The Detroit Spinners

[Ginger Yellow]

The Detroit Spinners

I don't know for certain, obviously, but I suspect the backlash from morons and the media about foreigners emasculating America would cause sales to plummet. The transition costs would be enormous as well.

[WOM]

The Detroit Spinners

I can't imagine anyone 'buying' any of the Big 3. I can, however, see a Japanese company buying a particular asset. A perfect one would be the Springhill Tennessee Saturn operation. It's run on the Japanese model already, without unions, and with a good quality product and wages/benefits that are in line with its contemporaries. You could keep building a small, fuel efficient car there without much bother and the factories are modern and flexible enough to retool. It's also a rural, southern, economically distressed area, which is where the offshore companies tend to like locating.
What I can't see is anyone buying the massive, unionized, old-school deathstars in Detroit, Windsor, or Oshawa.

[WOM]

The Detroit Spinners

Oh, and I'd like to touch on a point that SS made above. The Big 3 have been building cars that match, and sometimes exceed, the quality of the offshore builders for many years now. Statistical fact. Where they fall down is that every Big 3 car starts with a roughly $2000 deficit, due the legacy retirement and healthcare costs I've mentioned ad-nauseum. This is what the much quoted $76/$38 per hour difference ads up to over the build of a car.

So, that difference is made up for in two ways: 1) by de-contenting the car, by offering fewer features and cheaper materials and 2) through reduced profit per vehicle. The first move makes Big 3 small cars feel cheap and shitty. No less well-built, but certainly less enjoyable to own and drive. The second move causes the Big 3 to have less money to invest in product upgrades and technical innovations.

This $2000 is far easier to deal with when you're selling shitloads of high margin minivans, pickups SUVs (since it's a lower percentage of the overall cost), which is why the Big 3 have clung to them for so long as their lifeblood.

They can build high-quality small cars. They just can't do it profitably. In fact, they increasingly don't do it at all, but just import them from their Korean subsidiaries and stick a Pontiac or Chevrolet name on them.

One last point: Jim Kenzie, the editor of The Toronto Star 'Wheels' section, had a good article this weekend on the Big 3 issue. He pointed out that as recently as three years ago, Honda North American had one retired employee that it was supporting. One. The Big 3 have as many as 3 retired employees for each 1 paid, working employee. 1:1 is closer to the standard. But either way, you can see what a strain the legacy costs are to becoming profitable again.