A new study by the Harbour Felax Group indicates General Motors lost an average of $1,271 for every vehicle it sold in the United States and Canada last year. Ford, meanwhile, lost around $451 per vehicle, while Chrysler squeezed a narrow profit of $144.
Comparatively, Toyota profited $1,715 per vehicle and Honda made $1,259. Nissan’s profits were even stronger at an average of $2,135 per unit sold. Harbour Felax says U.S. automakers could greatly improve their profit margins by stabilizing pricing, cutting back on incentives, and reducing warranty costs. For example, the study shows Toyota’s warranty costs at $348 per vehicle versus GM at $512, Ford at $585 and the Chrysler Group at $595.
Even more money could be saved through commonization of platforms, body architectures and components, the report said. Toyota has apparently saved $1,000 per vehicle over the last five years by commonizing commodity components, the research firm said.
Health care also plays a significant role in the labor-cost gap. Detroit automakers pay a heavy penalty for health care benefits for both active and retired workers. The study sites Toyota’s competitive advantage in this area ranges between $900 and $1,400 per vehicle.
“It’s time for the Detroit Three and the UAW to get together and resolve these problems,” Harbour said. “In addition, the government must step up and find a way to eliminate the huge cost penalty for health care for active workers and retirees.”
The study shows in 2005 Toyota had a $2,985 profit per vehicle advantage over GM and $2,165 over Ford with $1,570 over Chrysler. However, each domestic automaker has implemented strategies to close that gap. In 2006, the evidence shows these strategies are generating results for GM. In the first two quarters of 2006, GM’s North American profit per vehicle gap has improved by $846 per vehicle or 72 percent over the first half of 2005. Much of this increase is due to the improvement in revenue per vehicle which went from $19,977 for the calendar year 2005 to $23,604 for the first half of 2006. In comparison, Ford had a $599 drop in performance in the first half of 2006, losing $738 per vehicle in North America while revenue per vehicle was relatively constant.
10/03, 11:09 AM
posted by:
Asher
Okay then, instead of losing $1200+ from selling me a car, I propose GM pays me $500 to NOT sell me a car. At least we’d both make more money this way. Anyone else want in on this deal?
10/03, 11:20 AM
posted by:
peter g
Fantastic idea…I’ll not take two, please! Make that not 22…
10/03, 11:33 AM
posted by:
YourNameHere
i 2nd that. if it means saving GM i will take the 500 bucks….
10/03, 11:35 AM
posted by:
Chris C.
This study was based off information collected in 2005. Has anyone checked their calendars lately? It’s damned near 2007. I don’t think it’s any secret or any great revalation US Automakers were in big trouble then. It appears it’s still much the same situation for Ford and DC however; there’s a much different picture for GM who recently reported (as seen on this very site) for the first time in um-teen years a profit on their compact car lines.
10/03, 11:37 AM
posted by:
zan
Hmm, I know I am not a financial genius or anything, buit what if they sold the cars to the dealership at least at say the cost of the vehicle?
In all seriousness I think the problem is they need to make less cars and try to find the number that is closer to demand rather then trying to increase demand with incentives
10/03, 12:27 PM
posted by:
Kenny W
Umm…zan, thats what they’re doing (at least GM is). This is based off of old information and in fact has already been stated before. Reports of this kind where coming out in 05. It amazes me that these companies are being paid to report old news that your average car enthusiast could tell you. I’m in the wrong field of employment.
10/03, 12:28 PM
posted by:
JC Whitless
Asher, better yet, I’ll have GM pay me $450 instead of paying you $500 for the car…
10/03, 12:57 PM
posted by:
Ricardo Head
Real tough study …
.
… Total Loss ÷ Number of Cars sold = Loss Per Vehicle.
.
What rocket scientists. As for their fantastic conclusions, they are pretty much the same thing everybody knows anyhow. How do I get a job reiterating the obvious like these Harbour Felax Group nimrods?
10/03, 1:26 PM
posted by:
Random Jerk
I got another study, conducted via partnership with Auto Trader Magazine: Domestic owners are losing huge money on every sale in the used market as well.
10/03, 1:28 PM
posted by:
Jon
One of the big questions is whether the looming legacy costs will weigh down Toyota in 10 or 20 years time as it has the big three.
Health care costs continue to rise and nobody has the answer.
10/03, 2:09 PM
posted by:
novicius
…and Random Jerk scores again! LoL
10/03, 3:28 PM
posted by:
JC Whitless
“Health care costs continue to rise and nobody has the answer..”
Kill anyone over the age of 55…Force a form of permanent retirement!!
10/03, 7:03 PM
posted by:
James
This is a flatout lie the USDM isn’t losing anything.
10/03, 10:02 PM
posted by:
chuckles
James…James…James – there is help for your condition.
Ok, first consider the fact that Japan has leveraged the US dollar against the yen and nobody wants to do anything about the Japan-imposed US trade deficit.
US consumerism of foreign products is adding to the lining of Japan’s pockets and the demise of the US industrial and economic infrastructure – when will we wake from the slumber? I hope not before it is too late.
Of course Toyota’s warranty costs are lower, I worked in a Toyota dealership several years ago and Toyota management’s philosophy first was that if there was a problem it was not their product, but owner neglect or abuse or an outside cause. Toyota is very difficult to get to pay for warranty claims – and forget about ever getting an after-warranty adjustment! This is classic to the same legacy that Detroit had in the 60’s thru the 80’s. This attitude will catch up with them eventually.
10/03, 11:30 PM
posted by:
Kaizen
Chuckles, you haven’t explained how Toyota and Lexus have the highest customer satisfaction levels at dealerships while blaming the vehicle’s issue on “owner neglect”. The fact is that they break less; and when they do, the dealership fixes it correctly the first time. Toyota designs the best components and work together with the best suppliers in the world to lower the cost on the dealership end. It’s all part of the TPS.
Sure, combining costs by sharing components is dangerous; that’s why Toyota has the most amount of recalls in industry right now. They share a substantial amount of parts across the world to reduce cost that eventually trickle down to the service drive.
10/04, 12:20 AM
posted by:
Vertical
On a non-related topic, what do you guys think about Dodge’s quality these days (I ask because many of you seem to be pretty knowledgeable about the auto industry)? I love the Nitro, and may want to buy one eventually.
10/04, 5:58 AM
posted by:
Veda
“US consumerism of foreign products is adding to the lining of Japan’s pockets and the demise of the US industrial and economic infrastructure – when will we wake from the slumber? I hope not before it is too late.”
It comes down to your willingness to buy inferior products which I have very little of.
10/04, 8:52 AM
posted by:
chuckles
Wake up veda…