New vs. Old--Costs
Thread Starter
Registered User
Joined: Nov 2001
Posts: 1,022
From: Newhall, CA USA
ProudPony: nope, I don't want you to lose your job. Just interested in cost comparisons in general. Because it seems that every time a new car is introduced, there is talk about how much simpler/cheaper it is to build.
The C5 was supposed to have "thousands" less parts than the C4 (probably largely because of its multiplexed wiring harness), and it is probably the only example I can think of where the new car cost less than the old one (in the case of the convertible only.)
I remember a press conference discussing the new Viper about a year before its intro, where Chrysler claimed to have pulled $10K in cost out of the vehicle, and the resulting excitement on the Viper board. There was widespread speculation that the new Viper might come in at $59,900 (the 2002 was $70K-ish). Of course, the 2003 came out at $83K. I know this is a poor example of a handbuilt halo car . . . but come on, guys, if you're gonna brag about cost reductions, don't raise the price!
The BMW example is about a 50% cut off retail price. With no limitations on the number of purchases, this tends to support the idea they're still making money on the product--good money. This also supports the idea that the margins they're running are similar to high-end audio products, which are handbuilt in very limited quantities (not many people are crazy enough to want a $5000 tube amplifier). When I was in that business, I could purchase as much as I wanted on "accomodation," which was 50% off retail. Which was also about the same price that we sold to retailers for, which meant we were still making 50-65% margin on the product, with overhead and fully burdened.
Let's compare the industries: high-end audio is niche, low-production, high-margin. Dealers get 50 points. Automobiles are mass-market, high-production, (theoretically) low-margin. Dealers get 10-25 points.
So how come the end pricing models seem similar? Who is making money hand over fist? Yes, cars ARE overpriced.
The C5 was supposed to have "thousands" less parts than the C4 (probably largely because of its multiplexed wiring harness), and it is probably the only example I can think of where the new car cost less than the old one (in the case of the convertible only.)
I remember a press conference discussing the new Viper about a year before its intro, where Chrysler claimed to have pulled $10K in cost out of the vehicle, and the resulting excitement on the Viper board. There was widespread speculation that the new Viper might come in at $59,900 (the 2002 was $70K-ish). Of course, the 2003 came out at $83K. I know this is a poor example of a handbuilt halo car . . . but come on, guys, if you're gonna brag about cost reductions, don't raise the price!
The BMW example is about a 50% cut off retail price. With no limitations on the number of purchases, this tends to support the idea they're still making money on the product--good money. This also supports the idea that the margins they're running are similar to high-end audio products, which are handbuilt in very limited quantities (not many people are crazy enough to want a $5000 tube amplifier). When I was in that business, I could purchase as much as I wanted on "accomodation," which was 50% off retail. Which was also about the same price that we sold to retailers for, which meant we were still making 50-65% margin on the product, with overhead and fully burdened.
Let's compare the industries: high-end audio is niche, low-production, high-margin. Dealers get 50 points. Automobiles are mass-market, high-production, (theoretically) low-margin. Dealers get 10-25 points.
So how come the end pricing models seem similar? Who is making money hand over fist? Yes, cars ARE overpriced.
Registered User
Joined: Mar 2002
Posts: 3,180
From: Yadkinville, NC USA
You wanna know where some of your hard-earned cash goes...
wanna see some of the games that manufacturers and dealers play with YOUR money...
then read the following article VERY carefully...
LINK
Pay attention to "Manufacturer's Cost" -
"We do know that in today's market the sport utility and truck market has several entrants that reportedly make the manufacturers over $10,000 per vehicle! Ford's Lincoln Towne Car, Wixom Assembly Plant at one time made the corporation over $1 million a hour in profits. "
Look at "Customer Incentive, or Rebate" -
"They're generally in the $500 to $2000 range...They're primarily given on slow sellers and often used regionally, where an oversupply condition may exist. "
"Dealer Incentive" -
"...a dealer incentive on the vehicles, sometimes in excess of $6,000. The dealers figure that this incentive is theirs and theirs alone, not to be shared with a consumer; they don't even want you to know about it. "
"Holdback, Giveback, or Dealer Holdback" -
"In essence this creates a multi-invoice price system, in which even the dealer selling just one penny over invoice is in reality making 2 to 5 percent. "
Here's a link to an atricle that has the various holdback rates for automakers worldwide...
Linky
Chevy goes 3% of total MSRP, so does Ford, and Chrysler, and Caddy, and just about ALL OF THEM - HOW BIZZARRE they would have such similar processes right out of the blue-creation, huh?
centric - I too recall some hype about "streamiling" the Viper assembly process from being so labor intensive and cost-cutting material changes, but you're right - the Viper's price sure ain't fallin' is it!
This Presentation (go down to page 4) is illustrated with charts and graphs at how 3-D modelling alone helped cut design/development costs of the Viper, the Boeing 777, and the U.S. Air Force’s Joint Strike Fighter significantly (by 50% in the case of the JSF!!!)
This Report shows how ORBIS corporation's pacakge handling systems saved DCM over $338,000/year on their specialty line where Viper and Prowler were assembled - did those cars see resulting price drops?
Here's a handout from DCM Investor Relations stating CLEARLY in the FIRST PARAGRAPH that they exceeded their expected earnings in 2002 due to "lower costs, increased efficiency and higher unit sales." Read on and see how they brag about how "the restructuring measures led to greater cost savings and efficiency improvements than originally targeted, but higher unit sales also played a part (see page 69)."
Anybody see their prices falling to reflect these gains they readily admit they acheived?!?!
I hope I am reaching some of you out there besides centric and Ken S. This is one of those points I am VERY conscientious about, and I take VERY seriously. This post mostly focuses on the dealer's contribution to our inflated costs (save the DCM stuff). I'll work on the manufacturer's share in it next. And that's a REAL doozy.
Again, my career has been largely devoted to designing manufacturing systems that make OEM parts, and I get the rashyass when I break my neck to get costs down and see a higher price when I go to the dealer to buy a unit I just worked on...
wanna see some of the games that manufacturers and dealers play with YOUR money...
then read the following article VERY carefully...
LINK
Pay attention to "Manufacturer's Cost" -
"We do know that in today's market the sport utility and truck market has several entrants that reportedly make the manufacturers over $10,000 per vehicle! Ford's Lincoln Towne Car, Wixom Assembly Plant at one time made the corporation over $1 million a hour in profits. "
Look at "Customer Incentive, or Rebate" -
"They're generally in the $500 to $2000 range...They're primarily given on slow sellers and often used regionally, where an oversupply condition may exist. "
"Dealer Incentive" -
"...a dealer incentive on the vehicles, sometimes in excess of $6,000. The dealers figure that this incentive is theirs and theirs alone, not to be shared with a consumer; they don't even want you to know about it. "
"Holdback, Giveback, or Dealer Holdback" -
"In essence this creates a multi-invoice price system, in which even the dealer selling just one penny over invoice is in reality making 2 to 5 percent. "
Here's a link to an atricle that has the various holdback rates for automakers worldwide...
Linky
Chevy goes 3% of total MSRP, so does Ford, and Chrysler, and Caddy, and just about ALL OF THEM - HOW BIZZARRE they would have such similar processes right out of the blue-creation, huh?
centric - I too recall some hype about "streamiling" the Viper assembly process from being so labor intensive and cost-cutting material changes, but you're right - the Viper's price sure ain't fallin' is it!
This Presentation (go down to page 4) is illustrated with charts and graphs at how 3-D modelling alone helped cut design/development costs of the Viper, the Boeing 777, and the U.S. Air Force’s Joint Strike Fighter significantly (by 50% in the case of the JSF!!!)
This Report shows how ORBIS corporation's pacakge handling systems saved DCM over $338,000/year on their specialty line where Viper and Prowler were assembled - did those cars see resulting price drops?
Here's a handout from DCM Investor Relations stating CLEARLY in the FIRST PARAGRAPH that they exceeded their expected earnings in 2002 due to "lower costs, increased efficiency and higher unit sales." Read on and see how they brag about how "the restructuring measures led to greater cost savings and efficiency improvements than originally targeted, but higher unit sales also played a part (see page 69)."
Anybody see their prices falling to reflect these gains they readily admit they acheived?!?!
I hope I am reaching some of you out there besides centric and Ken S. This is one of those points I am VERY conscientious about, and I take VERY seriously. This post mostly focuses on the dealer's contribution to our inflated costs (save the DCM stuff). I'll work on the manufacturer's share in it next. And that's a REAL doozy.
Again, my career has been largely devoted to designing manufacturing systems that make OEM parts, and I get the rashyass when I break my neck to get costs down and see a higher price when I go to the dealer to buy a unit I just worked on...
Last edited by ProudPony; Apr 30, 2003 at 02:00 PM.
Registered User
Joined: Mar 2001
Posts: 373
From: Anywhere but here
Wow, this thread is really informing!!
The sad thing is, there really isn't anything we can do about it, at least that I can see. As long as people keep paying those prices, the automakers will not lower them.
I would bet that hardly anyone, we're talking single-digit percentage, has thought about how much markup there is on their new car, seriously thought about it. I know a lot of people think the new car is expensive, but how many of them go beyond that? Most of them just plunk down their money anyway.
It's really too bad people aren't better informed. If everyone made a big enough stink about, something would have to change.
The sad thing is, there really isn't anything we can do about it, at least that I can see. As long as people keep paying those prices, the automakers will not lower them.
I would bet that hardly anyone, we're talking single-digit percentage, has thought about how much markup there is on their new car, seriously thought about it. I know a lot of people think the new car is expensive, but how many of them go beyond that? Most of them just plunk down their money anyway.
It's really too bad people aren't better informed. If everyone made a big enough stink about, something would have to change.
Registered User
Joined: Sep 1999
Posts: 1,873
From: South Jersey
Originally posted by ProudPony
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?
Yeah, well... you can't agree on everything. But we do work in the same industry, and the location where I work makes large complex parts that cannot be easily or profitably assembled by robot. So that's one of my reasons for disagreeing...
I would like to ask you ONE QUESTION...
A Ford Excursion can come from the factory today with ...
" edit - lots of crap" as you said, plus i] edit - lots of extra crap on top of the other crap[/i].
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?
Well, do I think it's expensive? - absolutely. I wouldn't buy something like that knowing I would be lining someones pockets with $20K. But is it unfair? Not really. If nobody bought them, they'd either lower the price or stop selling them. There are lots of choices out there, and almost everyone buys their cars loaded these days. On the otherhand, they do sell a number of models at a loss - usually economy and enthusiast type cars (which I'd hate to see go).
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.[/b] This is my point.
Yeah, but how do you get rid of them? Have everyone pick their cars up at the factory? Default on the pensions of their workers? (BTW, companies like BMW that just set up in the states have a new workforce and little pension liability - allowing them to sell their cars cheaper and at increased profits.) What about the advertising? If they didn't advertise - they might not sell nearly as many trucks...
...but the profit margin does put some value in the trucks - because it allows the company to stay in business, supply parts and service and design new trucks.
I don't think it's gouging - market forces would prevent that in absence of a monopoly - but I DO AGREE that I think the end result is an overpriced car, and I'm hugely disapointed that the great american V8 appears to be heading to a future where it's only available to the people who can afford luxury cars or high end sports cars.
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?
Yeah, well... you can't agree on everything. But we do work in the same industry, and the location where I work makes large complex parts that cannot be easily or profitably assembled by robot. So that's one of my reasons for disagreeing...
I would like to ask you ONE QUESTION...
A Ford Excursion can come from the factory today with ...
" edit - lots of crap" as you said, plus i] edit - lots of extra crap on top of the other crap[/i].
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?
Well, do I think it's expensive? - absolutely. I wouldn't buy something like that knowing I would be lining someones pockets with $20K. But is it unfair? Not really. If nobody bought them, they'd either lower the price or stop selling them. There are lots of choices out there, and almost everyone buys their cars loaded these days. On the otherhand, they do sell a number of models at a loss - usually economy and enthusiast type cars (which I'd hate to see go).
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.[/b] This is my point.
Yeah, but how do you get rid of them? Have everyone pick their cars up at the factory? Default on the pensions of their workers? (BTW, companies like BMW that just set up in the states have a new workforce and little pension liability - allowing them to sell their cars cheaper and at increased profits.) What about the advertising? If they didn't advertise - they might not sell nearly as many trucks...
...but the profit margin does put some value in the trucks - because it allows the company to stay in business, supply parts and service and design new trucks.
I don't think it's gouging - market forces would prevent that in absence of a monopoly - but I DO AGREE that I think the end result is an overpriced car, and I'm hugely disapointed that the great american V8 appears to be heading to a future where it's only available to the people who can afford luxury cars or high end sports cars.
Thread Starter
Registered User
Joined: Nov 2001
Posts: 1,022
From: Newhall, CA USA
What can we do about it?
I’d argue that we’re already doing something about it—discussing it in a public forum that the manufacturers monitor. By rejecting their party line, we’re sending a message. I could make a case for message boards undermining most corporate propaganda and marketing in the next few years, simply due to the way word spreads about good or bad products. Consider the 03 Cobra owner whose car was abused by a tech who posted on a message board, and how quickly that got around.
What else can we do? I wonder if it might not be time to write a book, something along the lines of, Hidden Costs: How Corporate Greed and Stupid Regulations are Destroying Your Quality of Life, which would expose rampant waste and mismanagement, such as described so well by ProudPony. Heck, you could do chapters on the RIAA, health insurance, and half a dozen other places where complexity has resulted in unnecessary consumer burden. Give people ways to fight back and beat the system—in the case of cars, by buying used, complaining vehemently to the automakers’ management, etc. Get enough people involved, and things will change.
Never get published? Put it up on the internet as a free PDF download. Hell, I’ll even volunteer to write it, even though I have a company to run.
Why am I so incensed? Perhaps because of something that ProudPony brought up in another thread: we’re Americans. We should be able to do anything we put our minds to—and do it better than anyone else. We shouldn’t be nay-saying little sheeple who come up with reasons why the automakers can’t make a V8 performance car for under $35K—we should be thinking around corners to come up with a way it can be done for $15K!
Ooh, but that’s the young market! It’s risky! It’s scary!
Bullcrap. Think around corners on that one, too. Don’t focus-group your way into a Scion. Sponsor one of the car racing videogames so you can put "upcoming" cars on it. Judge people’s reactions to them, and monitor what kind of mods they do to them. Take the best of them and put them in production. Done.
Or how about engaging the people you find on all the message boards to participate in the design of a new car? Fifth gen—hint, hint.
Or how about hiring young people to sell cars to other young people. Yes, I know they might only be able to do it after school, but they will be much more convincing than a 45-year-old ex-copier salesperson with a pinky ring.
Think about the payoff: new customers, possibly for life. How many cars will they buy? How many cars will their friends buy? Is there anyone out there listening?
There. That’s three new ideas. Anybody have any more?
I’d argue that we’re already doing something about it—discussing it in a public forum that the manufacturers monitor. By rejecting their party line, we’re sending a message. I could make a case for message boards undermining most corporate propaganda and marketing in the next few years, simply due to the way word spreads about good or bad products. Consider the 03 Cobra owner whose car was abused by a tech who posted on a message board, and how quickly that got around.
What else can we do? I wonder if it might not be time to write a book, something along the lines of, Hidden Costs: How Corporate Greed and Stupid Regulations are Destroying Your Quality of Life, which would expose rampant waste and mismanagement, such as described so well by ProudPony. Heck, you could do chapters on the RIAA, health insurance, and half a dozen other places where complexity has resulted in unnecessary consumer burden. Give people ways to fight back and beat the system—in the case of cars, by buying used, complaining vehemently to the automakers’ management, etc. Get enough people involved, and things will change.
Never get published? Put it up on the internet as a free PDF download. Hell, I’ll even volunteer to write it, even though I have a company to run.
Why am I so incensed? Perhaps because of something that ProudPony brought up in another thread: we’re Americans. We should be able to do anything we put our minds to—and do it better than anyone else. We shouldn’t be nay-saying little sheeple who come up with reasons why the automakers can’t make a V8 performance car for under $35K—we should be thinking around corners to come up with a way it can be done for $15K!
Ooh, but that’s the young market! It’s risky! It’s scary!
Bullcrap. Think around corners on that one, too. Don’t focus-group your way into a Scion. Sponsor one of the car racing videogames so you can put "upcoming" cars on it. Judge people’s reactions to them, and monitor what kind of mods they do to them. Take the best of them and put them in production. Done.
Or how about engaging the people you find on all the message boards to participate in the design of a new car? Fifth gen—hint, hint.
Or how about hiring young people to sell cars to other young people. Yes, I know they might only be able to do it after school, but they will be much more convincing than a 45-year-old ex-copier salesperson with a pinky ring.
Think about the payoff: new customers, possibly for life. How many cars will they buy? How many cars will their friends buy? Is there anyone out there listening?
There. That’s three new ideas. Anybody have any more?
Prominent Member
Joined: Dec 1999
Posts: 2,282
This is my fear.......
Originally posted by WERM
.......I'm hugely disapointed that the great american V8 appears to be heading to a future where it's only available to the people who can afford luxury cars or high end sports cars. [/B]
.......I'm hugely disapointed that the great american V8 appears to be heading to a future where it's only available to the people who can afford luxury cars or high end sports cars. [/B]
It will be a sad day indeed should WERM's comment come to fruition......
Registered User
Joined: Mar 2002
Posts: 3,180
From: Yadkinville, NC USA
Originally posted by newby
I would bet that hardly anyone, we're talking single-digit percentage, has thought about how much markup there is on their new car, seriously thought about it. I know a lot of people think the new car is expensive, but how many of them go beyond that? Most of them just plunk down their money anyway.
[/B]
I would bet that hardly anyone, we're talking single-digit percentage, has thought about how much markup there is on their new car, seriously thought about it. I know a lot of people think the new car is expensive, but how many of them go beyond that? Most of them just plunk down their money anyway.
[/B]
He's a genious IMO.I was in a restaurant Monday and heard the lady behind me telling her lunch companion that she ,"only paid invoice price, and got 0% - she got an awesome deal!" I wanted to pour my ice water on her head and tell her that she just gave her dealer about $5 grand, and the car maker even more than that - how AWESOME is that?!?!
But I'm not that kind of person. My point is - you are exactly right, people will buy anything. The heart-breaking part about it for me is that they are still happy thinking they got a great deal.
Not only do they not know, but most don't really care either.
I guess the fact that they are just happy is good enough.
Registered User
Joined: Mar 2002
Posts: 3,180
From: Yadkinville, NC USA
Originally posted by WERM
...but the profit margin does put some value in the trucks - because it allows the company to stay in business, supply parts and service and design new trucks.
...but the profit margin does put some value in the trucks - because it allows the company to stay in business, supply parts and service and design new trucks.
Originally posted by WERM
Well, do I think it's expensive? - absolutely. I wouldn't buy something like that knowing I would be lining someones pockets with $20K. But is it unfair? Not really. If nobody bought them, they'd either lower the price or stop selling them. There are lots of choices out there, and almost everyone buys their cars loaded these days.
Well, do I think it's expensive? - absolutely. I wouldn't buy something like that knowing I would be lining someones pockets with $20K. But is it unfair? Not really. If nobody bought them, they'd either lower the price or stop selling them. There are lots of choices out there, and almost everyone buys their cars loaded these days.
Apparently, nobody IS buying these overpriced units, that's why they are 86'ing it in 2 years. T-bird, Marauder, and a couple other high-end, high-profit models too.
Originally posted by WERM
Yeah, but how do you get rid of them? Have everyone pick their cars up at the factory? Default on the pensions of their workers? (BTW, companies like BMW that just set up in the states have a new workforce and little pension liability - allowing them to sell their cars cheaper and at increased profits.) What about the advertising? If they didn't advertise - they might not sell nearly as many trucks...
Yeah, but how do you get rid of them? Have everyone pick their cars up at the factory? Default on the pensions of their workers? (BTW, companies like BMW that just set up in the states have a new workforce and little pension liability - allowing them to sell their cars cheaper and at increased profits.) What about the advertising? If they didn't advertise - they might not sell nearly as many trucks...
(J/K - a little humor is needed in this thread) Seriously, I'd like a couple options as to how I ship my car. I can get a car from Australia to my driveway for @$1200 - ask a military guy based overseas. I can have classic car haulers take my car from my driveway to Cali for $600 in a covered air-ride trailer. So why must I pay almost $1000 for a railcar/open car hauler trip to a dealer?b)BMW in Greenville has to comply with all the same laws as every other company incorporated there, 401K, taxes, and benefits included. I don't see them in a "favored" position due to being new to the area. In fact, their benefits are as good or BETTER than the domestic plants nearby. People are on a post-tested waiting list to apply there.
c)Advertising is included in the "total manufacturer's cost" of the vehicle, defined in my previous post (with links) as the total "to design, engineer, plan, market, and put into manufacture" a vehicle. Again, profit is what is left over after all these expenditures, and profit margins are running 25 to 50% of the selling prices on average. Me no likey.
Originally posted by WERM
...market forces would prevent that in absence of a monopoly - but I DO AGREE that I think the end result is an overpriced car, and I'm hugely disapointed that the great american V8 appears to be heading to a future where it's only available to the people who can afford luxury cars or high end sports cars.
...market forces would prevent that in absence of a monopoly - but I DO AGREE that I think the end result is an overpriced car, and I'm hugely disapointed that the great american V8 appears to be heading to a future where it's only available to the people who can afford luxury cars or high end sports cars.
So we agree to the end result, but we just get there by different paths, cool?
Registered User
Joined: Mar 2002
Posts: 3,180
From: Yadkinville, NC USA
Originally posted by centric
What can we do about it?
I’d argue that we’re already doing something about it—discussing it in a public forum that the manufacturers monitor. By rejecting their party line, we’re sending a message. I could make a case for message boards undermining most corporate propaganda and marketing in the next few years, simply due to the way word spreads about good or bad products...
What else can we do? I wonder if it might not be time to write a book, something along the lines of, Hidden Costs: How Corporate Greed and Stupid Regulations are Destroying Your Quality of Life, which would expose rampant waste and mismanagement, such as described so well by ProudPony. Heck, you could do chapters on the RIAA, health insurance, and half a dozen other places where complexity has resulted in unnecessary consumer burden. Give people ways to fight back and beat the system—in the case of cars, by buying used, complaining vehemently to the automakers’ management, etc. Get enough people involved, and things will change.
Never get published? Put it up on the internet as a free PDF download. Hell, I’ll even volunteer to write it, even though I have a company to run.
Why am I so incensed? Perhaps because of something that ProudPony brought up in another thread: we’re Americans. We should be able to do anything we put our minds to—and do it better than anyone else. We shouldn’t be nay-saying little sheeple who come up with reasons why the automakers can’t make a V8 performance car for under $35K—we should be thinking around corners to come up with a way it can be done for $15K!
Ooh, but that’s the young market! It’s risky! It’s scary!
Bullcrap. Think around corners on that one, too. Don’t focus-group your way into a Scion. Sponsor one of the car racing videogames so you can put "upcoming" cars on it. Judge people’s reactions to them, and monitor what kind of mods they do to them. Take the best of them and put them in production. Done.
Or how about engaging the people you find on all the message boards to participate in the design of a new car? Fifth gen—hint, hint.
Or how about hiring young people to sell cars to other young people. Yes, I know they might only be able to do it after school, but they will be much more convincing than a 45-year-old ex-copier salesperson with a pinky ring.
Think about the payoff: new customers, possibly for life. How many cars will they buy? How many cars will their friends buy? Is there anyone out there listening?
There. That’s three new ideas. Anybody have any more?
What can we do about it?
I’d argue that we’re already doing something about it—discussing it in a public forum that the manufacturers monitor. By rejecting their party line, we’re sending a message. I could make a case for message boards undermining most corporate propaganda and marketing in the next few years, simply due to the way word spreads about good or bad products...
What else can we do? I wonder if it might not be time to write a book, something along the lines of, Hidden Costs: How Corporate Greed and Stupid Regulations are Destroying Your Quality of Life, which would expose rampant waste and mismanagement, such as described so well by ProudPony. Heck, you could do chapters on the RIAA, health insurance, and half a dozen other places where complexity has resulted in unnecessary consumer burden. Give people ways to fight back and beat the system—in the case of cars, by buying used, complaining vehemently to the automakers’ management, etc. Get enough people involved, and things will change.
Never get published? Put it up on the internet as a free PDF download. Hell, I’ll even volunteer to write it, even though I have a company to run.
Why am I so incensed? Perhaps because of something that ProudPony brought up in another thread: we’re Americans. We should be able to do anything we put our minds to—and do it better than anyone else. We shouldn’t be nay-saying little sheeple who come up with reasons why the automakers can’t make a V8 performance car for under $35K—we should be thinking around corners to come up with a way it can be done for $15K!
Ooh, but that’s the young market! It’s risky! It’s scary!
Bullcrap. Think around corners on that one, too. Don’t focus-group your way into a Scion. Sponsor one of the car racing videogames so you can put "upcoming" cars on it. Judge people’s reactions to them, and monitor what kind of mods they do to them. Take the best of them and put them in production. Done.
Or how about engaging the people you find on all the message boards to participate in the design of a new car? Fifth gen—hint, hint.
Or how about hiring young people to sell cars to other young people. Yes, I know they might only be able to do it after school, but they will be much more convincing than a 45-year-old ex-copier salesperson with a pinky ring.
Think about the payoff: new customers, possibly for life. How many cars will they buy? How many cars will their friends buy? Is there anyone out there listening?
There. That’s three new ideas. Anybody have any more?
Seriously, you are dead-on about getting the word out. THIS is the kind of thing that will help start the wheels turning. I think a few people in this little forum have learned something about how cars are priced in the last day or two.
And MEGA-KUDOS to newby for acknowledging that he finds it informing too.
You guys just need to read and understand for now. And if you have questions - ASK! PLEASE!!!! It's important that we all bring as much to the table as possible, and become informed based on FACT, not heresay or corporate brainwashing jargon. I deal with this crap 40+ hours a week, it's indirectly my job, so I'm intimate with it whereas most people are not. Once you feel that you understand it all fairly well, talk about these issues with your family and friends. Don't let them buy a car without you informing them about dealer cash, holdbacks, dealer rebates, and the incredible margins these vehicles carry for the maker. And heck, it's not just about buying cars, it's gas and the oil companies, it's real estate and realtors, investments and brokers, CD's and stores, clothes and retailers - it's EVERYTHING around us. But if we talk amongst ourselves, the word WILL get around. I stated in another thread that I don't buy new cars anymore - now you know why! I will someday, when I get my new Shelby Mustang
to go in the garage with it's window sticker still on it, but my daily beaters will all be used - make that pre-depreciated to an acceptable level.So the domestic guys are worried about market share, huh? Well I've got a solution... Start selling well-equipped Explorers for $17,000, isn't $2500 plenty of profit for one vehicle? Sell the F-150 for $14000. The Tahoe for $19,500. The Cavi for $9000. Then see how many move off the lots! Is it so crazy? Then how can Hyundai sell a 4-door car for less than $10k, offer a 10/100 warranty, AND oil changes for life, after shipping them here from Asia to boot!?!? Why did my buddy get a loaded Tundra for $18K? Think about it -
Great post centric. You are really spurring me on with this topic, as if you can't tell. Nice to see someone take an interest (especially in something that means so much to me).
Thanks!
Thread Starter
Registered User
Joined: Nov 2001
Posts: 1,022
From: Newhall, CA USA
ProudPony: if you want to collaborate on a book, I WILL write it. I'll probably work on it anyway, just because I think it needs to be done. By the way, both my wife and I are published authors . . . and I own an advertising agency. Think about it.
"The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man."
George Bernard Shaw
"The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man."
George Bernard Shaw
Registered User
Joined: Sep 1999
Posts: 1,873
From: South Jersey
Originally posted by ProudPony
I respectfully disagree. Profit is that portion of the price paid which occurrs AFTER all costs to produce the item has been deducted. The labor, design, overhead, etc is all accounted for in the cost of the vehicle - the product could continue to sustain itself if sold for that total cost to produce. Notice I said SUSTAIN, not grow, diminish, or change.
But if profit = 0, how will they pay for new cars, which cost hundreds of millions of dollars (if not billions) to develop? How will they sustain the company indefinately without new product? Who will invest in a company that doesn't make any money? They aren't a philantropic organization, why shouldn't they make as much money as they can? Isn't that why there in business?
Nobody said anything about "fair", I'm talking about gouging!
Apparently, nobody IS buying these overpriced units, that's why they are 86'ing it in 2 years. T-bird, Marauder, and a couple other high-end, high-profit models too.
This is where I disaree. Sure, some glaringly overpriced models are failing in the market place - but at the same time, the average price of a car is nearing $30k - up 9% in the last year. Why? Because most people buying cars are using the incentives and cash bonuses TO BUY A MORE EXPENSIVE CAR than they were buying before. This is one reason GM hasn't stopped the incentive madness!
a)I'd pick mine up at the factory to save $2000 - and get a picture of it and a tour while I was there!
How do you think I feel? I had to pay $500 to ship my car 18 miles.
I don't see them in a "favored" position due to being new to the area. In fact, their benefits are as good or BETTER than the domestic plants nearby. People are on a post-tested waiting list to apply there.
True - but since most of their workforce is young and few are retired, they have little or no pension liability and they don't have to provide healthcare or tons of other benefits to retired workers. GM spends $1200 per car on this and I guarantee that BMW is paying almost nothing in comparison.
That's my point as well. I hope you noticed that I claimed inherent value and quality have come a long, long way since the 60's and 70's models. I simply don't buy into the linear, single factor (inflation), adjusted-price theory claiming that we are getting a "bargain" these days. One car relative to other cars - sure. But that's because they ALL are overpriced to feed dealers, shippers, unions, and manufacturers all a tidy 10-25 points!
Remember, all of those people are CAR BUYERS, so it's not entirely bad to pay them enough so that they can afford to buy your cars!
Still, I don't think it's so much that cars are overpriced (there are plenty of cheap cars) as it is an absence of inexpensive cars to be excited about. But what can you do?
-Buy a less expensive or non-loaded car.
-Buy a used car
-Don't buy a car
...and if enough money stops coming in, the market will develop a solution - because there is money to be made!
So we agree to the end result, but we just get there by different paths, cool?
In a good conversation, not everyone aggrees, but everyone learns something.
I respectfully disagree. Profit is that portion of the price paid which occurrs AFTER all costs to produce the item has been deducted. The labor, design, overhead, etc is all accounted for in the cost of the vehicle - the product could continue to sustain itself if sold for that total cost to produce. Notice I said SUSTAIN, not grow, diminish, or change.
But if profit = 0, how will they pay for new cars, which cost hundreds of millions of dollars (if not billions) to develop? How will they sustain the company indefinately without new product? Who will invest in a company that doesn't make any money? They aren't a philantropic organization, why shouldn't they make as much money as they can? Isn't that why there in business?
Nobody said anything about "fair", I'm talking about gouging!
Apparently, nobody IS buying these overpriced units, that's why they are 86'ing it in 2 years. T-bird, Marauder, and a couple other high-end, high-profit models too.
This is where I disaree. Sure, some glaringly overpriced models are failing in the market place - but at the same time, the average price of a car is nearing $30k - up 9% in the last year. Why? Because most people buying cars are using the incentives and cash bonuses TO BUY A MORE EXPENSIVE CAR than they were buying before. This is one reason GM hasn't stopped the incentive madness!
a)I'd pick mine up at the factory to save $2000 - and get a picture of it and a tour while I was there!
How do you think I feel? I had to pay $500 to ship my car 18 miles.
I don't see them in a "favored" position due to being new to the area. In fact, their benefits are as good or BETTER than the domestic plants nearby. People are on a post-tested waiting list to apply there.
True - but since most of their workforce is young and few are retired, they have little or no pension liability and they don't have to provide healthcare or tons of other benefits to retired workers. GM spends $1200 per car on this and I guarantee that BMW is paying almost nothing in comparison.
That's my point as well. I hope you noticed that I claimed inherent value and quality have come a long, long way since the 60's and 70's models. I simply don't buy into the linear, single factor (inflation), adjusted-price theory claiming that we are getting a "bargain" these days. One car relative to other cars - sure. But that's because they ALL are overpriced to feed dealers, shippers, unions, and manufacturers all a tidy 10-25 points!
Remember, all of those people are CAR BUYERS, so it's not entirely bad to pay them enough so that they can afford to buy your cars!
Still, I don't think it's so much that cars are overpriced (there are plenty of cheap cars) as it is an absence of inexpensive cars to be excited about. But what can you do?
-Buy a less expensive or non-loaded car.
-Buy a used car
-Don't buy a car
...and if enough money stops coming in, the market will develop a solution - because there is money to be made!
So we agree to the end result, but we just get there by different paths, cool?
In a good conversation, not everyone aggrees, but everyone learns something.
Thread Starter
Registered User
Joined: Nov 2001
Posts: 1,022
From: Newhall, CA USA
Maybe the fallout has started:
http://biz.yahoo.com/rb/030501/autos_sales_7.html
"Detroit automakers on Thursday posted sharply lower U.S. sales for April, dragging industry totals down 6.2 percent as high incentives failed to lure Americans away from a slew of new models offered up by foreign manufacturers."
Yes, Virginia, cars ARE too expensive. If a Explorer was $17.5K and a 4Runner was $35K, this would not be a problem.
(Just like if a CTSv was $36K and a M3 was $50K . . . nevermind.)
http://biz.yahoo.com/rb/030501/autos_sales_7.html
"Detroit automakers on Thursday posted sharply lower U.S. sales for April, dragging industry totals down 6.2 percent as high incentives failed to lure Americans away from a slew of new models offered up by foreign manufacturers."
Yes, Virginia, cars ARE too expensive. If a Explorer was $17.5K and a 4Runner was $35K, this would not be a problem.
(Just like if a CTSv was $36K and a M3 was $50K . . . nevermind.)
Registered User
Joined: Mar 2002
Posts: 3,180
From: Yadkinville, NC USA
Originally posted by WERM
But if profit = 0, how will they pay for new cars, which cost hundreds of millions of dollars (if not billions) to develop? How will they sustain the company indefinately without new product? Who will invest in a company that doesn't make any money? They aren't a philantropic organization, why shouldn't they make as much money as they can? Isn't that why there in business?
But if profit = 0, how will they pay for new cars, which cost hundreds of millions of dollars (if not billions) to develop? How will they sustain the company indefinately without new product? Who will invest in a company that doesn't make any money? They aren't a philantropic organization, why shouldn't they make as much money as they can? Isn't that why there in business?
Originally posted by WERM
True - but since most of their workforce is young and few are retired, they have little or no pension liability and they don't have to provide healthcare or tons of other benefits to retired workers. GM spends $1200 per car on this and I guarantee that BMW is paying almost nothing in comparison.
True - but since most of their workforce is young and few are retired, they have little or no pension liability and they don't have to provide healthcare or tons of other benefits to retired workers. GM spends $1200 per car on this and I guarantee that BMW is paying almost nothing in comparison.
They're just as guilty as the car makers at gouging us!!!When the billed rate for me to get my teeth cleaned is $127, for a 20-minute job consisting of buffing with a high-speed pneumatic drill, picking, and flossing - SOMETHING'S WRONG THERE TOO. It still costs me about $15 out of pocket to boot! My barber has me in the chair for 15 minutes and only socks me for $12.
Again, I can't justify letting the carmakers secretly reap huge profits just to JUSTIFY the costs of high healthcare. That's like the pot calling the kettle black dude, or two-wrongs make a right. And in fact, this serves to SUPPORT my stance that our whole ecomony is artificially inflated - mostly to justify it's own overinflatedness.
One last point - if GM had INVESTED the pension moneys that were witheld from every person's paycheck AND LEFT IT ALONE, the monthly pension payments would be coming from the PENSION FUND ITSELF (where it's supposed to), not leeching $1200 from the margins on cars being produced TODAY.
Now ask me why the pension fund got used for "other reasons" than pension disbursements anyway...
I'm ready for that one!Having a great time with you WERM - you're a class act, and I respect your position greatly. Thanks for the great debate!
Last edited by ProudPony; May 2, 2003 at 11:39 AM.
Registered User
Joined: Aug 2001
Posts: 2,400
From: Michigan's left coast
Originally posted by ProudPony
Carmakers demand, and often get, price-cuts on the materials we provide them, and I have to work to make those cuts happen. But when was the last time you saw the CONSUMER get an actual price reduction on a Vette? What's good for the goose should be good for the gander.
Carmakers demand, and often get, price-cuts on the materials we provide them, and I have to work to make those cuts happen. But when was the last time you saw the CONSUMER get an actual price reduction on a Vette? What's good for the goose should be good for the gander.
The only thing saving the Big Three right now is that Honda and Toyota care more about profit margin than sales numbers. If either one of those guys ever decided to accept, say, a 2.5% profit margin, and dropped their prices accordingly (this would take nearly $1500 off the price of a $25K car), I think it'd be a bloodbath in the pass-car market.
I guess the bottom line is that I'm sick of paying for someone else's inefficiency in two ways - in my paycheck every time one of our customers wants a 5% cost-reduction, across the board, or else, and then a second time when I take what's left of my paycheck and plop it down for a vehicle.