Speaking of offshoring... Chrysler and China

[Ladyhawk]

Chrysler may outsource new car to China (http://www.latimes.com/business/la-fi-daimler22apr22,1,187410.story?coll=la-headlines-business&ctrack=1&cset=true)

DaimlerChrysler plans to build Chrysler compact cars in China to export to the United States, taking advantage of wages one-18th those of U.S. workers.

That's nice. Unemployment is the highest in Michigan (auto world) than all of the country. Guess they're not worried about anyone in Michigan buying this new vehicle, if they develop it....since no one will be able to afford it.

And this....

"It's not so much a trend as the reality," said Bob Lutz, General Motors Corp.'s vice chairman. GM plans to make Chevrolet Aveo compact cars in Shanghai for overseas markets. "Anybody who wants entry into this low end of the market finds it can no longer be done in the U.S., it has to be done in a low-cost country."


Translation: look for GM to do the same thing.

Several folks here seem to be of the notion that this kind of offshoring isn't a bad thing; that, in fact, it's a good thing because it 'creates more jobs'. But, I can't believe that it creates the kinds of jobs it replaces.

I'm all for business being profitable but the auto companies have been fully or partially outsourcing assembly and other processes to other countries for years and I don't see where the American consumer is enjoying a lower price for the vehicle as a result. If anything, the prices keep going up!

Chrysler may or may not go through with this. But, if they do, can someone explain to me how this benefits the American worker? I know how it potentially benefits the American consumer but that's assuming said 'consumer' has a job that hasn't been taken by some other country...

Am I missing something here? :(

[Grammatron]

I don't know if you noticed it, but the North American auto market, especially GM has been horrible in the last few years. The only way they can keep from going under is to cut costs.

My understanding is that a lot of the manufacturing rising costs has to do with Unions.

[AlH]

From http://64.233.187.104/search?q=cache:OH5vbz5UnRoJ:www.assemblymag.com/CDA/ArticleInformation/coverstory/BNPCoverStoryItem/0,6490,146242,00.html+Buffalo+News+Autoworkers+pai d&hl=en&ie=UTF-8

Meanwhile, Jeffrey McCracken, writing in The Buffalo News recently, cited a Detroit Free Press survey showing that about 10,000 autoworkers in the United States and Canada are getting full wages and benefits not to work. All are hourly workers on long-term layoff from the traditional Big Three automakers and their biggest supplier, Delphi Corp., and are in so-called jobs banks. The jobs banks have been around since the 1984 UAW contract, he says, but pinning down the exact number of workers in the jobs banks isnt easy. The automakers don't like to broadcast that they are paying people not to work, and the unions and the workers don't like the negative publicity either. According to McCracken, some UAW workers say they like being paid for not working, while others say they find it frustrating and embarrassing.

The buffalo news artcle is not available anymore.

If they can offshore half or three-quarters of these 10,000 jobs they could save a lot of money and I'll bet the startup costs to move them overseas would be very little.

[Tony]

Originally posted by Grammatron
I don't know if you noticed it, but the North American auto market, especially GM has been horrible in the last few years. The only way they can keep from going under is to cut costs.


Or build better cars...

[Grammatron]

Originally posted by Tony
Or build better cars...

Better than what? GM already builds quality cars.

[Cleon]

Originally posted by Grammatron
Better than what? GM already builds quality cars.

Compared to Matchbox, maybe.

I'll stick with my Honda. It'll last longer than I will.

[Tony]

Originally posted by Grammatron
Better than what?

Better than the crap on wheels they currently produce.

GM already builds quality cars.

I guess quality is conditional on how you set your standards. You can have the crap, I'll take the Hondas and the Toyotas (where are they made again?).

[Grammatron]

Originally posted by Cleon
Compared to Matchbox, maybe.

I'll stick with my Honda. It'll last longer than I will.

Oh yeah I bet it would because I am sure you(Cleon and Tony) have facts to back it up and not using common believes from the way they built cars in 1980's....nop, no way that's true...

Originally posted by Tony
I guess quality is conditional on how you set your standards. You can have the crap, I'll take the Hondas and the Toyotas (where are they made again?).
In Japan, certain models have final assembly in USA.

[Tony]

Originally posted by Grammatron
Oh yeah I bet it would because I am sure you(Cleon and Tony) have facts to back it up and not using common believes from the way they built cars in 1980's....nop, no way that's true...


What do you know about cars?

[Cleon]

Originally posted by Grammatron
Oh yeah I bet it would because I am sure you(Cleon and Tony) have facts to back it up and not using common believes from the way they built cars in 1980's....nop, no way that's true...


Oh, for crying out loud. Every year Honda, Toyota, and Subaru appear on Consumer Reports' "most reliable" list. Occasionally, a Ford or two. I don't recall ever seeing a GM model on the list.

No, I'm not going to hunt through Google for this. Call me lazy, or crow that I'm not backing up my facts. I don't care.

[Grammatron]

Originally posted by Cleon
Oh, for crying out loud. Every year Honda, Toyota, and Subaru appear on Consumer Reports' "most reliable" list. Occasionally, a Ford or two. I don't recall ever seeing a GM model on the list.

No, I'm not going to hunt through Google for this. Call me lazy, or crow that I'm not backing up my facts. I don't care.

Well if you don't care why should I bother? :)

I don't have any stake in this or any American car company, I may drive American but given a choice I'd take a Lexus or Infinity model. I'm just pointing out that the myth about American cars having no reliability is just that, a myth. They've been building good, quality cars since about 1997.

Chrysler(Daimler-Chrysler) is barely American now. Most new models share a lot of the parts and platform as Mercedes. The new Chrysler 300 is basicaly last generation E-Class. Which is good considring the new E-Class has a horrible quality record.

[Grammatron]

Originally posted by Tony
What do you know about cars?

A bit, why?

[Cleon]

Originally posted by Grammatron
Well if you don't care why should I bother? :)

I don't have any stake in this or any American car company, I may drive American but given a choice I'd take a Lexus or Infinity model. I'm just pointing out that the myth about American cars having no reliability is just that, a myth. They've been building good, quality cars since about 1997.


Except we weren't talking "American cars." We were talking GM. As in:


Better than what? GM already builds quality cars.


Japanese cars--particularly Honda, Subaru, and Toyota--have consistently scored the highest in reliability. GM...Not so much.

[Tony]

Originally posted by Grammatron
A bit, why?

What does your expertise tell you about how they compare in quality?

[Grammatron]

Originally posted by Cleon
Except we weren't talking "American cars." We were talking GM. As in:



Japanese cars--particularly Honda, Subaru, and Toyota--have consistently scored the highest in reliability. GM...Not so much.

Hmmm, I wonder why JD Power and Associates rated 2000 Chevroler Malibu in Overall Long-Term Dependability above a 2000 Toyota Camry and 2000 Honda Accord.

[Grammatron]

Originally posted by Tony
What does your expertise tell you about how they compare in quality?

For the price American is better, although Koreans are catching up fast.

[Thanz]

Originally posted by Grammatron
I don't have any stake in this or any American car company, I may drive American but given a choice I'd take a Lexus or Infinity model. I'm just pointing out that the myth about American cars having no reliability is just that, a myth. They've been building good, quality cars since about 1997.
From this article (http://www.msnbc.msn.com/id/7119221/) U.S. automakers continued to improve their reliability last year, but Hyundai Motor Co. and other Asian companies still make the most trouble-free vehicles, according to a survey released Monday by Consumer Reports.

Customers reported an average of 17 problems per 100 vehicles for 2004 models from DaimlerChrysler AG's Chrysler Group, Ford Motor Co. and General Motors Corp., the magazine said. That was down from 18 problems per 100 in 2003.

Japanese and Korean automakers had a rate of 12 problems per 100 vehicles — unchanged in the magazine's last three surveys. European automakers, some of whom have battled quality issues in recent years, had 21 problems per 100 vehicles. That's up from 20 a year ago.
While each vehicle is different, Asian cars, in general, have better quality ratings. At least according to Consumer Reports, and I am willing to accept them as an unbiased source.

[Grammatron]

Originally posted by Thanz
From this article (http://www.msnbc.msn.com/id/7119221/)
While each vehicle is different, Asian cars, in general, have better quality ratings. At least according to Consumer Reports, and I am willing to accept them as an unbiased source.

The break down is a bit odd.

[Ladyhawk]

I've owned several Chrysler/Dodge vehicles in my lifetime. To date, my Grand Cherokee has been one of THE most dependable, reliable, comfortable vehicles I've ever owned.

Having said that, this possible move of Chrysler's still ruffles my feathers. If major corporations are going to continually shift work to other countries, where does that leave American workers? Yes, I realize the Union is blamed for a lot of the costs behind automobile production. But, doesn't that become a little bit of a cop out along the way? If the Big 3 are saving so much money outsourcing work, why aren't Americans seeing the price reductions (or at least stabilization) in the cars they buy? And why does it seem that the Big 3 target their sales campaigns primarily toward their own employees and not the general public? (That's always bugged me. If you're a Big 3 employee, there are all kinds of incentives to buy a car, but if you're not....) Maybe coz employees are the only ones that can afford them? :(

Further, are stockholders really seeing the lion's share of these 'profits'? I'm sure the CEOs and top execs are.

I suspect that if all the unions folded up tomorrow, Chrysler would still continue with its plans. As the article says, workers there (China) are paid 1/18th of what the average American worker makes. Assuming the average auto worker makes even $40/hr,(here) that's less than $3 an hour! (I know, there are benefits and SS to match and stuff like that, but, at $100/hr to make up for those costs, you're still looking at less than $6/hr)

Does anyone know if US labor laws protect these foreign workers at all? Can they file claim against Chrysler if they're injured on the job?

Edited for clarity

[SlippyToad]

Originally posted by Grammatron
I don't know if you noticed it, but the North American auto market, especially GM has been horrible in the last few years. The only way they can keep from going under is to cut costs.

My understanding is that a lot of the manufacturing rising costs has to do with Unions. Actually it's health care (http://www.msnbc.msn.com/id/7446005/site/newsweek/). You know, our best-in-world private system? Yeah, that one!

[joe1347]

In response to the surprisingly strong support of GM - I just looked through the list of GM cars (Chevy, Buick, Pontiac, etc.) and assuming that a buyer has around $25K to spend on a new car. I certainly didn't see anything remotely more appealling than a Honda, Toyota, Subaru, or VW. Certainly quality is an issue - especially those of us over 40 that remember just how bad American cars were in our youth - but GM just makes uninteresting/boring/dull cars. I wish GM made more desireable cars since the decline of GM has such a negative impact on the US economy. In my interpretation - desireable could be many things. Such as high fuel economy in a Hybrid - such as the Toyota Prius or the hip factor of a Mini Cooper.

As for the offshoring car manufacturing - obviously the US hi-tech industry who pioneered offshoring doesn't have a monopoly on greed and short sightedness. If American car manufacturers think that the Chinese car manufacturers will play nice and not end up a future competitors - just ask some of the earliest advocates of offshoring - such as Motorola about what happened.

[Iamme]

Originally posted by Ladyhawk
I've owned several Chrysler/Dodge vehicles in my lifetime. To date, my Grand Cherokee has been one of THE most dependable, reliable, comfortable vehicles I've ever owned.

----------------------------------------------

Bad science. One example doesn't evidence make.

For all I know you have 79,000 miles on your vehicle. When you hit 80,000 the timing belt goes ($300). At 85,000 miles the alternator goes (normal cost $150. In your case $300 because they have to remove half the engine to get at it.) 90,000 miles, the serpentine belts go. ($400 to replace them all because they have to jack up the engine to get some of them off). 120,000 miles your battery not only goes, but they find out it leaked and rotted out part of the engine compartment and you need extensive work due to a bad design of how they placed the battery. 140,000 the head gasket goes ($850 for one bank of cylinders and $1500 if your engine is a v-6 or v-8 engine woith 2 banks of cylinders). Then you find out that it costs you $100 to change the plugs because they made the engine so you can't get at them without removing all kinds of parts, special tools and jacking up the engine.) Etc., etc.

Or, maybe you are lucky with your vehicle, but on average, others who have your vehicle are having all kinds of problems with it. That's why you do need to read consumer guides on vehicles to know which are the best ones.

________________________________________________


(off topic) They had to dig up Beethoven. They found him with an eraser in his hand. They wondered what on earth he was doing with an eraser in his hand when someone sharply answered, "I think he is de-composing."

[Drooper]

Great, yet another economic woo woo thread :rolleyes:

The same people who would bridle at the abuse, misuse and ignorance of our sphere of knowledge in the physical sciences happily and brazenly toss economic nonsense around to support absurd claims.


As an economist reading threads like this I see the following written in front of me:

"off-shoring"
=> channelling spirits

"consumer' has a job that hasn't been taken by some other country"
=> nasty "sceptics" standing in the way of the massive benefits homeopathy could bring to people.

"Several folks here seem to be of the notion that this kind of offshoring isn't a bad thing; that, in fact, it's a good thing because it 'creates more jobs'. But, I can't believe that it creates the kinds of jobs it replaces"
=> people talk about science, but even science doesn't know everything. They can't prove it doesn't exist.

Repeat after me.

"It's trade, it's trade, it's trade".

[Ladyhawk]

Originally posted by Iamme
----------------------------------------------

Bad science. One example doesn't evidence make.

I didn't expect it to, Iamme. Several folks are questioning quality of domestic vs foreign. I was merely saying what my experience with Chrysler/Dodge products have been. Wasn't trying to prove whether they do/don't make a better quality vehicle...


________________________________________________


(off topic) They had to dig up Beethoven. They found him with an eraser in his hand. They wondered what on earth he was doing with an eraser in his hand when someone sharply answered, "I think he is de-composing."

Cute. Old. Very old...but still cute ;)

[Ladyhawk]

Originally posted by Drooper
Great, yet another economic woo woo thread :rolleyes:

The same people who would bridle at the abuse, misuse and ignorance of our sphere of knowledge in the physical sciences happily and brazenly toss economic nonsense around to support absurd claims.


As an economist reading threads like this I see the following written in front of me:

"off-shoring"
=> channelling spirits

"consumer' has a job that hasn't been taken by some other country"
=> nasty "sceptics" standing in the way of the massive benefits homeopathy could bring to people.

"Several folks here seem to be of the notion that this kind of offshoring isn't a bad thing; that, in fact, it's a good thing because it 'creates more jobs'. But, I can't believe that it creates the kinds of jobs it replaces"
=> people talk about science, but even science doesn't know everything. They can't prove it doesn't exist.

Repeat after me.

"It's trade, it's trade, it's trade".

And, as a person who is asking questions in an attempt to understand this situation, I find that economists often attempt to belittle those who ask and yet, still manage to avoid answering. But, I'm sure that's just my experience. ;)

I realize it's trade, it's trade, it's trade, Drooper. I thought the article I linked to indicated that I have some slight understanding of the economics behind Chrysler's decision. When you boil it down, my question is this (for economists, too);) ...

Is the short term profit worth the long term effect for America?

[Drooper]

Just use a sniff test, like you would for any woo claim.

Consider. The US has been increasing its trade with all manner of countries for centuries. This has been associated with a massive evolution in industrial composition of the economy over time (e.g. basic manaufacturing waning in US rising in your trading partners, same with textiles etc.).

But despite this, the economy is as close to full employment as it ever hase been and you generation enjoys a level of income and hence welfare far beyond the dreams of you ancestors. If this "off-shoring" was a problem, there would have been evidence that it was such many many moons ago.

Note, just as with woo claims, anecdote has no standing - as in "well [I/name] lost a job when their company off-shored"

[Ladyhawk]

Originally posted by Drooper
Just use a sniff test, like you would for any woo claim.

Consider. The US has been increasing its trade with all manner of countries for centuries. This has been associated with a massive evolution in industrial composition of the economy over time (e.g. basic manaufacturing waning in US rising in your trading partners, same with textiles etc.).

But despite this, the economy is as close to full employment as it ever hase been and you generation enjoys a level of income and hence welfare far beyond the dreams of you ancestors. If this "off-shoring" was a problem, there would have been evidence that it was such many many moons ago.

Note, just as with woo claims, anecdote has no standing - as in "well [I/name] lost a job when their company off-shored"

Let me try again.

Michigan (where I live) has the highest unemployment rate in the country. It is not "as close to full employment as it ever has been". We also know that commonly accepted unemployment rate statistics are underestimated since they don't account for those whose unemployment benefits are exhausted, right?

Many folks here who don't have a problem with offshoring insist that 'new jobs' are created in the wake of the offshoring. I have posed the question (on several occasions) as to whether these new jobs pay similar to those replaced? No one has directly answered this.

Let's take the IT industry, for example. A great deal of IT is being outsourced. What are these programmers supposed to do? Get a second college degree in economics? (just kidding) If you've seen some of the threads posted in the Forum, you'd see there are folks here with PhDs and other degrees from different disciplines who have been unemployed for months and are looking at menial positions to support their families. This is a good thing? What do you tell a 50+ old lathe operator when he is laid off because the Big 3 don't need as many parts anymore. His profession used to be called a 'skilled trade'. What is the light at the end of the tunnel for him/her?

In one of my responses on this thread, I indicated that there seems to be no way to compete with China when their workers make 1/18th of what an American worker earns. Seems to me (and I admit that I'm no scholar) that the more workers we displace, the fewer we will be able to re-place if this trend continues. Either that or our standard of living in America is going to go way, way down over the next decade or so.

And as to whether offshoring makes economic sense for the Big Three, what kind of economic sense did GM make by losing one billion over one quarter?!? Offshoring didn't seem to help them there. Focusing on the Hummer (and other large SUVs) during a time when fuel prices were erratic just sounds like plain old irresponsible management to me. Yet, American workers will take the hit for this FUBAR everywhere.

To say it 'has no standing' when someone indicates that they lost their job due to offshoring makes no sense to me. It has standing to the person who lost the job. It's quite real to them and there seems to be more of them lately.

I'm not trying to pick a fight with you, Drooper. You're an economist and I respect that. I'm also trying to unabashedly take advantage of your perspective. I know you may think I'm taking a "sky is falling "attitude. I think you're taking a "we'll jump off that bridge when we get to it" position. So, if I'm wrong, I'd appreciate you showing me what positive contributions offshoring has made for the American worker. Coz I just don't see it. :(

[WildCat]

Originally posted by Ladyhawk
Let me try again.

Michigan (where I live) has the highest unemployment rate in the country. It is not "as close to full employment as it ever has been". We also know that commonly accepted unemployment rate statistics are underestimated since they don't account for those whose unemployment benefits are exhausted, right?
Could it be that Michigan goofed by having an economy based almost entirely on the auto industry? Or labor unions inability to accept short term pain for long term gain decreased their company's ability to compete against foreign manufacturers (by resisting automation)? If the Big Three kept all their jobs in Michigan come hell or high water, would they still be viable today? It's not just Asia that attracts auto plants, but Tennessee and other southern states.

Ladyhawk, at the end of the day someone actually has to buy those cars or there will no longer be a company or any auto jobs at all. This seems to be the part of the equation you are ignoring, or wishing wasn't so.

Perhaps Michigan should pass a law requiring every adult resident to buy a new Ford or GM vehicle every 3 years, that oughta fix it!

Also, unemployment rates count those who are out of work and looking for a job, it has nothing to do w/ whether or not they collect unemployment benefits.

[Kaylee]

Originally posted by Drooper
Repeat after me.

"It's trade, it's trade, it's trade".
OK it's trade. However, it seems to be easier for a large and even a medium sized corporation to pick and choose where to hire people worldwide than it is for an individual to pick and choose where to work. For example, most individuals would run into paperwork problems if they tried to cross borders for employment. It's a global labor market -- but in one direction only.

Corporations and industries are often protected with government's tariffs and subsidies. The equivalent does not appear to exist for individuals.

The USA federal govt. (actually USA taxpayers) bailouts for corporations have included the airline industries (http://www.tompaine.com/feature.cfm/ID/4556) and Chrysler (1970 - 1980) ( http://www.pipeline.com/~rgibson/VincentChinChrysler.htm). (See also this web page (http://www.findarticles.com/p/articles/mi_m1282/is_n23_v42/ai_9224646).) Here's another web page (http://uhavax.hartford.edu/doane/Corporate%20Welfare.htm) on corporate welfare programs.

Newspapers occasionally report that Senators and Representatives (both on the state and federal level) habitually tack on tax bill reductions for specific corporations at the end of bills right before its time to vote.

The wage gap between CEO and employees continues to grow and this article ( http://www.faireconomy.org/press/2004/EE2004_pr.html) showed that USA CEOs paychecks are highest at companies that offshore their jobs.

Its trade and the big boys are doing a good job cutting good deals for themselves. Because they needed to rely on the local employee market and the Labor movement created a sizable middle class in the early 1900s -- a lot of individuals in the USA did get side benefits.

However, unless there is political change (again, like there was in the early 1900s), there's no reason to expect to see that to continue to be the case. And hey, you never know, offshoring economists may be on the agenda one day too. ;)

Edited to fix link.

[Kaylee]

Originally posted by WildCat
...unemployment rates count those who are out of work and looking for a job, it has nothing to do w/ whether or not they collect unemployment benefits.

I have never heard that before. How are these people counted?
Just to be clear what I've heard is that the unemployment rate only includes people who are currently collecting unemployment insurance.

Also don't forget that this time around (for this recession) many people have had to downgrade to work that requires lower even only clerical skills, or only be able to get part-time work, or occasional work.

[Ladyhawk]

Originally posted by WildCat

Ladyhawk, at the end of the day someone actually has to buy those cars or there will no longer be a company or any auto jobs at all. This seems to be the part of the equation you are ignoring, or wishing wasn't so.

Ignoring it? Hardly, my friend. it has me greatly concerned. Is the rationale, then that unemployed workers are in a better position to buy cars than employed ones?

Also, unemployment rates count those who are out of work and looking for a job, it has nothing to do w/ whether or not they collect unemployment benefits.

Not exactly.

How is the unemployment rate calculated? (http://dli.state.mt.us/resources/howrate.asp)

The unemployment rate has specific limitations. It can't differentiate between full-time and part-time jobs. It doesn't account for people who are underemployed, or working in jobs for which they are overqualified because they can't find a good job. It won't tell you how many people have become so discouraged in their job search that they have given up hope of finding a job.

Economists concede that there is a margin of error in the rate calculation. Because of budget limitations, the Bureau of Labor Statistics cannot conduct household surveys in each labor market. Rates for small areas are less precise than larger areas. Although it's not 100 percent accurate, the unemployment rate provides a reasonable approximation of what it is supposed to measure. All states use the same method of calculating the unemployment rate.

Note: It won't tell you how many people "become discouraged" from finding work. In other words, 'become discouraged' or 'can't find work'....for the same reason. Outside of some surveys, the BLS relies on info reported by the States via unemployment compensation claims. Hence, when an unemployed worker can't claim benefits anymore, they don't report anymore. The assumption is that they returned to work.