Auto industry, it's all about ATP and GP, as usual

Apparently, when GM announced the next gen Equinox would be an EV, they also announced the base trim would be “affordable”, at some $30K.

Cancel that out. The 1LT trim has already been dropped, so now the base trim is the 2LT, at $35k.

Cancel that out. The 2LT will not be available for a while, so the lowest price Equinox is now the 2RS trim, at $49k.

If they sell cars that don’t earn them any money, sooner or later they will be out of business. So they can only sell what earns them money. That’s a general rule of all businesses.


It begs the question why can so many make affordable cars (Toyota, Honda, Hyundai ,etc.) but GM and Ford cannot?

Labor costs, perhaps?

From this summer:

UAW Demands Would Add $80 Billion to US Carmaker Labor Costs
“The current $64 per hour labor costs at Ford, GM and Stellantis are already higher than the $55 per hour cost at non-union US assembly plants of Asian and European automakers”


Bob Lutz addressed that in his book “Car Guys vs. Bean Counters” and gave excellent reasons why that is a convenient scape goat that does not match reality.

It’s a great book, overall, about the problems of the domestic auto industry and how we got here. Recommended!

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Could you summarize/explain his reasoning? Union workers have higher wages and benefits – that being their raison d’être. How does that not lead to higher production costs?


And Mexican’s work for $10/DAY, yet the Mexican built models are just as expensive as the US built models.



GM apparently thought it could make a profit at $30K. But then, they wanted $35K. Now they want $49K. Are you sure it is about making a reasonable profit, vs gouging people?



So far they haven’t shown much profit at all from EVs, so it’s probably the former and not the latter.

From memory Bob’s reasoning was that Germany has the highest labor rates in the world but has no problems. See also Steve’s reply.

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Mini cars mean mini profits

–Lee Iacocca

That I don’t remember. In general lower production costs work well for both the producer and the consumer.

I’m still interested in hearing an explication of the Lutz idea you mentioned.


All this caterwauling… Let us all be reminded that Ford - just Ford, by itself - reported a TWO BILLION $ PROFIT in the last QUARTER… yeah sure “just” a 4% margin on 45 billion in sales.

It would seem there is mathematical support for a modest increase in UAW wages.

These executives can, to put it nicely, cry us a river while they deposit and spend their slight reduced million dollar bonuses.

$one hundred and seventy BILLION dollars in sales a YEAR is a very, very large number. They don’t WANT to build EVs because the profit margin is lower than $70K f150s/250s/350s - full stop.


Unfortunately I no longer have the book. :frowning:

What’s “affordable”?
I’m defining “affordable” as <$30k MSRP.

They can make affordable cars, they don’t really want to. Ford is getting out of the commodity small CUV space, for example. They make a cheap pick up (Maverick) but not very many of them, so they sell at MSRP+.

GM is selling the new Trax small CUV, it’s affordable…and built in S. Korea.

They can’t yet make affordable EVs, not at a profit. But nobody else does, either. Cheapest Tesla is around $40k. Our Chevy Bolt EV was $25k, but there’s no way GM made money on it, even more so after two new traction batteries fitted under warranty.

We just got the kid a Kia Niro hybrid for $30k. There was no equivalent US made vehicle available.

< archer >Can’t, or won’t?< /archer >

They don’t make small cheap sedans any more - but should they try to? Not every car company has to have “affordable” cars in their lineup. Many of them don’t. Obviously, Mercedes doesn’t make “affordable” cars. The days when it was a necessary business model for a large car company to have a brand extension into every market segment, from the cheapest entry-level vehicle to the most luxurious large sedan, may be gone forever.


Those days are clearly gone. But I do wonder, now that the average car payment is $730/mo, if we do eventually have a recession, what happens? If the economy takes a hit, even a small hit, and 15-30% of the “market” of people able/willing to pay $730/mo disappears, then what? Do those auto companies, at least temporarily, shrink by 15-30%? When those 15-30% buy other models, will they then stick to their new brand? Who knows?

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Curious that Toyota can give its non-union employees parity wages, while the big 3 get tagged with “high labor costs” by some. Weird.


Unclear. It’s a problem that all makers of expensive goods face - an economic downturn makes people more frugal. Sometimes you just have to ride those times out, and cobble together a strategy based on targeted discounts and emphasizing the cheaper end of your existing line. Apple’s not going to suddenly release an “affordable” iPhone, for example, even if the market for $1.2K cell phones shrinks a bit; they’re not in the budget market, and they’re not going to be.

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Not really weird. They probably felt that they needed to bump salaries to stay competitive. And did it without the us vs. them of a strike. Nor the lost wages and lack of cars to sell due to a strike.