Business Week – April 23, 2007:
How cheap is cheap? Renault-Nissan Chief Executive Carlos Ghosn is betting that for autos, the magic number is under $3,000. At a plant-opening ceremony in India Apr. 4, he was already talking up the industry’s next challenge: a future model that would sport a sticker price as low as $2,500—about 40% less than the least expensive subcompact currently on the market. Renault-Nissan is the first global automaker to take up the gauntlet thrown down in 2003 by India’s Tata Motors, which plans to launch a $2,500 car next year. Both are leading a race to the bottom that could affect the business every bit as much as Henry Ford’s Model T did a century ago.
When Tata made its vow to build a $2,500 car, many Western auto executives ridiculed the project, dubbing it a four-wheel bicycle. They aren’t laughing anymore. Tata’s model is a real car with four doors, a 33-horsepower engine, and a top speed of around 80 mph. The automaker claims it will even pass a crash test. And while the car probably won’t win any beauty contests, it’s no ugly duckling either, according to the handful of industry insiders who have been given a glimpse.
You could always make a cheap car if you could dump state mandated safety and emission requirements, Unionized labor, tariffs, and a thousand lawyers; massive insurance for liability shielding. Not to mention the billions in advertising and political contributions.
Its hard for GM and Ford to make a car that cheap when they are paying their executives mulit million dollar salaries.
The guy currently running Ford into the ground made $28 million for 4 months work.
I admit I’m horrible at math but I roughly calculate he could have purchased around 10,000 of these cars in that 4 month period. If he actually drove himself, he could be driving a brand new car every day for the next 27 years, if he lives that long.
What the hell do these um, greedy, um, persons do with all that money?
This should really help get emissions down. Say 200,000,000 of these on the roads of India and China. Cheryl crow was wrong, we better go no square wiping.
The problem is not the salaries paid to the top executives of these companies, it is the pension plans paid out to their employees. Often retired employees are retired longer than they were employed, adding thousands of dollars to the cost of every American made car.
5,
*cough* BULLSHIT *cough*.
That’s an old, tired excuse. You know what the problem is? Craptacular cars that no one wants. Toyota has union plants, Honda has union plants, VW has union plants… EVERYONE has union plants. You know what GM, Ford and Chrysler do NOT have? GOOD CARS!
Anyone else snicker at the article’s mention of “Tata Motors?”
God, I’m such a juvenile…
We haven’t seen a Yugo in a while…
I’d be happy with a turo-intercooled 3cyl that got 45mpg and cost under $10K. Is that possible?
How many retirees does Toyota have, and are paying for their health care?
Indian cars are cheaper because they don’t have all the safety regulations that the US has. No release in case you’re locked inside the trunk. No third brake light, etc.
It’s amazing… 28 million for 4 months to a single exec… and yet a bunch of guys want to begrudge the actual guys who do the real labor a pension for their modest suburban homes…
The real problem with class warfare is that we still fight it with words. When we finally do it with guns, it will be settled real quick.
8. Ha the YUGO, I had a friend, we went for a ride in a new YUGO, from the transmission hump came a sound like a hammer thumping. I was waiting for “Alien” to pop out. We took it back to the dealer who said “Oh thats Normal”. I think that car was around 2000.00 dollars in 1987.
#5: You’re asserting a commonly held misconception. While it’s true that many US companies are having trouble paying for pensions, it’s wholly false that this has anything to do with the workers. See, one “benefit” to being an executive is that no matter how little time you actually put in, you have a full pension plan when you leave. So say you come in and are CEO for a year. You only pay 1 year’s worth of money into the pension plan. But when you leave, you get CEO level salary for life.
If you break pensions down into executive pensions and workers pensions, you find that at large companies (GM specifically) the workers pensions plans are easily self-sustaining, while the executive pension plans are a huge drain on the company’s resources. But, of course, guess whose pension gets cut first?
These companies would be just fine if they started giving 401(k) plans to their executives instead of pensions, but they refuse to do so because “you’ll be set for life” is a great way to attract top flight talent. Problem is, that once they’re set for life, they fly away.
It’s not so much the pension as the health care costs. I don’t egrudge them anything, I just wish they had funded those upfront. Instead now the company is paying money for workers who aren’t part of the production and are at a competitive disadvantage.
#12 – These companies would be just fine if they started giving 401(k) plans to their executives instead of pensions, but they refuse to do so because “you’ll be set for life” is a great way to attract top flight talent. Problem is, that once they’re set for life, they fly away.
Comment by Matt — 4/25/2007 @ 7:48 am
And judging by their performance, one has to wonder just what qualifies as “top flight talent” in the first place.
So this is great, when the entire Indian and Chinese middle class start driving these cars what happens to the fuel supply? The real revolution would be if these cars ran on hydrogen fuel cells, or some other alternative fuel. When will the government start taking this stuff seriously?
Union labor is killing the big 3. It has already killed the American textile industry, shoe manufacturing, electronics manufacturing and a host of other industries from bicycles to furniture.
When you have people being paid $60,000+ in salary plus huge benefits for a job that does not even require a high school diploma you should not be surprised when the tap runs dry.
Unions had their day. They accomplished the last of their important goals in the late 60’s or early 70’s. Everything the unions worked for in the first half of the 20th century is now written into law.
Unions are far too powerful, corrupt and expensive. Ask anyone who has ever tried to setup a trade show or event in New York about their experience with the Teamsters if you would like some examples.
The last American autoworker can thank his union for fighting to get him a salary he does not deserve. Then he can head down to the long line at the unemployment office.
Just give a reliable car that’s easy to fix if and when it does break down, but I do want safety too.
#8
VW had this amazing tiny car:
http://en.wikipedia.org/wiki/Volkswagen_Lupo
Diesel of course, TDI engine.
Labor issues are moot. Would you, as an American expect to be paid less to compete against China and India? Don’t think so. And be paid less would have domino effects on th American economy (less wages=less tax revenues, and also less buying power that would, in turn, impoverish the country).
unions and safety laws didn’t kill the american car companies — greed did. they want to build SUVs with 120% profit margins. they want no part of building cars with a 5% margin. so, some other company will. i assume those companies won’t pay their CEOs 120 million dollars a year.
those unions created a generation of americans who could buy homes and send their kids to college. somehow the big 3 made trainloads of cash anyway. but they became greedy. executives became insanely greedy. they made you look at unions while they stole billions and ran the companies into the ground.
um, why isn’t union labor killing the foreign companies? why didn’t unions kill the big 3 in the 50s and 60s when they were riding high? and health care costs are insane because we have a profit-driven insurance system and no government regulation of prices.
TESTIFY CATBELLER, TESTIFY
Speak The Truth, Brother!!!
The US market will never see a sub $7000 car for 1 reason:
1. US dealers won’t offer it because they know that US car buyers are willing to pay lots of money for sub-standard cars.
Inexpensive and better made models are already sold in countries outside the US. We don’t see them for the same reason above.
Until the average American starts making car-buying decisions with his/her wallet, he/she will continue to be offered over-priced junk, foreign or domestic.
How much for the hood ornament?
Yeah unions and companies did well in the 50s and 60s and weren’t so bad in the 70s. This is because they still didn’t have too many retirees then. The problem isn’t the union salaries, but the payments being made to people after they leave the company.
Unions — the people that brought you the weekend.
#1 >>You could always make a cheap car if you could dump state mandated safety and emission requirements,
Those cars would kill us… but would be a cheap way to die!
Here’s another way to get cheap cars: tax the hell out of big, expensive ones.
(And let the small, cheap ones be tax free.)
#26
Unions: the people that brought you safety equipment.
Unions: the people that brought you a living wage.
Unions: the people that brought you overtime pay
Unions: the people that created the middle class
Unions: the people that created the American dream.
… and don’t bash me as being a mindless union guy. I’m not. I’ve nearly my entire life as a non-union salary guy.
In fact it was my management experience that made me pro-union.
Management spends all our time organizing and working to get the most out of labor for the least amount of money.
It’s only fair that labor should have the right to organize and try to get the most out of management for the least amount of work.
I know I am going to piss off allot of people with my opinion on the union thing, but here goes.
Unions are needed, but so are employers.
The problem is that the Neo-libs think every union walks on water and will give them everything they want.
The other side of the aisle hates unions and would like to see them abolished.
The answer, as usual lies somewhere in the middle. No one should ever be forced to join a union to get a job. On the other hand, no employer should be able to keep a union from forming. Again balance, if the scale tips too far one way or the other you have chaos. In the late 19th, and early 20th century, the scale was tilted to far in the Employers direction, now the scale is too far in the Unions direction, and you have companies unable to compete with other non-union and overseas businesses.
The sad part is that both sides need each other, the workers need the employer, and the employer needs the workers.
Only morons will blame unions for the downfall of the domestic automakers. Only morons will ignore the fact that Toyota and Honda operate with the same exact unions that GM and Ford do.
Look instead at the the 300+ hp vehicles the domestics are bringing out that no one wants, the huge SUV that nobody can afford, and the terrible, terrible build quality that scares away everyone else.
Foreign automakers, meanwhile, build solid, reliable cars that you can drive into the ground, and they are absolutely DOMINATING GM and Ford. Thank god. I just hope GM and Ford aren’t bailed out by the federal government, and are forced to fix their problems on their own.