Toyota Bumps Ford in US, Topples GM in World. Why?, page 1


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Topic started on 30-12-2006 @ 05:41 PM by donwhite
A medium long time ago, GM built a new assembly plant in Freemont, CA. I never saw the reasons behind this story, but it was not long before GM took a drastic decision: Close the plant rather than deal with the workers. Later, Toyota began discussions with GM about reopening the plant to produce Corollas and a knock-off called Nova, for Chevy, and the small mini-pick up trucks Americans were buying like hot cakes. GM and Toyota formed a 50/50 partnership, NUMMI - New United Motors Manufacturing Inc. Toyota would operate the plant, GM would stay in Detroit. The plant is still there, no problems with the workers, and it is still making cars and trucks for Toyota and GM. This was in the same time frame that Ross Perot was kicked off the GM Board of Directors, for which act they paid him a half billion dollars in settlement.

In response to Honda’s Maryville, Ohio, plant, Toyota then built their own factory at Georgetown, Ky. Near to Cincinnati. They build Camry and Avalon cars there and also make the engines in a separate plant. Toyota built a full size pickup truck plant 100 miles west, near Evansville, Indiana. Now, my father was a UAW Ford man. Ford built its first Model T assembly plant outside Michigan in Louisville, before World War 1. Ford has made cars, or Jeeps, continuously in Louisville more than 90 years. Ford ventured into the Class 8 heavy truck game in the 1970s, and built a state of the art truck plant in Louisville. That plant was sold in the 1990s to Mercedes-Benz, well, Daimler-Benz, who now make a medium weight truck line there called Sterling - the first truck brand in America. D-B also own Freightliner. D-B is now DiamlerChrysler.

When Toyota opened in Georgetown, the pay was $14 an hour. The “benefits package” cost another $8 an hour. Ford’s assembly line workers were paid $18 to $22 an hour, and the benefit package cost $12 an hour. So, Toyota made Camry’s for $22 an hour, and Ford built Crown Vics for $30 to $34 an hour. Quality differences in the cars were not due to American workers, as we had been told forever. It was obviously due to design and production techniques that made one car better than the other. It was the bosses, not the workers, who were mucking up the cars.

Dealerships are crucial to the success of the automobile in America. When GM was first formed with the amalgamation of Buick and Cadillac, GM choose its dealers carefully. GM’s owners realized they were in the car making business, but it was car dealers who were in the car selling business. GM was making good cars, as good as any, but they were the first to realize the quality of dealers was more important than the quality of cars. People dealt with dealers, not with makers.

The Big 3. In the hay-day of American autos, the 1940-1960s, GM always had the best dealers in any city. Ford, whose founder had a different vision - the universal car - was second in quality and Chrysler was a distant third in the quality of its dealers. I don’t mean character-wise, but I do mean in site location, in physical facility, in stocking of cars and parts, and in reputation in the community. In financing. GMAC - General Motors Acquisition Corporation. Ford’s UCIT - Universal Credit Investment Trust - and Chrysler’s link to CCC - Commercial Credit Corporation.

The Little 4. Packard. Once the leading luxury car in America. Yes, the Cadillac was always a competitor and Dusenberg’s are said to be the best cars ever made in the US, but it was Packard who built real quality cars for a couple generations. Studebaker began in South Bend making ox drawn Conestoga wagons to ride in to Oregon. Stude made a good medium priced line of cars in the 30s and 40s but by the late 50s, overhead and costs were strangling the old wagon company. One well-known faux pas, the mid line Studebakers were called “Dictators.” After the rise of Hitler and Franco, it was decided to change the lines’ name to “Commander.” Nash. Made way far away in Kenosha, Wisconsin. But a good car, well made and very sturdy. The in-line 6 first developed in the early 1930s went on to power some Jeep station wagons as late as the 1980s. You don’t throw away a winner. Yes, Nash also made Kelvinator home refrigerators.

Hudson. A car I always wanted to own, came close once, but never did. A very high quality car, which made famous the in-line 6 flat head engine driven by Fireball Roberts in the late 40s and early 50s when the new Olds 88 was the fastest car on the street. Both engines were 5 liters, the Olds shared its post-war overhead valve engine with Cadillac. Hudson came back with the Hornet series, its best IMO, and on short tracks the Hornet won almost every race. On long tracks, the higher top speed of the Olds made it the sure winner. Those of you who can deal with the difference in torque and horsepower will note the larger pistons in a 5 liter 6 versus the smaller pistons in a 5 liter 8, understand why the Hornet was tops on short tracks. Torque is for acceleration, horsepower is for speed.

Hydra-Matic Drive. This is the single most important development GM made. It and it alone put GM securely on top of sales. First offered in 1937 on a few Olds and Buicks, it was dropped before the end of the model year. Further development saw Hydra-Matic reintroduced in late 1940 on 1941 models of Olds and Cadillacs. It was an instant hit, GM never looked back, and the rest is history. It was used on a series of Army tanks in WW2. GM now makes it for Class 8 trucks, in the Allison Division. Chevrolet and Buick never used it. But Ford put it in Lincoln. Hudson used it. Mercedes Benz made it under license from GM. Packard’s bankruptcy was speeded along when it tried to make its own automatic transmission. Ford and Nash bought an automatic from Borg Warner. Chrysler had the worst alternative of any car company, and probably lost half its market due to that failure. It was not until 1954 that Chrysler had a genuine automatic transmission.

In sales in America, Toyota is passing Ford this year to become #2, after GM.

But worldwide, what’s it mean to American’s to see the only Number One in the history of the car world, General Motors, become an historical footnote, and the new giant of the world’s car makers, to be Japan’s Toyota? How long before GM slips into 3rd place, then maybe into Chapter 11? Can Saturn reverse the tide?


[edit on 12/30/2006 by donwhite]


reply posted on 30-12-2006 @ 08:56 PM by donwhite
Competition?

The first foreign car maker to build an assembly plant in the US was Volkswagen which built a plant in Westmoreland, PA. That was in the early 1970s. Even before the plant was finished, VW changed its corporate mind and built a factory either in Mexico or Brazil, I forget. I’m not sure if VW ever assembled cars in the US. I believe the plant was sold and may be in use today.

When Toyota came to Ky, the state offered them a package would about $300 million. Some of it was things they would have done eventually, like 4 lane-ing the road to the plant from the nearby interstate. Other services the state offered was screening job applicants and sending over only those who met Toyota’s qualifications, which had the secondary benefit of preventing fair employment practices law suits by unsuccessful applicants. The state also located the land and then purchased it and rented it back to Toyota for a nominal annual rental.

OK, I’m pointing out how much the various governments have assisted Toyota - and all the others - which was not done to the same extent for GM and Ford. By the bye, in the case of the pickup truck factory, Ky made the same bid to Toyota it had made at Georgetown, but apparently Indiana made a higher bid as the plant went to Princeton, 20 miles out of Evansville.

By the mid-1980s, when the US manufacturers were seeking import duties on foreign car imports, and did not get them, I noticed Toyota had a plant in CA, Mazda had in MI, Mitsubishi had one in IL, Honda had one in OH, Nissan had one in TN, and then Toyota added one in KY. BMW went to SC, Diamler-Benz to AL, and Subaru to IN. By 1990, the Japanese car makers had 18 US senators who would not want to offend them.

It is so hard to make a level playing field. That is the one function of government I should think everyone would agree is really important.


reply posted on 31-12-2006 @ 05:02 PM by MCory1
I must say this is quite an informative and thought provoking thread--thanks donwhite.

In response to your questioning why American automakers didn't receive the same treatment as Toyota--and I hope I am interpreting your last post correctly; if not, let me know--would it be possible that the other manufacturers weren't seeking relocation?

Having a large factory is bound to be a major boon to any locale, regardless of the company. How many direct jobs would the company bring to the region? Those employees will mostly have families, which would bring in more consumers to the area, as well as more tax dollars. More consumers strains the local infrastructure, which means more jobs need to be opened up, and possibly more stores as well. A $300M investment is a pittance for something that can drastically improve a local economy like a large factory.

Why the other manufacturers weren't offered that I can only speculate, but my guess is that they didn't need to relocate. They already had well established facilities in their regions, working efficiently and meeting demand quite well. Opening up the burden of a new factory would be a waste if there wasn't a need for it.

When the major American auto makers first started--and this is very much a guess, and probably way off base--the ramifications of a new factory probably weren't as well known at the time. I'd even wager that the fact that Ford and Chevy opening up their plants is indirectly what led Kentucky to give Toyota so much money, because those were past case histories of how dramatic an affect on the local economy a car manufacturer would have.
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