Lol, I bet there are more components to the wire harness of the 2005 Corvette Dash than the ENTIRE 1967 dashboard assembly. Now, go around and open the hood of that corvette, and tell me the engine compartment has "far fewer parts." Then take a look underneath and compare the number of parts. If you've got a lot of time, open up and compare the trannys and pull of the wheels and compare the suspensions and brakes. Go back to the interior and pull off a door panel, compare the number of parts behind the door.

While you do all of this, keep in mind that every one of those parts has to have a mold, stamping press or die tooled up to produce it and that someone or something has to physically install it. Also take note of things like door panels that are one piece yet made of different materials. This is done for quality and is not always cheaper than bolting two parts together - but it doesn't rattle.

All these extra parts exist because:

a) people want them
b) the government wants them

Sure, they are expensive, but cars are the bargain of the century. Considering the number of parts and the cost of the car, it's absolutely mind boggling... You can buy a new KIA for the cost of a nice bedroom suite or a year at a decent college!!

 

What was the one mind-boggling statistic that I heard a while back...if you tried to piece together a $20,000 car part by part, purchasing each part individually, you'd end up spending something like $80,000+.

Considering the fact that as with any good or service in the world you can't sell a car for more than people are willing to spend, and the auto industry is coming off of obscene record profit amounts in the last few years and buying booms that they couldn't have imagined 10 years ago, I'd say cars are probably priced right where they should be.

 

I've been arms deep in my C5. I've had my 66 off the frame. I understand tooling (I spent five years as a EE). I'm still not convinced, sorry.

It sounds like we'll have to agree to disagree.

I am very concerned with the automakers' new stance that $35-40K is going to be point of entry for V8 performance, and I'm concerned about the shrinking number of choices that we have with respect to exterior and interior colors and options. To me, it seems like these results are inconsistent with truly superior processes . . . and true progress.

 

On that point I don't think you'll get much of an argument from anyone here. The next Camaro has GOT to find a way to offer a world-class chassis, decent interior materials and fit/finish, while coming in at what a 2002 Z28 was, adjusted for inflation.

 

You'd be surprised at how simple harness assemblies are getting, due to the increased use of serial buses (such as J1850, CAN, LIN, etc.). Sure, there's increased engineering cost up front, but the piece price drops significant. Sure, this hurts a bit more on lower-end vehicles like the Vette, but the engineering investment can be spread over multiple platforms to a certain extent.

Parts-department prices say nothing about the cost of manufacturing the vehicle. The markup ranges from 400% to 900% (our contracts usually require that we sell service parts to the OEMs at the regular negotiated production pricing). If you do some digging into, say, Toyota vs. Lexus pricing, you'll found two parts sold with the exact same part number, in slightly different packaging, for a 2x difference in cost. Interesting stuff, to say the least

I was thinking more about this topic while changing oil on the Accord, and I think there's some non-intuitive reasons for new car pricing. I think that the Big Three pay too much for labor, and more than they did 30 years ago. Health care and pension costs are higher now. Mismanagement of the supply chain has probably raised cost (keep in mind that most part design was done in-house 30 years ago - added additional layers of value-add mark-up may have increased costs at a great rate than productivity has increased). Halo cars like the Vette, trucks, and SUVs are carrying higher markups, as generic passenger cars from the Big Three aren't making much money (if any at all).

I think that Toyota and Honda sell their "generic" vehicles at very competitive prices and make a lot more profit by avoiding some of these pitfalls. If there was more competition, I don't think that Honda could get away with 8% profit margins while GM struggles with a 1/3 of that if they didn't have significant advantages.

I'm sure there's others that I haven't thought of now, but will later

 

....perspective.

I just turned 46 years old......and when I see a car that costs $35k.....I still think Corvette price......I just do.

My parents bought their home and 5 acres, in 1961 for around $9,000.00.......

My home...which I built 11 years ago and used all my resources as an Architect.....cost me $150k+ on a 1 1/2 acre lot....with a $1k/mo mortgage...

Call me old fashioned, but all the rationalization in the world doesn't help the fact that I wil refuse to pay nearly the same amount per month for a car as I will my home.......all the while knowing the car will depreciate faster than a sinking rock while my home just keeps getting more valuable.

If the entry point for a V8 RWD performance car is in fact approaching the mid to upper $30k's then the Camaro is SCREWED

Smells more and more like the death of affordableAmerican muscle cars........sad really..............

The T-bird died again due to it's extremely high price for what will always be a 2nd car.....a big boy's toy............just like the Camaro did.....

 

Eric do you happen to know how much autoworkers pay costs the manufacturer per unit?

 

Not exactly, but I've got an idea of what it costs us around here, and as a non-UAW Tier 1 supplier we only get to pay our workers about 40% of what an assembly-line worker at the Big Three makes.

 

OK - not typical for me to be close-minded, but I am going to be this time.

When you machine a stamping die to make a steel fender, hood, or trunk lid, the cost of the steel for the die is fixed - regardless of the car the fender is intended to go on. The machining time is roughly the same to machine the shape of the fender, so machining time is a wash between models too. Installing the die in a press, loading rolls of sheet steel, etc all take the same basic amount of time as well. Stamping presses can produce large or small fenders at the same cycle rate - 1 cycle = 1 fender - and the presses run at @20 strokes/minute. Actual tooling cost and cost/part across the models varies only a small bit at the OEM level. Pricing (especially outside) is cut-throat it is so tight. It really doesn't matter if the company is tooling up for a Cavi fender, GTO fender, or a C/K1500 fender, the tooling costs are almost identical. The cost-savings come in making as many parts as possible ON THAT TOOL AFTER IT'S BUILT. Distributing the entire $250k price of the stamping die across 400K units adds only (250,000/400,000 =)62.5 cents to the cost of a Cavi fender, but $250k across 40k units adds (250,000/40,000 =)6.25 dollars to the cost of a GTO fender. And only (250,000/900,000 =) 27.7 cents for the C/K fender!
My point is, tooling cost is not so important as many beleive. It is volume dependent, and that's why raiding a "corporate parts bin" is so economically fruitful these days.

Next issue is this labor thing. I don't hold anything against a hard-working UAW person - but when I, as an engineer with 8 years of college education and a 4-year apprenticeship as a tool and die maker, saving $millions for my company each year, scarcely make more than a high-school graduate working in a paint booth - there's something wrong. Again, I'm not anti-union or pro-union, but look at what has happened to unionized companies in the last decade... and not just auto workers either - look at the airline industry for example. That guaranteed high-paid job they fought so hard for has resulted in them "pricing themselves" right out of work. It is a no-brainer IMO.

40 years ago, there were people all over the line moving parts by hand, doing machining manually, painting manually, fitting body panels by hand and eye, and so on. Now, there are robots that do most of this work, thereby reducing the actual man-hours per car at assembly. The reduction is staggering in some modern plants like Saturn's, Honda's, and Mazda's. Humans hardly touch the cars themselves now until near the end of the process in finish and trim or QC areas. And robots are ALWAYS at work on time, never call in sick, always do the job exactly the same, and result in better overall quality than humans do. And I promise, robots are FAR cheaper than humans in a given position - even $300k Fanuc robot (we use GE-Fanuc units in our company, so I know their cost/capability better) cells can pay for themselves in less than 2 years when compared against 3 low-cost employees (1 each on 3 shifts/day) costing the company $70k each per year in salary, benefits, 401K match, insurance, day care, flex accounts, etc. That's 3 people*$70k/year*2 years = $420K for 2 years service against a $300K robot that will consistently outperform the people (for more than 2 years I might add).
Point here --> The human labor hours in todays typical car line is drastically less than it was 40 years ago, yet the labor cost/vehicle is actually more. That should say something about high-cost labor, no?

So here's a question for you to ponder...
What is SO different between totally (from the ground up) manufacturing a Kia for $9k, a Cavi for $15K, a Focus for $20k, A Mustang for $27k, and a GTO for $35K? Does one model have fewer wheels? less seats? more steering wheels/columns? three times as much steel or glass?
If we knew the truth, options aside, they all probably differ less than 20% in their actual, basic cost-to-produce, and most of that is in differences like leather v. cloth, sound deadening and insulation levels, and engine/drivetrain components. Yet one costs the buyer over 3 times more than the other... it's called "status", desireability, and marketing. It's like the difference in making a Bic ballpoint pen or a PaperMate deluxe pen - they are less than $.01 difference in ctp, but one is sold in boxes of 12 for $1.99, and the other is sold individually for $1.99. Go Figure...

At this point, I must add my opinion about the cost of todays cars...
It's too damn high!!!
The honest truth is that carmakers don't set MSRP based on what the car cost to build, they set it based on what the market will bear. Technologies (like my robot example above) have made the cars better AND cheaper - BOTH. Anybody who beleives otherwise is kidding themselves. I make my living designing the machinery and equipment that does EXACTLY THIS KIND OF THING, and I can tell you first hand, my management will NOT approve any request from me for $4million to put in an automated manufacturing cell unless I can PROVE in cold hard figures that they have a 95%+ chance of seeing a 25% ROI-short term for the project. That is, they are going to get $125 in value for every $100 they spend in the next few years. That savings can come in labor cost, throughput, reduced operating expense(i.e. electricity, compressed air, LP gas, etc), reduced scrap, whatever. I'm telling you guys, this IS my job, and it's nothing new to industry. The kicker is, I may get a 32% ROI on my end of the product, and my counterpart in raw materials may get a 27% ROI on a project he's doing too - and we both are working on projects that affect the SAME END PRODUCT!!! That means a cumulative savings of 59% on ONE PRODUCT!!! On one "Micro-Edge" SIMM memory card socket, I was on the product development team and watched our cost-to-produce (all inclusive) go from $1.55 each to $.32 each between '95 and '98 - that's 79% in 3 years. It happens.

When you get a minimum of 25% yeild (actually our minimum here in my company now) on the project, and inflation is (aggresively) 3%, you are beating the HELL out of inflation on cost savings, so I don't buy into the "equal dollar ratio - corrected with inflation" between 1963 and 2003 earned dollars. There are too many variables in the real world that have profound effects on the current buying-value of a dollar to use such rudimentary scales for comparison. If I can replace a metal glove box door that cost $3 with a plastic molded one that cost $1.50 - both in todays dollars - why can't I expect to pass some of that savings on to the customer?!?! Better materials and processes DO NOT mean "more cost" by default. That is a farce portrayed by marketing people to falsely justify huge markups. Remeber this, the best accountants and statisticians can make the numbers reflect whatever they want them to if creative enough. I prefer NOT to exclude factors like material costs, processing costs, distribution, transportation costs, process improvemts, and many others when/if I evaluate a car from 1963 to a 2003 model - there's simply more to it than salary and monetary inflation. Any of you want me to justify your raise for this year based solely on one single day's work you did, or would you rather I take in all the factors from last year?

Which leads me to my last point in this rant-gone-awry...
MARKUPS - aka, margins, profit margin, profit, cleared $, black numbers, and "cha-ching".
When Ford is clearing $20,000 on EACH Excursion - DAMMIT, there's something WRONG! $10-16k for each Explorer sold, $7-11K for each Escape... am I the only one with a problem here?
I don't know GM's margin on their Tahoe, Suburban, C/K trucks, but I am CERTAIN they are in line with what Ford sees on their models. This again, shows that they are pricing what the market will pay, not relative to what their cost-to-produce is. And to think that cars such as the Sunfire, Cavi, Focus, and Mustang are not profitable is insane. The Mustang ALONE pulled Ford out of the fire back in the mid-80's because they were selling like hotcakes, very profitable (like $2.5-4.5k margin each back then), and required no advertising to sell. Margins are everything to a company.

One problem is that the manufacturer's are loading all the advertising, promo, exhibit, shows, and development costs FOR THE WHOLE COMPANY onto select car lines, making them bear the cost load and yeild tax advantages (through losses), while the trucks and SUV's reap the enhanced higher margins. It's an accounting game.
Example - (I'll pick on Ford here) Ford runs an ad, basically for the Explorer and throws in a shot of the Taurus too. They charge the cost of producing the ad, distribution, and airtime against the Taurus alone - since it is the lower-cost, less-profitable unit. The Explorer gets most of the benefit from the ad, and the Taurus pays the bill. All we hear then is how the Taurus is not as profitable... or how the Cavi is costing GM $3k each to move with incentives...

I've ranted long enough for one post. If you guys have any questions or issue with what I have said, I welcome the responses. I feel I can back-up everything I said with actual data, from my job or other related documents. The other thing that gets me is, it's not just cars, it's EVERYTHING. From CD's to furniture to bubble gum to medical bills, we are really paying too much for what we get these days with only the rare exception. Just look at CEO bonuses and Director's stock options that are handed out these days if you don't beleive me... even in this slow-to-dead economy.

Proud

 

ProudPony: I'm interested in you have any data or anecdotal evidence that suggests new cars are made with cheaper components, in general, than was common in the past? Things like glass taillights and cast taillight frames, cast glovebox doors get me thinking that we've been shortchanged.

I'm sorry, but the system seems to be broken. It also seems that if enough people complained about it (rather than parroting and supporting the automakers' pricing stance), we could help do something about it.

 

So you save $1.50 making a plastic glovebox instead of a metal one, but now you have to add flocking on the inside and a dampener to keep the door from slamming down....but you've also added things like 6 airbags, power seats, power windows, power locks, keyless entry, anti-lock brakes, independent suspension systems, cd changers, air conditioners, automatic climate control systems, fuel injection, computers, moonroofs, alloy wheels, 4 and 5 speed automatic transmissions (up from 3) and 5 and 6 speed manual transmisisons (up from 3 and 4). These things are almost standard on every car nowadays, because people expect them.

Yeah, they've found cheaper ways to make things, but there are so many more things...and robots are great when you are making things like little electronic boxes and running a molding shop - but they don't work nearly as well when you are handling bigger things or assembling them - because you'd need a lot of big robots.

 

Yup.. Just like consumer desktop CPU's.. They all basically come from the same batch.. (Well, the highest rated ones might have to go thru some more testing to make sure they can run that fast) But basically all the other speed varients are the same, except for a small part that locks it into the specified speed.

Why don't they just sell the same 1 CPU with the same high GHz rating at one low price? Cause there is a market for slower CPU's at a lower price, and a markup on higher rated CPU's.

If the figure out how to make em cheaper, it doesn't necessarily make the costs to the consumer lower.. it just gives them the option of making them lower if they have to...

With tech advancements for all products, just because something is better, isn't necessarily pushed to the consumer.. If they can still squeeze money out of the current cow, then they'll continue.

Then there are music CD's... blah..

 

As far as robots go, we are using them to handle everything from glass bottles that weigh almost nothing, to chemical containers/mixers, to 15lb bobbins of glass yarn, to handling 120lb raw reinforcement fiber glass packages, to actually toting full pallets of product (1200lbs or more) through the plant. The size is irrelevant because the size and speed (and cost) of the robot are included in the ROI calculations, so if the return is still 25% or greater on the investment - it's usually approved. Fact is, they are better than any human in cases where decision-making can be removed from the process.

WERM, I feel like we're kinda "buds" on this board since we share a lot of common views, and you typically present your case with great support, reasoning, or fact. This may be the first time we've ever been so far apart on our positions about a subject - kinda neat, huh?

I would like to ask you ONE QUESTION...
A Ford Excursion can come from the factory today with ...
"6 airbags, power seats, power windows, power locks, keyless entry, anti-lock brakes, independent suspension systems, cd changers, air conditioners, automatic climate control systems, fuel injection, computers, moonroofs, alloy wheels, 4 and 5 speed automatic transmissions (up from 3) and 5 and 6 speed manual transmisisons (up from 3 and 4)" as you said, plus DVD player, entertainment center, dual stereos, dual A/C, full leather, HD suspension, 14k-lb towing package, auxilliary power outlets, full carpet, 3rd row seat, 17" alloy wheels, a diesel or V10 engine, lighted running boards, signaling side mirrors, lighted sun visors, GPS/nav system, self diagnostic center, console with temp/compass/garage opener built in, and oodles more junk I can't even list right now.
And it will set you back nearly $50k.
And Ford will CLEAR $20K on it, after all the dealers' cuts, transportation charges, labor costs, pension surcharges, material costs, assembly costs, design costs, engineering charges, advertising, and overhead. YES - that's right - $20,000 PER VEHICLE in pre-tax profits. Read THIS ARTICLE and look at the very last line in it.

So here's my question...
How can you see Ford clearing that much money on ONE vehicle, and not think the consumer is being gouged?

I don't expect a vehicle of that magnitude for $9-grand, but the honest truth is - that's not too far below what it ACTUALLY costs Ford to make it - literal cost. The rest of the cost is non-value-added to the unit. How did $750 in freight charges add value to that truck? How does $1800 towards the Pension Plan put value in that truck? How does $1500 in advertising charges put value in that truck? How does $4250 in Dealer incentive put value in that truck? How does Ford's $20,000 margin (beyond all the previous charges) put value in that truck?
THEY DON'T. This is my point.

I think the QUALITY of todays vehicles is better than ever before. The inherent VALUE of the vehicle (it's ability to do what I need, last for years, and give trouble-free service) is astounding. And if the truth were known, the vehicles made today are very cost-effective to manufacture. Problem is, we don't get the opportunity to benefit from that cost-effective manufacturing process, because...
a)the pipeline between manufacturer and us is filled with middlemen who take their slice of the pie,
b)the manufacturer has been forced to tack-on charges to the actual, mechanical, deliverable, useable product such as advertising, pension, insurance, Union fees, and other non-value-added costs, and
c)the manufacturers set prices based on what the market will bear, not what it can afford to sell the car for and make a fair and reasonable profit.

My Opinion - this is exactly why the import vehicles are gaining an ever-increasing share of the domestic market. They are willing to be a little "less-greedy" and settle for a fair and reasonable profit instead of getting all they can get out of us. Earning $10/car on 100 cars is better than $1000/car on one car, because it helps you distribute the tooling costs over 100 units intstead of only one. The total sales profit to the company is still $1000, but it keeps people working and keeps buyers happy. In another thread, I mentioned my high school buddy just bought a Toyota Tundra because the Ford and GM dealers wouldn't budge on pricing - they had a fixed price, and you could choose a little cash-back or financing rate. Toyota dropped like $4800 off the price, and still gave him a great finance rate to boot - they got a sale for it too.

 

You have me in a catch-22 here centric.
In a word - YES. I do have some data indicating exact production pricing on OEM equipment that we supply to our customers. The catch-22 is that I will lose my job if I disclose any of it in detail - i.e. specific! I'd like for that NOT to happen! Being "exact" as in stating the make/model/part no and it's cost will get me into trouble for disclosing confidential information, which violates the confidentiality agreement between us and our customers.

I'll tell you what though, I will see if I can do some research out-of-office and drum up some "old" figures on manufacturing costs between old and new. There may be some analyst's papers or lawsuit disclosures that have actual pricing that has been disclosed under permission. Maybe comparing a '70 price to a '98 price for the same headlamp or something - I don't know. Just give me some time - it might be fun.

Interesting tidbit...
One of my good friends who is in charge of the maintenance shop in our biggest plant has a son that's about 32 now. His son got a job at the new BMW plant in Greenville, SC on the assembly line. His son is able to buy brand new BMW's from the back yard at the plant for cost plus a processing fee. They can even ORDER the options they want on the cars. (How cool would it be to assemble your own car, on the line, and get paid to do it! )
Here's a quote I just rounded-up real quick from Yahoo on a new Z3 vert.
Bud's son bought one for a little over $19,000 My word on it. The pizzer is, he can buy all of them he wants - there's no limit of 1/year or anything like that. They just have to pay for it at delivery - BMW won't finance in-house sales.
Everyone that works there, and all their families now drive Bimmers - wonder why? I've never seen so many Bimmers as there are in that town.

One of you guys (or me) go try and buy one for that, yet BMW covered ALL THEIR COST selling it to him for that price.
THIS is why I say the public is being gouged. I have priced some new vehicles (Explorer and Mach 1 ) recently with my Ford X-plan benefits, and that saves me a ton over MSRP, but they are still making a killing off me - just imagine how the average buying public is getting used.

 

Would you be referring to the Price-Fixing Lawsuit recently settled in New York?
ARTICLE in USAToday which states "the industry kept consumer CD prices artificially high between 1995 and 2000 with a practice known as "minimum-advertised pricing" (MAP)"

"Under MAP, the record companies subsidized ads by retailers in return for agreement by the stores to sell CDs at or above a certain price. "

""This is a landmark settlement to address years of illegal price-fixing," New York Attorney General Eliot Spitzer said in a statement. "

"In settling the lawsuit, Universal BMG and Warner said they simply wanted to avoid court costs and defended the practice. "We believe our policies were pro-competitive and geared toward keeping more retailers, large and small, in business," Universal said in a statement. "

So they conspire to get retailers to keep prices artificially and illegally high, but they feel they are "helping keep retailers in business"... ummm,right.

Couldn't POSSIBLY be the same in the auto industry, could it now?!?!