GM's new owners and...tariffs

[Hondo]

Mods, please don't combine this thread. This is a different subject.

The government of the USA now own GM. The current government is the Democratic Party. The Democratic Party cares not for head to head competetion, they like a stacked deck (see ACORN). I'd bet car importers, with the exception of China, will soon be looking at all kinds of new quotas, taxes, regulations, tariffs, fees, and requirements designed to give the new national car company an edge. A much larger edge than ever before.

[markabilly]

why??When we did Nafta, the ballgame was over....

just try to buy an american car in Japan or russia or china....see what it cost you......"larger edge???" they got some punk 31 year old yale law student/grad in charge of GM now.....oh that will give them a "larger edge" for sure.

be making green cars that only nerds will buy......bright future, big edge, yes sir

[anthonyvop]

why??When we did Nafta, the ballgame was over....


NAFTA stands for NORTH AMERICAN Free trade Agreement. HAs nothing to do with China or Japan

[Easy Drifter]

Canada and the Province of Ontario also now own a chunk of GM Canada, which has not declared bankruptcy, either complete or our version of Chapter 11.
With NAFTA and the Cdn./US auto industries tied so closely together any 'protectionist' legislation could create major problems for both GM and Chrysler/Fiat to say nothing of a possible trade war which could only hurt both economies.
Canada/US are each others' biggest trading partners which many people on both sides of the border either forget or do not know.
I do think Obama knows this even if many Congressmen and Senators do not.
Up here the NDP will probably blather away but as the 4th party in seats (very left wing) they are just a bothersome noise who get far more press than they deserve.

[Rollo]

From what I can gather, the imposition of tariffs isn't going to make stark differences in any direction at all.

If a foreign country to the US imposes tariffs and quotas, then there's not much that the US can do about it. If the US imposes tariffs and quotas, then the problem internally is that companies like Toyota, Honda, BMW and Mercedes who already build cars within the USA's borders, aren't going to be affected by them.

At any rate, in general the opinion expressed on these boards and other places is that smaller "Eurobox" cars don't do well in the US because they're too small, and likewise, it's rare to find US built cars in Europe by virtue of the fact that better cars are built within the EU or that the US cars are simply too big.

The whole question of tariffs and quotas only works in the circumstances of a like vs like product, elsewhile the whole question becomes a WSOGMM Confusopoly Affair.

[Hondo]

I think they'll pull some sneaky stuff in a roundabout way such as each vehicle made in or imported into the USA must have "X" amount of material Y used in it's construction. Material Y being something that a US company controls or has the rights to.

It will be little things, that add up.

[Rollo]

Doesn't that concept already exist for new cars out there in car yards? Or is that not a national policy?

Whence I was last in the USA, I walked down the San Diego Mile of Cars "for fun", and found posted in the rear window of the cars there a white sticker of circa 3 x 4 in with a breakdown of the top four places of manufacturer for the car.

I'm wondering with the fallout from GM's breakup (with regards Opel, Magna, Holden, Daewoo et all - who honestly knows) where and how the bits will come from.

[janvanvurpa]

Mods, please don't combine this thread. This is a different subject.

The government of the USA now own GM. The current government is the Democratic Party. The Democratic Party cares not for head to head competetion, they like a stacked deck (see ACORN). I'd bet car importers, with the exception of China, will soon be looking at all kinds of new quotas, taxes, regulations, tariffs, fees, and requirements designed to give the new national car company an edge. A much larger edge than ever before.

Suggest you read a bit about the modern industrial economies; I suggest a brief read through John Kenneth Galbraith's "the New Industrial State" and if you read it you'll see all business all want a stacked deck.

When a corporation invest an average of 3-4 billion to develop a new motor, buy the tooling (ever wonder what a 10 spindle drill costs, one that has to work for tens of thousands of cycles to drill and tap the bolt holes in a block's deck?), run it thru emissions certification, make the spares, print the service procedures, procure the repar tooling, pay the thousands of people from draftsmanen to machinists to fork lift guys,

then they want to be absolutely certain of X return, so they want the deck stacked. (That's why manufacturers cooperate with each other splitting development costs while ostensibly being "competitors" in the "marketplace".
Are you aware of how much badge swapping and engine and even chassis swapping has been the norm since forever?)

What's new?

[Mark]

Sharing components has gone on forever, but it does seem to be happening much more recently, e.g. the Ka and FIAT 500 sharing a plaform. Likewise the Grande Punto and Corsa.

Fiesta and Mazda 2 doesn't really count since it's all Ford.

And yes, it takes a long time and a lot of money to put a new model out. e.g. Ford just released a new model Fiesta about 6 months ago, and they usually have a design life of 7 years with with a mid-life uprate at 4 years. So we can expect the new Fiesta in 2015, but I'll bet they are already working on it.

[chuck34]

I wouldn't be surprised to see some "protectionist" tariffs being put in place. Remember that along with the government, the UAW now own a large chunk of GM too. They will most likely push for these tariffs in order to "level the field". And I'm suspicious that anyone in the current government has ever heard of Smoot-Hawley, so they won't learn from history.

This is all a very slippery slope. Now that the government is in, I hope no one is under the impression that they won't force their view of what the public wants. That means that GM will be making all sorts of small "green" cars that the US consumer has proven they don't really want. That will mean that GM will not be a profitable company any time soon. That means that the government will keep telling us that GM just needs $X billion more to be profitable. Lather-Rinse-Repeat.

[Rollo]

That means that GM will be making all sorts of small "green" cars that the US consumer has proven they don't really want. That will mean that GM will not be a profitable company any time soon.

The real question that comes from that is... "Just what sorts of cars does the US consumer want?" Wouldn't it seem likely that an inability to read the market, ie lethargy from the auto makers, partially caused this in the first place? After all, you don't see Honda, Toyota or M-Benz sticking out their hands for handouts.

[chuck34]

The real question that comes from that is... "Just what sorts of cars does the US consumer want?" Wouldn't it seem likely that an inability to read the market, ie lethargy from the auto makers, partially caused this in the first place? After all, you don't see Honda, Toyota or M-Benz sticking out their hands for handouts.

True the US consumer is a bit undecided at this point. And lethargy from auto makers has been a problem. But do you think a government owned/controlled manufacturer will be more or less lethargic?

I though I heard that Honda and Toyota both got some cash from Japan. Also I think BMW got some from Germany. Hadn't heard about M-Benz. Of course I don't have any hard facts to back that up, so I could be wrong.

[Hondo]

Transportation for the masses will be built by P.F. Flyer and Schwinn. GM will partner with Zil and make limos for the elite.

[Jag_Warrior]

The Chevy Camaro and the Chrysler 300/Charger/Challenger are built in Canada. A number of other American brand vehicles are built in Mexico, in addition to being built here. The Honda Accord and Toyota Camry are built in the United States. Mercedes is expanding its factory in Alabama. BMW is said to be adding another vehicle to its line in South Carolina. Toyota now controls the Subaru plant in Indiana. Toyota's new Mississippi plant is now back on track. VW's Chatanooga plant is proceeding to plan. Hyundai and Kia are established in the S.E. U.S. and expansion plans are on the drawing board. Toyota's San Antonio, Texas Tundra plant is slowly coming back up. Nissan is also here in a major way. And as of today, with the purchase of the Hummer brand from GM, the Chinese will be in the U.S. I'm leaving a lot of vehicles and brands out - but that's more than enough to make the point.

So with all of that, do I see any practical way to implement tariffs? No. What would be the point? Why build a wall when most of the "enemy troops" are already inside the fort??? And I don't believe the political will is there anyway. Even within the domestic auto community (including suppliers), there's no support for it. The domestics import some of their vehicles into the U.S. and the transplants export some of their vehicles out of the U.S. And the parts content of most vehicles would make this a moot tariff anyway.

I think it's possible that some sort of tax break could be given to consumers who choose a certain type (though probably not a certain brand) of vehicle. But no one is talking about placing trade barriers on the transplants or even the ones that do import... not here anyway.

Other countries have been erecting and maintaining (unfair) barriers to our products for years. Neither the Democrats nor the Republicans have done a damn thing about it. And so... here we are.

[Jag_Warrior]

The real question that comes from that is... "Just what sorts of cars does the US consumer want?" Wouldn't it seem likely that an inability to read the market, ie lethargy from the auto makers, partially caused this in the first place? After all, you don't see Honda, Toyota or M-Benz sticking out their hands for handouts.

Absolutely! And not just the inability to read the market, but the inability to be flexible enough to meet the known demand at the right time.

If people want trucks, you sell them trucks. If people want big cars, you sell them big cars. But if the market turns and demands small cars... "uh... well... er... we don't have any small cars." :(

Honda and Toyota do make good cars. But more than that, they make the right good cars at the right time, and they have no (real) problem stopping or slowing production of vehicles that the market does not want. The market is what it is. So in that sense, the market is always right.

I give Ford a lot of credit for making major changes before their house really caught fire. But I have my doubts that GM will be able to really execute the plan (whatever the plan is) over time. As for FIAT/Chrysler, I'll believe in that marriage when I see them kissing in public.

[Hondo]

The Japanese have always had their small car lines as their main bread and butter. American manufacturers have always made larger cars because thats what their customer base wanted. American small cars only got serious attention from manufacturers and customers during "hard time" periods of high gas prices. From what I've read, GM seems to have hamstrung itself through labor agreements and a failure to shift to smaller cars. Maybe they could have focused Chevy and Saturn on strictly small cars, used Pontiac as their performance division including moving Corvette to Pontiac, road and luxury cars to Cadillac, and shut down the other divisions. Of course this is all hindsight and looks good now but would never have been allowed earlier.

I don't think there will be huge glaring tariffs, just very subtle, sneaky things like specing wire insulations, adhesives, fabrics, paint formulations, connectors, plastic formulas, etc. It will be small stuff that adds up.

[Hondo]

Absolutely! And not just the inability to read the market, but the inability to be flexible enough to meet the known demand at the right time.

If people want trucks, you sell them trucks. If people want big cars, you sell them big cars. But if the market turns and demands small cars... "uh... well... er... we don't have any small cars." :(

Honda and Toyota do make good cars. But more than that, they make the right good cars at the right time, and they have no (real) problem stopping or slowing production of vehicles that the market does not want. The market is what it is. So in that sense, the market is always right.

I give Ford a lot of credit for making major changes before their house really caught fire. But I have my doubts that GM will be able to really execute the plan (whatever the plan is) over time. As for FIAT/Chrysler, I'll believe in that marriage when I see them kissing in public.

Don't forget the Japanese didn't just walk in and take over the place either. They had quite a struggle getting going in the USA. Honda had an advantage by virtue of people being familiar with the brand through it's motorcycles. I remember a couple of false starts for Toyota in my area. In addition, the Hondas, Toyotas, and Datsuns then didn't yet have the reliability they have now and parts were hard to get. Back then if you needed or wanted economy and reliability you got a VW beetle that came complete with it's own sub-culture of devotees. You can fault the American manufacturers for their failure to downsize their product line but shouldn't do so without also noticing how much the Japanese have had to increase the size and engine displacements of their vehicles, including building SUVs and full size pickups to maintain their share of the market.

[Jag_Warrior]

Don't forget the Japanese didn't just walk in and take over the place either. They had quite a struggle getting going in the USA. Honda had an advantage by virtue of people being familiar with the brand through it's motorcycles. I remember a couple of false starts for Toyota in my area. In addition, the Hondas, Toyotas, and Datsuns then didn't yet have the reliability they have now and parts were hard to get. Back then if you needed or wanted economy and reliability you got a VW beetle that came complete with it's own sub-culture of devotees. You can fault the American manufacturers for their failure to downsize their product line but shouldn't do so without also noticing how much the Japanese have had to increase the size and engine displacements of their vehicles, including building SUVs and full size pickups to maintain their share of the market.

I agree with most of that. But I'm not faulting the American OEM's for not downsizing. I'm faulting them for not having flexible enough design and manufacturing processes.

If you ever get a chance, pick up a book called The Toyota Way. It's well worth a read. Henry Ford basically invented the mass manufacturing/assembly line structure that we know today. But Toyota perfected it. Americans have long held onto push manufacturing (build it and they will come), while the Japanese eventually went with pull manufacturing (have it your way). The American OEM's and various suppliers have tried to get in tune with Just In Time, Kanbans and Kaizen theory. But most of them have done it sort of half-assed, and haven't been totally committed to the principles. Check out the book. I think what you'll see is that within Toyota, there is a culture based on standardization - they're all about reducing variation and waste. What other mega successful company is like that? McDonalds! Within the Big 3, I'm not sure what you'd call the culture. "Every man for himself", maybe? If I heard that GM was hiring some of the top managers from McDonalds, I'd be one of the first to subscribe to the IPO when the new stock is issued. But I don't look for that to happen. My guess is GM will settle in at around 10-12% market share and stumble on from there. I can see Ford eventually taking the lead as the biggest domestic manufacturer in terms of share.

[Jag_Warrior]

I don't think there will be huge glaring tariffs, just very subtle, sneaky things like specing wire insulations, adhesives, fabrics, paint formulations, connectors, plastic formulas, etc. It will be small stuff that adds up.

I'm still not clear on how that would help GM or hurt (net) importers. What you've listed would definitely affect suppliers, but how would that give GM any sort of market advantage? GM doesn't care about its suppliers anymore than the average Roman cared about his slaves. If one dies, everything is fine as long as you can get another one.

I understand the concerns about protectionism. But like I said, the enemy is already within the fort. If there was any real desire to kill or injure the enemy within (which I'm not aware that there is), there would necessarily be a lot of friendly fire deaths too.

IMO, maintaining foreign investment is a bigger (macro) concern than this. I don't see anything being done to protect GM, Chrysler or any other single company, if it puts the foreign inflow of funds in jeopardy. As a "bond salesman", over the next few years, Tim Geithner is going to put Michael Milken to shame - and I mean back in the Drexel days when Milken was at the absolute top of his game.

[Rollo]

True the US consumer is a bit undecided at this point. And lethargy from auto makers has been a problem. But do you think a government owned/controlled manufacturer will be more or less lethargic?

Government Owned... don't know about Government Controlled though.

http://www.reuters.com/article/vcCandidateFeed7/idUSTRE5513A320090602
"We are acting as reluctant shareholders, because that is the only way to help GM succeed," Obama said. "What I have no interest in doing is running GM."

Can a Corporation owned by the Government operate independantly from the Government? Does GM now exist as a Quango?

The most successful corporation which exists within the sphere of government but is not controlled by them (and is frequently criticised by them, so they must be doing something right) is the BBC. It has an independant board of directors and certainly does not take orders from HM Government.

Can GM operate similarly? Who knows?

[Hondo]

The same people that told you Freddie Mac and Fannie May were doing fine are now responsible for our "national car company". With the exceptions of expanding government and curtailing liberties, I can't think of anything the government has managed to do successfully unless they were the only game in town. I don't see GM, while under Federal control, making any profit without forcing drastic changes in the labor agreements, very large government subsidizing per vehicle manufactured and or subsidized rebates after the sale. Maybe Obama plans on using his volunteer corps on the assembly lines.

[555-04Q2]

I dont see why anyone would want to see a company that made the poor products that GM did, that could not surivive on its own, be revived. The best thing would have been to let it disappear and let a better product and company replace it.

[Hondo]

GM made some great products for the American market, but they also made some poor ones and some unwise ones. I think there is such a thing as "too big" in both business and government. Sort of like a vastly overweight person, they are reluctant to move any more than necessary and slow and ponderous when they do move.

[555-04Q2]

True GM had some success stories, but their overall products range could not compete against the Japanese and Europeans in quality and reliability. In fact, the Koreans are starting to build bloody good cars these days too.

The problem with GM is their business models did not cater to a changing world and they got left behind. Poor management, poor plan execution, poor forward thinking and poor products resulted in their demise. The current world recession put the final nail in their coffin.

[Easy Drifter]

When we sold our business last year we got rid of our GMC van and GMC pick up. Both were for the business. Both reliable but rather strak and uninspiring compared to Fords. We just got good deals on them as off lease trucks.
We got a pair of 2007 Cobalts with about 30,000 k on them. Basically we liked them. However, both have now had to have the front control are bushings replaced on both sides. My Ex's also had a sway bar link fail.
There is obviously something wrong with the design or quality of the bushings. The Service Dept. admitted there was a problem and the equivilant Pontiac is the same.
This is the sort of problem that has helped to cause GM's problems. As the repairs were covered by warranty GM has to eat the cost.

[GridGirl]

In general how are GM cars perceived price wise in the US? I ask because I'm currently working at a dealership which sells GM built cars and as I walked through the showroom on Monday all I thought was 'F**king hell, you want that much money for that car? Are you kidding me?' I thought there must of been a mistake untill I saw a second car of the same model at the same price. There's definately no snobbery factor or perceived quality that would make me pay the price they wanted. If they are per perceived to be over priced in the US it's not suprising that they've filed for bankruptcy.

[Hondo]

I can't help you there unless you're going by the sticker price on the vehicle. Over here, only the foolish and Saturn owners pay sticker price.

The last new GM car I bought was a 1982 Pontiac Trans Am, which I was still driving and enjoying when I joined this forum. I kept it until 2005 then gave it to a girlfriend as a birthday present.

I've always been comfortable with used cars and have never hsd s bsd experience with one.

[Jag_Warrior]

In general how are GM cars perceived price wise in the US? I ask because I'm currently working at a dealership which sells GM built cars and as I walked through the showroom on Monday all I thought was 'F**king hell, you want that much money for that car? Are you kidding me?' I thought there must of been a mistake untill I saw a second car of the same model at the same price. There's definately no snobbery factor or perceived quality that would make me pay the price they wanted. If they are per perceived to be over priced in the US it's not suprising that they've filed for bankruptcy.

Assuming you're comparing cars in the same class, I believe they're competitively priced. But as Fiero said, you can't really go by the sticker or the MSRP. The Chevy Malibu compares very well to the Toyota Camry and the Honda Accord. Right now, the Chevy Malibu (in the U.S. or Canada) could probably be found for much less than the Camry or Accord though. GM (and Chrysler) is offering much better financing and rebates than Toyota or Honda at this time.

What cars were you looking at or comparing?

[Rollo]

I don't see GM, while under Federal control, making any profit without forcing drastic changes in the labor agreements, very large government subsidizing per vehicle manufactured and or subsidized rebates after the sale.

Why is that different to the company before? Moreover if private control has failed, and you deem government control as incompetent, then logically the last option is immediate liquidation, because no-one is fit to run the company.

[Hondo]

That would save us all money and hasten the inevitable.

[Jag_Warrior]

That is a question that should be asked: what would be the macro economic cost of a GM Chapter 7?

[rah]

I think GM still has a future. But obviously things have to change. I know they have many new plans for putting more fuel efficient engines into Holen here in Aus. These motors are coming from the US although I am not sure what they are. Once a company the size of GM sets it's sights on something it can usually get there with the right management. It's just adjusting the target which has been the problem. Change needs to start from the top down.

[Mark]

In general how are GM cars perceived price wise in the US? I ask because I'm currently working at a dealership which sells GM built cars and as I walked through the showroom on Monday all I thought was 'F**king hell, you want that much money for that car? Are you kidding me?' I thought there must of been a mistake untill I saw a second car of the same model at the same price. There's definately no snobbery factor or perceived quality that would make me pay the price they wanted. If they are per perceived to be over priced in the US it's not suprising that they've filed for bankruptcy.

Are you talking about Vauxhall's? Then generally they are a 'bog-standard' range, much like Ford?

Having said that when I bought my first car I compared it with a near-top spec 1.4 Fiesta to a poverty spec 1.2 Corsa and the Fiesta was the same price, which a *much* better finance deal.

[Daniel]

In general how are GM cars perceived price wise in the US? I ask because I'm currently working at a dealership which sells GM built cars and as I walked through the showroom on Monday all I thought was 'F**king hell, you want that much money for that car? Are you kidding me?' I thought there must of been a mistake untill I saw a second car of the same model at the same price. There's definately no snobbery factor or perceived quality that would make me pay the price they wanted. If they are per perceived to be over priced in the US it's not suprising that they've filed for bankruptcy.

I wonder what you'll think of how much I paid for a Fiat 500 :p

[Malbec]

That is a question that should be asked: what would be the macro economic cost of a GM Chapter 7?

It would be immense.

Its not just GM, its about the suppliers that would fold if GM and/or Chrysler went down, the same suppliers that keep healthy American based companies like Ford, Toyota, Honda, BMW and Mercedes running too. If the suppliers lost that much custom and income how would they keep going? The other car companies might be able to expand into GM's market share but how are they going to get parts if their suppliers fold?

I think people are a little harsh on GM, their products were getting better in recent years although not quickly enough.

As for the US government,, they won't be bringing in tariffs any time soon. After all many of GMs cars are not built in the US itself and many of its competitors are. Also, the threat of the EU or Japan going to the WTO to sort it out is always there.

BTW neither Japan nor the EU have much in the way of tariffs for US cars either.

[Cooper_S]

BTW neither Japan nor the EU have much in the way of tariffs for US cars either.

They never had much need to as they we not selling enough to worry domestic cars companies, besides in Europe GM was selling Opals without too much bother, trying to see Chevy's was never going to be a big worry form what I saw of the products...

[GridGirl]

Are you talking about Vauxhall's? Then generally they are a 'bog-standard' range, much like Ford?

Having said that when I bought my first car I compared it with a near-top spec 1.4 Fiesta to a poverty spec 1.2 Corsa and the Fiesta was the same price, which a *much* better finance deal.

Actually, I was looking at a bog standard small engined Corsa that had a ticket price of just over £12k. I wouldn't really want to pay more than £9k for a car of that spec and would therefore want the ticket price reduced by a quarter before I would even contemplate purchasing one. I paid less than £12k for my Fiesta ST brand new although that was a couple of years ago.

Daniel, if I knew what you paid for your car I could easily work out if you'd been taken for a mug and could take a good guess at the dealers margins. If your happy with the price you paid it's irrelevant, your not out to generate a dealer healthy profits. ;)

[Daniel]

Daniel, if I knew what you paid for your car I could easily work out if you'd been taken for a mug and could take a good guess at the dealers margins. If your happy with the price you paid it's irrelevant, your not out to generate a dealer healthy profits. ;)

Not really :p Sadly (for me at least) the 500 is on a 8-12 week waiting list and Fiat have books full of orders so there's no reason for them to offer any big discounts. I went in the week when the scrappage deal was announced and was offered a £300 discount which is the best I've heard anyone being offered but of course once the details were fleshed out that vanished. With the way the scrappage deal has worked I've got £1k off from Fiat on list as well as 1k from the government so it's a pretty good deal. I'd struggle to find a bare spec 1 year old car for the price I've paid with to also get a few options like leather and nicer wheels so I'm happy. Depreciation isn't a problem for me as I'm going to keep it for a long long time. Though I wouldn't mind a 500 Abarth! :p

[GridGirl]

Your right about the second hand car market. I was comparing Glass's guides for December 08 and May 09 and second hand car values are increasing quite significantly. The cut off between buying a new and almost new car is decreasing so maybe this could work in GM's favour if they get rid of the stupid ticket prices in the showroom.

[Daniel]

Your right about the second hand car market. I was comparing Glass's guides for December 08 and May 09 and second hand car values are increasing quite significantly. The cut off between buying a new and almost new car is decreasing so maybe this could work in GM's favour if they get rid of the stupid ticket prices in the showroom.
Well, getting 2 or 3k off the ticket price through apparently hard negotiations will make most people think they've got a fantastic deal.

Which sounds better? "I got 3k off what they were asking and got the car for 9k" or "I got 1k off what they were asking and got the car for 9k"

6 of one half a dozen of the other :)

There are so many sites offering obscene discounts these days that you can pretty much go in and name your price when it comes to most cars.

[Lousada]

You also have to consider part of the price is image. You can't have a Vauxhall Corsa for a cheaper price than a Chevrolet/Daewoo Matiz.