Debunking Big 3 Myths

December 16th, 2008 at 11:33am

As published by

The debate about bailing out the Big Three has hit a fever pitch. It seems like everybody wants to weigh in with their opinions, and the louder they rant, the more coverage they get.

Strangely, the media is devoting far more attention to the $25 billion bridge loan for the automakers than it is to the $700 billion bailout to the financial industry. How does that makes us a better informed citizenry?

There are always two sides to every argument, but this discussion shows how much misinformation, misperception and wrong-headed “facts” are being bandied about. So here is my chance to debunk the five most popular myths that I keep hearing.

“The Big Three only build cars that nobody wants.” Oh really? Somehow last year they managed to find over 8 million customers to buy those cars nobody wants. And a good many of those people are not just satisfied with their purchase, they are passionately devoted to them. Corvette, Mustang and Viper have practically created cult followings. F-150, Silverado and Ram owners are the most loyal buyers in the business. Even with all their other vehicles, customer satisfaction has never been higher.

“The Big Three build crappy quality.” Says who? According to J.D. Power’s Vehicle Dependability Survey, Mercury and Cadillac are rated ahead of Toyota. Buick and Lincoln are ahead of Honda. Ford is ahead of Infiniti. Chrysler and Dodge are ahead of Mini, Scion and Volvo. In fact, of the 10 brands at the bottom of the list, 8 of them are import brands. The J.D. Power numbers show the Big Three have closed the quality gap.

“The Big Three cars don’t get good fuel economy.” Only if you don’t look at the EPA numbers! Do an apples-to-apples comparison of vehicles with the same size footprint and powertrain and you’ll see the Big Three match, or in some cases, beat their foreign competitors. When it comes to hybrid technology, all of the Big Three have hybrids in their showrooms right now. Only two of the eight Japanese automakers make hybrids (Nissan buys its hybrid technology from Toyota). Not one Korean or European automaker has a hybrid yet.

“UAW plants are not competitive with the transplants.” Only if you ignore the facts. The 2008 Harbour Report shows Chrysler is tied with Toyota and ahead of Honda in manufacturing productivity. GM is ahead of Nissan. Ford is ahead of Hyundai. But this is a “How many angels can dance on the head of a pin?” argument. All of them are within one labor hour or so of each other. In other words, they are all extremely competitive.

“Those greedy UAW workers make $75 an hour,” or “Those greedy UAW workers make $150,000 a year.” Wrong. This includes total labor costs, which dumps the cost for all retirees into the equation. The average worker on the line actually earns $55,000 a year, which comes to about $28 an hour. With benefits those numbers have been a lot higher in the past, but after last year’s historic UAW contract those benefits get whacked down to levels roughly equivalent to the transplants.

The Big Three have been going through a painful, gut-wrenching restructuring for several years, and that process will continue into the future. I’m just amazed they don’t get credit for the significant progress they’ve made. And I’m puzzled why these myths continue to persist in the face of the facts.

14 Comments to “Debunking Big 3 Myths”

  1. Tom Martin Says:

    Isn’t the financial bailout over $1,500 billion now, rather than $700 billion, due to Citicorp?

    And some of the financial leaders are making over $100 million a year. Why does Congress seem less concerned with this than the pay of auto executives who make who make far less?

  2. Tom Martin Says:

    Also, I am a Ford and Chrysler supporter. My father would only buy Fords. But I believe that GM has made monumental improvements over the past 5 years. Cadillac and Saturn have been reborn, and the Chevy Malibu is a vast improvement over past products and the Camaro will be a hit. Chevy trucks and vans have improved, and the Volt is revolutionary. Not sure why Congress wants to change the current management.

  3. Dave Bardsley Says:

    Thanks John for providing factual information and debunking all the mis-information that the main line press and particularly the TV media is sending out. Keep up the good work.

  4. Jim Lubinski Says:

    I have been saying this for years, but it’s almost impossible to change perceptions. I bought a Thunderbird in 1994 (for less than the price of the contemporary Corolla), and it now has about a quarter million miles on it. It’s still very dependable. But people are shocked that a Ford would last that long. Part of the issue, I think, is that the U.S. automakers did not publicize their accomplishments enough.

  5. rich rutstein Says:

    I think Saturn is getting a raw deal.Their
    dealerships are well rated and very customer
    freindly. The new product lineup is very
    interesting offering plenty of choices for
    a broad spectrum of buyers. Perhaps the
    Saturn way of treating people with respect
    and caring is just not what is the norm
    in todays world. My motto is save the Saturn
    way of doing business. Save the Saturn automobile.

  6. Peter Pryce Says:

    Good article, John. You have to keep the positive automotive industry facts out in the media to make Americans aware of the competive products Detroit builds.
    In the past 26 years, I have owned 3 Chevrolet pickups. All my trucks have lasted in excess of 200,000 miles, without a major breakdown.
    As Dave Bardsley stated above,”keep up the good work!”

  7. Chris Batori Says:

    The auto-bailout gets more coverage than the bank-bailout because it has all the feel of a “soap-opera”, with a cast of interesting characters we can all relate to (or love to hate), like those UAW evil-doers. All we need now is a love-interest and this will be an Emmy-Award winner!

  8. Truman Lewis Says:

    Thanks John;
    As a recent GM retiree and still a UAW member, your facts are the truth, I think the media has gave the autoworkers and the companies and the country as a whole a black eye.
    Gore their bull and see how load they would scream “unfair” We are and the best country to work, Live, Play and die in. Thanks for a positive take on our goods.

  9. Johnnie Sanchez Says:

    I have owned GM and fords and Dodges and I have no rerards. I just bought a New Buick Lacrosse and my wife and I love it. I think the media has given the American manufactures a bad name. What can we do to change the preception that Asian car cars are so much better. I also own a GMC pickup and love it

  10. Phillip Lordo Says:

    I sure appreciate seeing more detail on the subject from someone who knows the industry, Thanks, John!! It would be nice to see a true side-by-side comparison of the transplants and the Big-3; productivity/dollar of labor, cost/unit sold (Capex, labor, retiree benefits, etc.). All the information is there, but it would take some research to pull it all together.

    It really does beg the question, why are they in such bad shape?

    2 other things I’ve heard but cannot confirm. 1) The cost of the bailout is roughly the same as the cost of unemployment benefits should they have been allowed to fail – if so, then what’s the fuss about?
    2) The big-3 have too many models/brands competing against each other and driving up production costs. I tend to dismiss this last one since there are so many shared components/platforms the actual incremental cost of maintaining a brand may not outweigh the ability to market 2 brands towards 2 different markets.

    Keep up the good work – miss you on the Speed Channel!!

  11. Kit Gerhart Says:

    It is amazing how much misinformation there is out there. I don’t know how many times I’ve heard certain senators from southern states with transplant factories stating as “fact” that UAW workers make $72-75 and hour, not bothering to mention that they were including all of the “legacy costs” of retirees in their calculations. The interviewers never seem to tell “the rest of the story.”

    There’s another thing that won’t seem to go away, which is people saying things like “My grandfather’s 1972 Vega was a piece of (bleep), so there’s no way I would buy a GM car.”

    I just wish everyone could see your article, not just the car nuts among us. That might help educate a lot of people. Maybe you could get some regular gigs with the “mainstream media” to counter all of the misinformation.

  12. Kit Gerhart Says:

    I have to agree with those who say there are too many brands out there, even if there are a lot of shared components. Looking at GM, all of those trim and body differences in the basically similar Enclave/Traverse/Outlook/Acadia DO cost money, not to mention the expenses of advertising, dealer support, etc. Chevy, Pontiac, Buick, and Cadillac do have their brand identities, but it would seem that you could simplify things a lot without losing such identity. Why not drop GMC and have Chevy-Pontiac dealers and Buick-Cadillac dealers? There is no reason for GMC to exist; Chevy has a version of all of their products. There’s still Saturn and Hummer to consider, and maybe both of them should go away, but look at it this way. Toyota is now about tied with GM as the biggest car company in the world. They have three brands, Toyota, Lexus, and Scion, and Scion doesn’t really count as a brand, since they are sold only at regular Toyota dealers. Other than a couple cases of Toyota and Lexus versions of SUV’s, Toyota doesn’t do “badge engineering,” at least in the US market.

  13. John K Gallagher Says:

    You do make a few points that the mainstream media misses.
    1. I always contended that the government would never let GM go out of business since that would lead to the dreaded Universal Health Care, due to the large retirees health coverage which is now supported by GM.
    2. Saturn could be merged with Buick. GMC could be merged with Cadillac, or dropped. The CTS could be decontented/reengineered into a Chevy and or the Malibu could be upgraded to be a Cadillac or a Buick.

    BTW, Kit:
    2007 Lexus ES Review Highlights

    * By Consumer Guide
    * Featuring: Lexus ES

    2007 Lexus ES 350: Highlights

    Lexus’s best-selling car is redesigned for 2007 with fresh styling, more power, and additional features. The ES remains essentially a luxury version of the Toyota Camry;

    Detroit has made some advances in fit and finish in the last few years but has some way to go. The Malibu interior is very nice but the Cobalt and G5 still look Old School. And when is Detroit going to figure out that they need to install locking gas doors!#@#
    GM touts that the HHR has the tightest gaps in its’ entire line. That would be great, except my HHR rental front passenger door scraped the paint off of the front fender. However, I would have bought one if it was not for the huge A pillars creating such big blind spots up front. Good radio too, one of the best in the industry.

    GM ‘Heavy’ Hybrids are amongst the best, too bad their ‘light’ Hybrids drag down their rep.
    Who killed the electric car? Could it have been GM? Where is my EV1?

    Don’t ask me about Chrysler. They’ve really lost their way with the recent fleet they have inflicted upon us, thanks Daimler. At least the present owners admit it and are attempting to do something about it. But if VW buys them then why shouldn’t we?

  14. Stan Says:

    Great article!! Our family has always bought North American (big three) vehicles and no lemons in 40 years. I believe that the biggest problem for all North American industry is the expectation that every company must show growth and profit every quarter. This leads to short term gain instead of long term profitability. Companies cannot take the time to retrench and reorganize themselves for long term profitablity.