Both are exempt from CAFE. Auto makers don't need the marginal units to sell gas guzzlers. They can sell all the SUVs they want without fear of noncompliance with CAFE. CAFE has turned into a joke and has no practical meaning anymore.

 

[Gary Allan]

Wasn't that "were" exempt. I thought that they brought the SUV's under CAFE and Trucks under xx GVW. Or was that what the evolution to the "cross over" was supposed to do? That is, give car buyers an SUV option that fell under CAFE.

But ..Ford lived and died by CAFE for a over a decade or two. Every Escort they made they lost money on to allow the Lincolns to be sold. Not all the gas guzzlers were SUV. Apparently they did make some money on the Contour or whatever the econo-mega-mileage unit was.

 

[Kestas]

http://www.nhtsa.dot.gov/cars/rules/CAFE/overview.htm

Okay, it's a little more complicated than I first thought. But light trucks are treated separately from passenger cars, and the manufacturer does not have to average the two together. Heavier trucks with a GVWR over 8,500 pounds are completely exempt. Since people more often opt for SUVs than your V8 sedans, meeting CAFE standards has been a cakewalk for auto manufacturers.

As a side note to fuel economy, remember the Toyota commercials where they report selling 30 models that get over 30 mpg (or something like that)?... this includes the flex-fuel vehicles, and only the 15% gasoline is included in these ratings, and assumes the vehicle is using E85. So even though the vehicle may only get 17 mpg, it is rated at 113 mpg gasoline for advertising..... very misleading!!.... more so, because most flex fuel vehicles use gasoline, not E85.

 

[H2GURU]

The WORLD ECONOMY has arrived. Asian manufacturers adapt quicker in slumping markets. The 3 of them are all offering sub-$13,000 vehicles. Look at the SCION line-up, did they bring that out at the EXACT right time or what???! Sure, profits are 1/4 of those on larger offerings, but at least they will be PROFITS...keeping employees working - probably alot of over-time too! Their home offices are in a land where waste is really frowned on and now that feature of their culture will pay them HUGE DIVIDENDS at someone elses' expense. I would say that poor product offerings will come home too roost very soon. You have to know what your customers may want even if they have no clue.

 

[eljefino]

Attempts at making saleable small cars were pretty lame.

Tempos, escorts, fiestas, festivas, aspires all pretty tepid. Contour supposed to be a driver's car. Sat in one, felt real solid. Contour quickly cheapened into a fleet special with 4 cyl, automatic, and steel wheels.

Cavaliers, Sunbirds, Metros, spectrums... yawn. Saturn S-car did okay then it was fattened and made less economical in 02 when Ion came out. D'oh.

Neon was a valiant attempt at making a profitable small car with pep and economy. Nicer than the sundance it replaced. Styling when it came out. Quality was never 100%.

If anyone paid attention to the shining stars in the small car mix, marketed them, and treated them like stepping stones for repeat customers.... we wouldn't be in this mess.

 

[Aldaris]