GM and Ford were happy to pour Billions into EVs, as long as Tesla was posting enviable GP numbers. Now that price cuts have brought Tesla’s GP to earth, GM and Ford aren’t so eager to switch to EVs.
(note, the industry’s protests that EVs are “too expensive” is hooey, because the automakers have been systematically eliminating their lower priced models, and pushing ATP and GP ever higher.)
Two points. The problem is that people aren’t buying as many EVs as projected and so the EVs are being overproduced.
Secondly, all of the car makers (except Tesla) are still in the losing-money part of the curve where billions have to be invested. This, of course, is where TSLA was for many years.
DB2
Meanwhile Ford is announcing plans to review its planned investment in new plants after the latest UAW contract will raise costs. More manufacturing could be headed for Canada (no health insurance problems) or Mexico (lower wages).
Meanwhile Ford is announcing plans to review its planned investment in new plants after the latest UAW contract will raise costs.
I saw that on the wire the other day. Farley is being a horse’s patoot. USian autoworkers could take a 50% pay cut, and their pay would still be far above that of Mexican autoworkers. Recall, Mexican autoworkers make $20-$30 PER DAY.
Steve
If “big gummit” required people to buy EVs, the situation would be different. GM and Ford were fine with that, when Tesla was booking an 11% GP. Now that Tesla is booking a GP comparable to what ICE cars book, the “JCs” no longer have a motive to interrupt their golf game to make the investments to switch to EVs.
Steve
Canada has Universal Health Care (by province). Mexico has it also (federal?). So the automakers really want the US to have it also. Saving $1T to $2T per year on healthcare would cut costs in a lot more areas than just making autos, trucks, etc.
If the US had a national health plan,. someone would need to pay the taxes to cover the cost. The “JCs” certainly will not take that “burden”, so it will be the worker’s pay that takes the hit.
But even if the US had a national health plan that, magically, did not cost the “JCs” or the workers, anything, Mexican factory workers are still working for less than half the US Federal minimum wage. USians can’t compete with that.
I have told the story before, about the Gibson appliance plant in Greenville, MI. Some years ago, Electrolux bought Gibson, and told the workers they had to take pay and benefit cuts to keep their jobs, otherwise, production would be moved to Mexico. So the workers accepted the cuts, and worked for short pay for a couple years, to “save their jobs”. Then Electrolux announced it has finalized it’s plans to move production to Mexico, the plant was closing, and everyone was losing his job.
Some years ago, when Ford Motor was closing out production of the Focus compact in Wayne, MI, Ford said it was going to build a new plant in Mexico, to build the Focus for the US market. TFG was campaigning for POTUS at that time, TFG publicly announced that, if Ford built that plant in Mexico, he would impose a 25% tariff on the cars, and no-one would buy them. Ford never built that plant, nor followed through on it’s plans to import the Focus from China either.
Steve
He also said the Carrier plant in Ohio would stay. It was closed while he was President and the work moved to Mexico.
Some of the work was moved to Mexico, but much remains in Indy. I had a new Bryant (Carrier) HVAC system installed in my condo in 2018. The furnace was built in Indy, the a/c in Mexico.
As asserted above, Farley is a horse’s patoot, in claiming that the USian autoworker’s pay increase is the difference between building in the US and building in Mexico.
From an article on the Indy Carrier plant
Carrier’s unionized workers in Indy are paid, on average, about $23 an hour (though more recent hires earn $17). Their Mexican counterparts earn an hourly rate of $3.
Same wages as the Mexican auto plants, less than half the rate of the USian Federal minimum wage. It would be impossible for USians to work for that little. Where does the Shiny economy go? Send every bit of productive work out of country, so the entire Shiny economy rides on financial speculation?
As those politicians CLAIM to be “productive”, send their “productive work” out of the country as well. Problem solved.
till 2030 then the $16 per hour kicks in. The Trump replacement for NAFTA.
Tesla will lower the profit margin more. GM and F do not need to be car manufacturers. The executive suite has not earned that right.
No Mexican factory worker makes anywhere near $16/hr. iirc, that $16/hr minimum only applies to part of the content, some 40-45%, in the USMCA. The big three, with much of their supply chain still in the US and Canada will be in a better place than some others. My Puebla built VW, for instance, is 40% Mexican, and only 11% US/Canadian, as VW has been building cars in Mexico since the 60s, so much of their supply chain is there.
Steve
Article from June 2020.
Separate note from 2023
Mexico significantly has improved its position as the main supplier of auto parts to the US. The Latin American country captured 42.72% of the US market share of automotive parts and components during the first five months of 2023, according to the National Auto Parts Industry Association (INA).Aug 9, 2023
One reason is the cost of moving production. Honda Motor-affiliated parts maker Keihin will raise the hourly wage of employees at a factory in Mexico to $16 by next month – triple the average rate of a parts factory in Mexico, but still cheaper than making a move.
Thanks. I didn’t know that, but that is only one vendor. Have any other Mexican factories raised wages so much?
Steve
Mexico now has a steadily increasing shortage of workers, is mandating significant wage increases, and sucking citizens back home from their sojourns in the USA. The peso has been strong against the dollar because zillions (a technical term) in capital are being sucked from USA into Mexico to build lots of new factories and infrastructure.
d fb
I am/was? considering a new truck. Current truck from mid/late last decade is V6 with plenty of towing capacity 4wd, mid sized truck. New version of that truck has 4 cyclinder, turbo charged engine, exclusively. No way I am buying a 4 cyclinder turbo truck, it just screams short engine life to me. Current truck is running just fine, so it was totally a discretionary decision to go new. Domestic automaker might be losing a customer (me), as Toyota might have mid-sized that has what I want, but have never owned a Toyota, so a little hesitant.
I am well aware that this is a deferral of cost, as I will eventually find something I want, but in the meantime got the purchase dollars in treasury bills and earned enough on it last year to pay property taxes. Looks like it’ll be the same this year.
You are thinking in terms of supply-side econ.
This is different. The US and Mexico are going for economies of scale. People can be paid better with very little price inflation. The factories are paid for quicker having more orders and exports. This is a spiral. Energy and resources are contracted at better prices relatively speaking.
Think again. I had a 4-cyl/turbo Dodge Caravan. Got it at 10 yrs old–with 150k highway miles on it. Drove it for some years (still going strong) when a real b0z0 in an F-150 rear-ended me at 40mph (in Jan in MN on icy roads–a car had stopped to make a left turn, so there were 3-4 of us in a line behind him) while I was stopped behind a Cadillac SUV. Pushed my vehicle into the Caddy, destroying my front end up to the radiator. Minimal damage to SUV. My engine ran non-stop through-out the accident. Insurance company totalled the car as it was undrivable (no front lights of any kind due to the accident AND rear of vehicle a big mess). Yet it still ran great. I hated to lose that car.
Toyota makes pretty good vehicles. They DO stand behind them. A friend buys a new Toyota when he needs a new vehicle–for that reason. Got a 2022 Rav4 gas/electric that gets 52mpg. He really wanted the hybrid Sienna, but there were none available for the foreseeable future. The Sienna would have been 12" longer than the dead Caravan he had, and he wanted the rear room to carry stuff. He did not really need the room because he realistically no longer is doing major repair work to his house. Most of it is done–at least what he could do. Everything else that needs to be done requires an outside contractor (permits, licensed installers, inspections, etc).
Did you do any towing with that 4 cylinder turbo Dodge Caravan ?
If so, how did it pull ?
I don’t tow a ton, but I do pull my utility trailer up a fairly steep road when doing some projects, so I like the power of the v6. It’s towing cap is rated at 7,000 lb’s.
