According to the article discussing the Detroit’s Big Three obstacles, it is shown that General Motors, Ford and Chrysler are losing thousands of dollars on cars produced. Because of the retiree healthcare from which workers are benefiting from social advantages which conducted Detroit Big Three losing up to $ 1,500 per vehicle.
In my opinion, to be competitive, General Motors, Ford and Chrysler should respond to the market demand by offering diverse products, but it is a hard task to execute when the total dept is still increasing especially the retiree healthcare payments which were for about $ 7.5 billion for GM and $ 6.3 billion for Ford.
I also think that today’s situation is favorable for Detroit Big Three to gain an important increase in both sales and customer trust. Toyota’s last communication problem could help GM, Ford and Chrysler to change its customer perception especially the quality of domestic products by the way to increase national sales.
David Wech has published an article in Business Week Journal May 31, 2007 discussing the profitability and productivity of Detroit vs Toyota and Honda. When General Motors spent about 32.4 hours to build a car as well Honda, Chrysler was close enough by spending 33 hours in the same circumstances. However, domestic cars produced were as productive as Japanese cars. The difference is that Japanese are using more than 100% of their production capacity to build a car and have low expenses in comparison to Detroit’s Big Three. According to the same General Motors use 93% as well as Honda but Chrysler use only 88%, Ford 77% of its total production capacity.
This situation gives Japanese cars a comparative advantage and let U.S imports from Japan more frequently while domestic cars still in dump, suffering from federal depts and retiree healthcare expenses.
Written by: Redouane Boufous