It comes down to several undeniable problems within the domestic manufacturers. They have a very heavy burden to bare. Their vehicles will always cost alot to build. Even though their quality is pretty close to the Asian Import brands there is an uphill struggle to deal with. For example according to the 2006 Harbour Report there is a distinct cost advantage for the Imports:
Quote: "What does productivity mean to the bottom line? According to the report, Nissan enjoys a cost advantage of as much as $450 per vehicle over its less-productive competitors. Another financial statistic is the pre-tax profit per vehicle for each of the manufacturers, which Harbour said resulted in GM losing $2,496 on every vehicle produced in North America last year, while Ford lost $590 and DaimlerChrysler managed to eek out a $223 profit on each vehicle. The rest were raking in the dough as Honda recorded an average profit of $1,215 per vehicle, Toyota threw $1,587 in its bank account for each car produced and Nissan built its balance sheet to the tune of $2,249 for each vehicle produced in the region."
Additionally "Quality problems add to the U.S. automakers' competitive disadvantage, Royal Oak, Michigan-based Harbour-Felax Group said. Toyota spends $348 per vehicle on warranty costs, compared with more than $500 each at Detroit-based GM, Dearborn, Michigan-based Ford and DaimlerChrysler AG's Chrysler unit.
U.S. automakers spend as much as $138 more per vehicle on longer vacations and holidays and up to $70 per vehicle on unscheduled absenteeism, Harbour-Felax said.
Japanese automakers provide workers with an average of 30 minutes of break time each day, costing $133 per vehicle, while GM, Chrysler and Ford provide 46 minutes at a cost of $203 per vehicle, she said.
Retiree Costs
Toyota spent $215 per vehicle on health care for active workers and has only a handful of retirees at its North American factories, which it began building in 1986. Last year, GM had to make pension payments to 337,588 retirees and surviving spouses. GM spent $1,120 per vehicle for retiree health costs last year and $515 for active workers." (from Bloomber.com)
In spite of this dire news GM seemingly is digging itself out of the hole they are in, and I do see it happening with its new products. I think the import brands are in for a surprise when GM gets efficient. Considering the progress they are making with the huge barriers they face.
Another surprising figure for me from the report is that Toyota warranty costs are pretty close to the domestics. Less than $200 apart. That is 50% more for sure but by the way arcticsteve talks you would think that it would be several thousand dollars. And it does prove that Toyota (which is the quality leader by the way) isn't perfect and that the service departments at their dealers aren't only doing oil changes.
What do we take from all of this? Well I do know that Denso which is the parts arm of Toyota is gaining contracts for domestic manufacturers (one of the suppliers to the Saturn Aura-Automotive News) and Delphi provides parts to Toyota (Automotive News). As we can see from warranty costs there is a $200 advantage to Toyota with "Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. persuaded buyers to pay an average $24,289 per vehicle, 12 percent more than U.S. automakers" All figures American (Bloomberg.com). That is less than 1% of the average selling price of the vehicles. A very small figure. I would say the hype and accolades for quality don't add up to much of an argument.
And finally, I would like to mention something about resale value. I will use Toyota as an example. Currenty a used 2006 Toyota Corolla Sport with the package B with an MSRP of $25,200 is selling for $19,700 on a local Toyota dealers lot with other models having similar price drops. Most shoppers do not realize that Toyota, Nissan, and Mazda have many cars in rental fleets. I am seeing more and more of them. The 2006 model seems to be hit the hardest by this. Since domestics sell for less with better incentives, interest rates and pricing there is of course going to be lower resale values. What is the cost advantage to the Corolla? Well if you spend on average $3,000 more to get one in terms of MSRP and then spend on top of that an extra $1,000 to $2,000 on interest and get an extra and I am exaggerating here- $4,000 for resale value in 5 years you are not further ahead at all but it took 5 years to get there. With more and more Toyota's and imports going to the rental fleets their resale values will drop as a result. If someone wants to pay the same for a 2004 model as a 2006 model they are kind of dumb are't they? It kind of illustrates the blind attitude the strong Import promoters have. It sounds like they are the worst suckers out there- hey I have a bridge in San Francisco that I want to unload, any takers?
With more cars out there the prices will tumble and are. Of course there is the negotiation factor. With Toyota there isn't the benefit for much negotiation. With too much negotiation the resale values drop as well. I know for a fact that here in Calgary most Toyota's sell within $1,000 of MSRP due to Toyota Canada's Access Toyota pricing and selling policy. Saturn's are 99% of the time selling for full MSRP. Import salespeople use their resale advantage to help sell their vehicles compared to the domestics and why they do not negotiate as much as Ford or GM or Chrysler.
Yes there are cars that suffer much worse than my illustration but they are heavily available in the rental fleets and show up on dealers lots in the hundreds. Chrysler anyone? It is well known that GM and Ford are cutting back their shipments to the rental companies and guess who are filling in the gaps? Yep, you guessed it.
