Originally posted by J Landrith:
RE:
http://www.joplinglobe.com/joplin_metro/local_story_318223348.htmlWhy the automobile makers are in trouble.
In 1968, I came back from Vietnam and bought a 1963 Chevrolet Impala covetable. I paid down $1,200, and financed the rest, for two years. I think payments were about $100 a month. After a few years, I got married, and we decided to buy a new car. We bought a 1973 Grand Prix Pontiac, it had a big engine, and fancy wheels, and we financed it for three years. When the payments were almost up, we bought a Volvo, it was about 1975, and again we financed it for three years, I remember the payments were about five hundred a month, which was rather high for the time. In 1981, I bought a Ford F-150, for $10,000, and financed it for four years. In 1993, in bought another F-150 for $20,000, and financed it for five years, that was the only way I could have afforded the payments. After that I bought a 1998, Chevy Suburban, used, and again financed it for five years. When I sold this Suburban, I bought a Chevy Avalanche for about $38,000, and again financed it for five years.
I guess you are wondering where I am going with all of this, but as years have gone by, the automobile makers, are selling less cars, for more money and by extended the loans to make the payments lower so people can afford them. My mother-in-law financed a new Mercedes for ten years, this means she is not going to buy another car for probable ten years, and she is probably paying $1,000 per month for a car ten year old. If people bought say 10 million cars in three years, and now buy the same amount cars in four years, that is 486,111 less cars sold the year the loan was extended. By increasing the loan time, they have to charge more for the cars, to make their profit.
The problem has now come to the surface, it is not gasoline prices, and it is people not being able to pay the money that the car manufacturers want for their new cars. When Henry Ford, first built the Model T, he said was building a car everyone could afford. The car manufacturers have built cars today that the average person cannot afford, and by reducing the number of cars to be sold, by increasing the years on the loans, have caught up with them.
The unions have not helped, every time they received a raise, the price of cars have gone up. When a person is being paid a high wage to do a menial task, we are hurting America’s production rating, and raising the cost for items that are not worth it.
In construction, my field, I have seen subcontractor that were doing well over the years, and then one day, they went out of business. The reason the went out of business, is that they gave their employees raises over the years, to the point they could no longer compete with other contractors for bid jobs. They were paying the workers more than the competition. Once this downhill started, the company, in order to survive, would have to fire all of the higher priced workers, and hire new cheaper ones. If they did not do this, they would be out of business.
Because we have only three major car manufacturers in the United States, they have only had to compete with each other. Now they have to complete with the American people, and bailing them out at this time, is not going to solve the situation, only prolong the agony. I am sorry to say, but someone is going to have start building new cars, at prices the Americans can afford. This means we are going to go though some hard times for awhile. So many people work for the car makers, it is going to cause a major unemployment issue for a long time.
I do not have a solution for the problem with the auto industry today, but the government has put so many regulations on building new cars, that is very difficult for new builder to come along. If you should visit the Orient, you will find cars that are more like motorcycles with passenger sitting. No air bags or seat belts. I am not suggesting we eliminate all of the new safety features that are being required, however we do not have seat belts on motorcycles and probably never will.
Joe Landrith
Springdale, AR
