<p>My local Ford dealer received its first Ford FLEX SUV recently. I stopped by to take a look, and I liked it. BUT, is it simply me or is Ford completely out of touch with the current environment. First, there’s the sticker: $42,995. Then there’s the mileage thing: 16 city 22 highway. And finally there’s the annual fuel cost disclosure: “Estimated annual fuel cost driving 15,000 miles per year with gas at $2.80/gallon - $2,335.” Two-eighty a gallon???</p>
<p>Thanks, that reminds me to check my status on the Prius waiting list.</p>
<p>Still at #118. It’s gonna be a while.</p>
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That sticker price was determined a long time ago. I’m sure you could get 7-8K off if you were determined. You could also get a slick financing deal.</p>
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The powertrain of this car was designed at least 24 months ago. You can go to any dealership in town and see similarly sized SUVs with the same mileage.</p>
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Sticker was probably made 18 months ago.</p>
<p>In response to the question of whether or not American carmakers are out of touch … yes, they are. Unfortunately, it’s the top management who are. The engineers & other peons have been trying to tell the top management a lot of things that management has blown off over the years. The trouble is, the guys in charge (I’m talking up at the tippy top) live in a make-believe world. The corporate culture in the auto industry has long supported top management being treated as gods. The layers of management below them (and there are too many of these) spend lots of time keeping them insulated from reality … and they know this, because they themselves once did the same before they moved up.</p>
<p>There is NO REASON auto companies do not have contingency plans to be able to roll out new models in response to economic changes. The talent is absolutely there to make it happen … IF the top dogs were to deem it something important. </p>
<p>I wanted to throw up when I watched the GM top brass telling the world that they couldn’t have anticipated the events of the past few weeks. Dudes, that is what you get paid for!!! </p>
<p>18 months ago … that’s too much lead time in today’s economy.</p>
<p>What’s mindblowing is that the US carmakers have been down this same road before in the mid 1970’s. Gas prices skyrocketed, US consumers abandoned their V8 engines for Japanese high-mileage vehicles, GM et al. profits and market share took a nosedive. 30 years later, it’s the same song. Management should be ashamed of itself.</p>
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<p>Unexpected events are just that, unexpected. NO ONE predicted prices would be this high. $140/bbl? Are you kidding me? Can you find one person 12 months ago who predicted these prices (ie: someone who went on the record)? Even if they did predict it 12 months ago GM & other car makers still couldn’t have gotten a new model out in time. Product design cycles for modern automobiles are at least 24 months in the making.</p>
<p>That’s exactly the problem … the design cycles are too long. Creativity in uncertain times is a necessity. And even I (no economic genius, mind you) saw that bad times were ahead. Not to this extent, but just the same …</p>
<p>Slitheytove, you are dead on. The thing is, many of the top auto brass WERE involved in that downturn. It’s not history to them … they lived it. I just don’t get it. Other industries are much better at responding to change than the auto industry.</p>
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What industries? The airline industry? The financials? Both of those industries are in far worse shape that autos. The global auto market has only contracted about 15% this year. Airlines are about to go bankrupt. Financials are being unbelievably hammered.</p>
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<p>Betcha a nickel that you don’t work in new product development. Eighteen months from conception to delivery would be stellar in nearly every industry I can think of. The truth is that the time from first concept to the showroom for a new car is more like 5-7 years. Whether a car is Japanese, Korean, German or American, it has to go through the following steps (and this is not a complete list – a real expert would give you a much longer one):</p>
<p>Concept
Market research
Art design
Engineering structure
Engineering propulsion
Engineering electrical
Engineering NVH
Engineering other systems
Engineering integration
Engineering safety
Engineering other governmental regulations
Safety testing – US
EPA testing – US
Safety testing – at least Canada, usually other countries and the EU
Environmental testing – at least Canada, usually other countries and the EU
(I’d bet that all the governmental-required certification and testing takes more than 18 months)
Spares analysis
Spares production
Production line tooling and configuration
Model changeover planning
Marketing planning
Creating user manuals
Creating shop maintenance literature and training
Dealer training
Literature distribution
Marketing execution
Distribution time of new models (no reason to market something people can’t buy)</p>
<p>etc.</p>
<p>I recently read an article by an industry observer that said it took <em>mumble</em> years to prepare each new model (where <em>mumble</em> was 5-7 years, I don’t remember exactly – and I can’t find the original article right now). When a car maker introduces new models or model changes every two or three years, each introduction is at the end of a pipeline that stretched for five years or more.</p>
<p>Companies like Toyota are just a little smarter than GM – they were willing to invest billions in cars that lost money for years (things like the Yaris and the Prius) capturing teeny-tiny market share as an investment in a future where they would suddenly become valuable. While Toyota was building those small cars, they were investing far more in gas-sucking hogs like the Land Cruiser and Lexus SUVs. I would be willing to bet another nickel that there were big annual management arguments at Toyota about whether to continue to sell tiny, unprofitable cars in the US. Sometimes, it pays to be lucky.</p>
<p>I didn’t mention this in my OP, but I also drove past dealerships for several Japanese automakers (who make most of their cars for US consumption here in the US) and those dealerships had signs up saying “41 MPG!!” and “up to 56 MPG !!!” </p>
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Exactly. And now the Toyota insiders who pushed the development of a massive manufacturing facility in Texas for full size trucks likely got smacked on the head. In an uncertain world humans have to make decisions based on the data available.</p>
<p>The hindsight bias which is being shown right here is pretty hilarious.</p>
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I guess if we wanted we could also talk about the systemic disadvantages that American companies have to deal with when competing against unionless peers. A truly forward thinking CEO would never have yielded to unions in terms of the ridiculous benefits packages and pensions. They simply were not sustainable, much like the low level of gas prices.</p>
<p>Well you’re right Mr Payne, and more’s the pity. The thing is, Detroit is building some good cars. My D owns one, a Ford Mustang. Corvette, Malibu, F150, E150, and numerous minivans are first rate vehicles. I happen to agree that the pain for american carmakers is just beginning. But I still can’t excuse them for being blindsided by current economic conditions when numerous non-american automakers weren’t. </p>
<p>You’ll have to pardon me now. I need to go polish my collection of aging Pontiac and Plymouth and Mercury and Oldsmobile automobiles. Sure hope I don’t have to add Fords and Chevy’s anytime soon.</p>
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What automakers are you talking about? Toyota just built a new truck plant for about $1B. They developed their new Tundra to compete directly with Chevy/Ford/Dodge (the previous model was smaller and sipped the gas). No automaker predicted otherwise.</p>
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<p>Well, they’re lying. Only two real cars in the US get EPA highway ratings over 40MPG – the Prius and the Civic Hybrid (the SmartForTwo also does). According to the 2008 EPA ratings, no vehicle sold in America is rated at over 50 MPG (a dealership lying to you? say it isn’t so!). Were all the dealerships Toyota and Honda?</p>
<p>“Toyota just built a new truck plant for about $1B. They developed their new Tundra to compete directly with Chevy/Ford/Dodge (the previous model was smaller and sipped the gas).”</p>
<p>But they didn’t put all their eggs in the truck basket. They hedged their bets with a diverse line of models. And given the countries that live on top of our oil…diversifying was smart.</p>
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<p>And that’s the price Toyota played in order see its immense growth in the total US auto market (Honda didn’t follow suit, but also didn’t see the sales and fat profits in large trucks and SUVs).</p>
<p>Nonetheless, Toyota, at the same time, did invest heavily in its hybrid technology and offered small autos (including its Scion line) that are considered better than anything the Big3 have to offer here in the states (GM & Ford, otoh, have some great small auto offerings in Europe).</p>
<p>Plus, Toyota can much more easily shift those manufacturing facilities to produce crossovers and cars.</p>
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<p>The UAW has nothing on the Korean auto unions.</p>
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<p>“…when you pop it in neutral, turn the engine off, and roll down hills!”</p>
<p>I think we need to split the blame for the failing US automakers 3 ways. (And they <em>are</em> failing.)</p>
<p>1/3 ostrich-headed execs
1/3 entitlement-headed unions
1/3 dumb-headed consumers who bought penny-wise and pound foolish</p>
<p>“NO ONE predicted prices would be this high. $140/bbl?”</p>
<p>Osama Bin Laden not only predicted it (actually $144), he saw it as a goal. He seems to have won that battle.</p>