6 myths about the Detroit 3

[thecamaroguy]

6 myths about the Detroit 3

BY MARK PHELAN
FREE PRESS COLUMNIST

The debate over aid to the Detroit-based automakers is awash with half-truths and
misrepresentations that are endlessly repeated by everyone from members of Congress to
journalists. Here are six myths about the companies and their vehicles, and the reality in each case.

Myth No. 1
Nobody buys their vehicles.

Reality
General Motors Corp., Ford Motor Co. and Chrysler LLC sold 8.5 million vehicles in the United States
last year and millions more around the world. GM outsold Toyota by about 1.2 million vehicles in the
United States last year and holds a U.S. lead over Toyota of about 560,000 so far this year. Globally,
GM in 2007 remained the world's largest automaker, selling 9,369,524 vehicles worldwide -- about
3,000 more than Toyota.
Ford outsold Honda by about 850,000 and Nissan by more than 1.3 million vehicles in the United
States last year.
Chrysler sold more vehicles here than Nissan and Hyundai combined in 2007 and so far this year.

Myth No. 2
They build unreliable junk.

Reality
The creaky, leaky vehicles of the 1980s and '90s are long gone. Consumer Reports recently found
that "Ford's reliability is now on par with good Japanese automakers." The independent J.D. Power
Initial Quality Study scored Buick, Cadillac, Chevrolet, Ford, GMC, Mercury, Pontiac and Lincoln
brands' overall quality as high or higher than that of Acura, Audi, BMW, Honda, Nissan, Scion,
Volkswagen and Volvo.
Power rated the Chevrolet Malibu the highest-quality midsize sedan. Both the Malibu and Ford Fusion
scored better than the Honda Accord and Toyota Camry.

Myth No. 3
They build gas-guzzlers.

Reality
All of the Detroit Three build midsize sedans the Environmental Protection Agency rates at 29-33
miles per gallon on the highway. The most fuel-efficient Chevrolet Malibu gets 33 m.p.g. on the
highway, 2 m.p.g. better than the best Honda Accord. The most fuel-efficient Ford Focus has the
same highway fuel economy ratings as the most efficient Toyota Corolla. The most fuel-efficient
Chevrolet Cobalt has the same city fuel economy and better highway fuel economy than the most
efficient non-hybrid Honda Civic. A recent study by Edmunds.com found that the Chevrolet Aveo
subcompact is the least expensive car to buy and operate.

Myth No. 4
They already got a $25-billion bailout.

Reality
None of that money has been lent out and may not be for more than a year. In addition, it can, by law,
be used only to invest in future vehicles and technology, so it has no effect on the shortage of
operating cash the companies face because of the economic slowdown that's killing them now.

Myth No. 5
GM, Ford and Chrysler are idiots for investing in pickups and SUVs.

Reality
The domestic companies' lineup has been truck-heavy, but Toyota, Nissan, Mercedes-Benz and
BMW have all spent billions of dollars on pickups and SUVs because trucks are a large and
historically profitable part of the auto industry. The most fuel-efficient full-size pickups from GM, Ford
and Chrysler all have higher EPA fuel economy ratings than Toyota and Nissan's full-size pickups.

Myth No. 6
They don't build hybrids.

Reality
The Detroit Three got into the hybrid business late, but Ford and GM each now offers more hybrid
models than Honda or Nissan, with several more due to hit the road in early 2009.

[Camaro_Corvette]

Thank You! A positve post!

[The_Blur]

Do you see this, Congress?

[Camaro_Corvette]

HA, they wouldn't even know how to get to the website.^ If one is reading this i will be glad to be proven wrong. Prove me wrong, do it, dooo it!

[linkwpc]

Good post!

[JaysonAych]

Originally Posted by thecamaroguy

Myth No. 5
GM, Ford and Chrysler are idiots for investing in pickups and SUVs.

Reality
The domestic companies' lineup has been truck-heavy, but Toyota, Nissan, Mercedes-Benz and
BMW have all spent billions of dollars on pickups and SUVs because trucks are a large and
historically profitable part of the auto industry. The most fuel-efficient full-size pickups from GM, Ford
and Chrysler all have higher EPA fuel economy ratings than Toyota and Nissan's full-size pickups.

This is the only sticking point in the list of myths, IMHO. I don't think they're idiots for investing in pickups and SUVs. Pickups are the best selling vehicles in the US, SUVs sold very well too, and they were all highly profitable. Their failure in this investment however is that throughout the late 80s and most of the 90s, the Big 3 didn't have any contigency plans for world-class small cars in America, and they weren't putting their SUV money into creating world-class cars. There were exceptions, of course, but most of their bread-and-butter line up of cars suffered and stagnated while the foreign makes all kept refining their cars. Affluent buyers who could afford the pricey American SUVs bought them, but young buyers coming out of school with tight budgets just entering the car market made their first purchases with the foreign companies' better lineup of entry and mid level cars, and those companies started building loyalty from the ground up.

And then when those companies entered the SUV market, they not only did so with solid SUVs, but with a solid portfolio of cars as well and a lot of equity built up in their customer base. When the gas prices started shooting up after Hurricane Katrina, the mainstream foreign companies still had their excellent portfolio of cars and small vehicles to fall back on, while Detroit was largely caught off-guard, especially Chrysler. Ford and GM have just started putting out serious competition, and 2010 is going to be an excellent product year for them, but not having those cars in place back then and not having most of them now is costing them dearly.

So I don't think they're idiots for investing in pickups and SUVs, but I do think they're idiots for not investing what was needed in everything else.

[TheMadHatter99]

Excellent post.

It's a shame more of this isn't reported on in the media with more frequency.

[MCPOAJ]

holy shit thank god... about time we hear some good news i was just about to move to canada

[rayhawk]

Myth #7: Foreign car makers build cars in america and invest in our country and would pick up the slack in the economy for any loss in capacity from the big 3.

Actually I have tried to find some answers on how much of the money made by a foreign company building a car in the US stays in this country and how much leaves. I believe (but cannot find much data that states this) that foreign companies only build here to avoid tariffs and shipping expenses, and that most of the money ends up leaving our shores. It is much cheaper to export the money they make here than to import the cars.

I also believe that even when GM builds a car in Mexico, more of the money ends up in the hands of Americans than when Toyota assembles a Camry in the US. Maybe somebody has some idea where we can find better answers to this.

I know many American companies do this (such as HAAS automation-they build machines in China for the Chinese market) due to restrictions by the government and tariffs. They have to invest in China to do so but the profit that comes back here is many times greater than the money they invested in that country.

[zebra]

another good plug for the Chevy Gas Fairy!

[LarkVille]

All wonderful tidbits of information.

I do want to say that in my estimation and in an all-around sense, the domestic industry caught up with foreign competitors in reliability and quality around 2003-2004. It takes a long time for consumers to readjust their view of these brands.

[DGthe3]

Originally Posted by rayhawk

Myth #7: Foreign car makers build cars in america and invest in our country and would pick up the slack in the economy for any loss in capacity from the big 3.

Actually I have tried to find some answers on how much of the money made by a foreign company building a car in the US stays in this country and how much leaves. I believe (but cannot find much data that states this) that foreign companies only build here to avoid tariffs and shipping expenses, and that most of the money ends up leaving our shores. It is much cheaper to export the money they make here than to import the cars.

I also believe that even when GM builds a car in Mexico, more of the money ends up in the hands of Americans than when Toyota assembles a Camry in the US. Maybe somebody has some idea where we can find better answers to this.

I know many American companies do this (such as HAAS automation-they build machines in China for the Chinese market) due to restrictions by the government and tariffs. They have to invest in China to do so but the profit that comes back here is many times greater than the money they invested in that country.

I don't have any hard numbers, but the foreign makers spend about half as much as domestics do on their line workers. That is for both benefits and hourly pay. Both import a lot of parts from overseas for assembly here, but again, I would guess that the foreign companies do this more than domestics do. A minimal amount of engineering is done by those companies over here, though the domestic automakers are globalizing their efforts (Camaro for example). Then there is management pay, which nearly 100% goes overseas for foreign and nearly 100% stays for domestic. Also, something that is important for me is funding for universities. Engineering departments all across North America get millions of dollars from domestic automakers for R&D. Foreign car makers spend some here, but they spend much more in their home country.

[flaguy]

Originally Posted by camaro_corvette

Thank You! A positve post!

STOP POSTING!!! Every time you do and I read it, I waste 30 seconds of my life staring/drooling at the pic in your signature.