If GM and Toyota sold about the same number of cars (I am not sure if this was for '07 or '08 thus far), why did GM lose $35 billion and Toyota make $17 billion?

UAW

The Ky. Enquirer today listed 7 myths of US car companies. It seems that the US car copanies make more hybrids than Honda or Nissan, but Americans want the pickups and SUV's. The US car companies are for the most part the most productive in the world, with 8 of the top 10 factories. Part of the debate was whether to include the payments made to the auto retirees. It must be part of the equation, because it is a cost to the auto makers, whether you count it as part of current wages or as a seperate cost of business.

If GM and Toyota sold about the same number of cars (I am not sure if this was for '07 or '08 thus far), why did GM lose $35 billion and Toyota make $17 billion?

 

The cost of the vehicle is only one component of profitability. The main difference between GM (and other domestics) vs Toyota is paying for the retirement and health care costs of all of the retirees. My guess is that it adds about $1500 per car.

I thought I heard that Toyota's profitability is higher than GM's.

I thought I heard that Toyota's profitability is higher than GM's.

 

Much.

Much.

 

I guess what you mention about retirement plays into that as well. Plus, the Japanese aren't allowed to retire....

I guess what you mention about retirement plays into that as well. Plus, the Japanese aren't allowed to retire....

 

Its the number one difference between the domestic car companies and the foreign car companies.

UAW

In part, the Japanese Automakers use what is called just in time delivery. This means that they don't keep big stock piles of parts in their factories. They only order what they need for production for that month. This helps them to hold down their costs.

 

I've worked for a Japanese auto supplier for the past 17 years. We only make enough of the parts to fill the orders than come in. We don't keep a bunch of the parts we make for Honda in storage.

 

I guess what you mention about retirement plays into that as well. Plus, the Japanese aren't allowed to retire....

That comes from them having to rebuild their country after WWII. It is nothing for the Japanese administration where I work to be at the plant from 8 am to about 10:30 pm. They do this almost every day. I've seen some of them work 20-30 hours straight without going home.

In part, the Japanese Automakers use what is called just in time delivery. This means that they don't keep big stock piles of parts in their factories. They only order what they need for production for that month. This helps them to hold down their costs.

 

I've worked for a Japanese auto supplier for the past 17 years. We only make enough of the parts to fill the orders than come in. We don't keep a bunch of the parts we make for Honda in storage.

They call it Kanban, right?

They call it Kanban, right?

Correct, Kan means "card" ban means"signal.

In part, the Japanese Automakers use what is called just in time delivery. This means that they don't keep big stock piles of parts in their factories. They only order what they need for production for that month. This helps them to hold down their costs.

 

I've worked for a Japanese auto supplier for the past 17 years. We only make enough of the parts to fill the orders than come in. We don't keep a bunch of the parts we make for Honda in storage.

 

 

 

I think the U.S. manufacturers have adopted lean (i.e. just in time) inventory on most of their parts, too. The amount of inventory for many parts is determined by how far the supplier is from the assembly plant. The farther away, the more inventory is held. But there is not much parts inventory in an American automobile assembly plant these days.

I think the U.S. manufacturers have adopted lean (i.e. just in time) inventory on most of their parts, too. The amount of inventory for many parts is determined by how far the supplier is from the assembly plant. The farther away, the more inventory is held. But there is not much parts inventory in an American automobile assembly plant these days.

If that's the case then that is not a true just in time system. It shouldn't matter how far away a supplier is. We send products to Japan and the far east and neither us or our customers carry huge inventories.

Part of the problem is the health care that is paid by the domestic companies. The foreign companies do not have to pay health insurance in their home countries.

Part of the problem is the health care that is paid by the domestic companies. The foreign companies do not have to pay health insurance in their home countries.

But the Japanese and Korean companies that produce cars in the US do provide for health insurance for their employees and they are still able to operate profitably.

 

The Japanese were desperate after World War II and were the first country whose major industries embraced statistical process control methods, which they learned from Dr. W. Edwards Deming and his disciples. American companies have been playing catch-up in terms of quality for decades and still face the widespread perception that Japanese cars are made better than American cars, whether that remains true or not.