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Make it here if you want to sell it here!

Discussion in 'Chrysler Chat' started by Andy4.7, Jan 3, 2017.

  1. LouJC

    LouJC Member

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    Deming offered his knowledge to both the US and Japanese manufacturers but the US companies felt that they had (at the time, early 60s) their captive market and chose not to listen. Contrary to popular belief, Japanese auto quality in the 70s was far from great. In fact, the VW Beetle still was selling well till the mid 70s because while Japanese cars were selling, the quality was actually quite poor. They did not become what I'd consider good, till the mid 80s. What helped their sales greatly was the huge ramp up in oil prices from the 2 oil shocks, 1973-4 and 1979. Another factor was by the mid to late 70s the VW Beetle was having trouble meeting both emissions and safety regs. It was replaced by the VW Rabbit (Golf) and while it was modern, fun to drive and economical, the formerly good VW quality plummeted and this damaged their reputation. This and the fact that US companies still were not serious about building good small cars, gave then an opening. People who had Japanese cars back in the 70s knew that they rusted fast (far worse than most US cars), blew head gaskets often, and the dealer service was often lacking.
     
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  2. duster92

    duster92 Active Member

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    People haven't mentioned here that Japan has been in a prolonged slump. In fact it is in recession again. I think part of this is due to their protectionist economy. One of our most protectionist Presidents was...Herbert Hoover.

    It is misleading to blame the loss of US Manufacturing jobs entirely on "globalization" and "free trade." AUTOMATION has also played a MAJOR role in killing off manufacturing jobs.

    It is interesting to see some diehard Mopar members wanting to deport Japanese car owners when FCA is a Dutch company that makes cars in many different countries.
     
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  3. AC TC

    AC TC Active Member

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    Biggest parts of Heavy industry problems:
    - short term profit ( x 10 or so...)
    - lack of development.
    - changing markets. ( news and fine paper for example, the entire market is almost disappering and itt was a huge several million tonne market in 2005. There were investments in new capacity to trie to meet the raising problems but the market has almost totaly collapsed.)
    What have made Germany, Sweden, etc succsesful isnt low wages or lack of benefits for the workers.
    - Its a longterm commitment whithin the industry, developement, automation and so on. Stable governements, stable economics, education and Healthcare etc has also played a major role.
    - They have given up on some jobs like textile were workforce costs play a wery large role and let these jobs go to other countries. This is a smart move since it keeps the livingstandard up for the lowest part.
    Dont blame Europé, Mexico, Canada or Japan for your problems because thats not true...
     
  4. Lee N. Burns

    Lee N. Burns Member

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    Instead of posting what you "think", try doing a little research. Japan's stagnant economy is largely due to an aging population with fewer working-age adults. (Incidentally, this afflicts all western nations to some extent.) When you measure growth relative to adults participating in the workforce, Japan's growth is on-par with the US and better than the EU. Because interest rates are low, and the economy is deflationary, there is little incentive for investment so the older population hoards cash. Being risk-adverse means no one is building skyscrapers or inventing the next iPhone gadget.

    While Herbert Hoover gets the rap for "causing the depression" along with the infamous Smoot-Hawley tariffs, the real causes are much deeper than the sound-bite used by power brokers looking for cheap labor. First of all the stock market crash of 1929 arrived 8-months before Smoot-Hawley was signed into law. What made the depression stick around so long was the collapse of credit and then banks throughout the Midwest (farms). American farmers had for years gotten top-dollar for their crops as Europe recovered from WWI, and had purchased additional land and modern equipment. As European farms came back on-line, commodities prices fell, which led to more American overproduction. Eventually farmers couldn't pay their mortgages, fortunes were lost and banks failed. Because Europe's economy was still faltering, it's doubtful they would have been purchasing much in the way of manufactured goods from the US, reciprocating tariffs or not.

    Next we have the most recent talking point telling us another reason not to care about manufacturing... Automation. Yet as someone who's been around a few years, this feels oddly recycled, from about 1985; when robots really came on strong. We get it... An assembly plant is never going to employ 10,000 people again as it did when building WWII bombers. But people still need to design, build, service the robots. Someone needs to design, fabricate and test the products. We need people for back office functions. None of those jobs exist without a manufacturing base. They are the highest dollar value jobs, and they never leave their "home nations" in meaningful numbers.
     
  5. Lee N. Burns

    Lee N. Burns Member

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    And protectionist economies. Again, I quote the great leader...

    Globally, our industry has the capacity to produce around 94 million cars a year—some 30 million more than we can typically sell. About a third of that capacity resides in Europe, where the automotive industry remains virtually the only sector that has yet to rationalize production. Europe utilized 75 percent of its capacity last year, a number that may shrink to 65 percent this year. The reason, simply put, is that European manufacturers simply do not close plants. The reason for that, in turn, is that they simply do not have to. In fact, they’re often paid not to. The last time a German plant shut down, World War II had yet to begin.

    This problem coincides with European governments’ apparent determination to make the automotive sector the last bastion of economic nationalism on the continent. More than half a century has passed since the Treaty of Rome was signed, yet European governments continue to act as nursemaids to their domestic automakers while discriminating against those of other countries. Their motives for doing so may be admirable. Preserving jobs is one—but ensuring that human needs are met is an imperative all of society must meet, not one to be forced, inefficiently and ineffectively, on industries that can only do so artificially.
     
  6. rapidtrans

    rapidtrans Member

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    Trade Agreements, wages, safety, emissions yada, yada, yada.....
    Simple guy that i am, i purchase cars built or designed by family, friends and neighbors! Anything I might want or need is built by the Big Three and VW.
    I don't ever want to see the many forclosed homes in my neighborhood again.
     
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  7. MJAB

    MJAB Active Member

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    Sorry but the VAT has nothing to do with the pricelist difference, since is the same for al cars.
    1) the VAT is applied on all products sold within European Union, it is, for example, 19% in Germany and 21% in Italy, and is applied on every car sold inside the European Union.
    VAT = value added tax. It is applied at customs to importer based on the price listed in the invoice (for example FCA Italy). When the importer makes his invoice to the dealer, for example a Fiat dealer in Milan, than the VAT of 21% is applied again and so another time when the dealer sell the car to the final client.
    But there is no double, triple taxation since the VAT is a "neutral tax" for a company. The company periodically transfer the VAT collected in its transition discounting all payed VAT on purchases from all VAT received from its clients, so transferring to state the difference of VAT in - VAT out.
    It is more complicated than that, since there are different VAT level, exception for caritative organizations, fundations, ...
    2) there is a tariff of 10% on imported cars (the Wrangler is a car as the Cherokee, ...)
    3) vehicles has to be certified in Europe (it is not per model year as in U.S.A.), so more You sell more the amortization of that costs is spread between cars
    4) In Europe for most are sold diesel Cherokees, so You have to do armotization of R&D costs + certification also for diesel models. notes: Sales are for most with diesel engines.
    5) Jeep in Europe is positioned as "premium brand", so You should look at another premium brand, like, for example Audi.
    6) None pays a car at pricelist (MRSP), the discount made at a Jeep dealer, at least in Italy is about 7-9% on an ordered car. Than You have also the "km 0" cars, that are the ones You find at the dealer (or that are arriving ordered by dealer or imposed by manufacturer), that have higher discounts.

    If You want to see real prices, for example, look at autoscout24 website, that is a search engine for cars covering many European Union countries.
     
    Dave Z likes this.
  8. Dave Z

    Dave Z It's me, Dave Staff Member Supporter

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    MJAB is absolutely right. Also, before someone starts going on about the evils of VAT, I need to put in the obligatory “you pay one way or the other” comment. Monthly bills for health insurance plus various other taxes, vs VAT.
     
  9. Lee N. Burns

    Lee N. Burns Member

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    The double-taxation occurs when "It is applied at customs to importer based on the price listed in the invoice". This is what we would call the Manufacturers Suggested Retail Price (MSRP). When a US manufacturer determines that price it is made of these elements:

    1) Materials
    2) Labor
    3) Overhead Costs
    4) Desired Profit Margin

    The devil is in 2 & 3, because they include any US taxation the company pays. Some labor examples might be:

    a) The employer's portion of Social Security taxes for X number of people required to produce a salable product.
    b) State Unemployment Insurance for those same people.
    c) Taxes borne by the employer for certain fringe benefits.

    On the overhead/capital side, they would include:

    a) Taxes paid to local units of government for real estate (the land a factory sits upon)
    b) Taxes paid to local units of government AND the Federal government for equipment.
    c) Taxes paid to the Federal government for material inventory.

    All of these costs are "baked into" the MSRP. The European and Asian model is quite different. Here, taxes are paid at every step where Value is Added (thus the name). I'm not sure of the taxation at each level; let's say for example a supplier who stamps coiled steel into a useful bracket, but the total should amount to 19% (in Germany). The exact mechanism isn't as important as these simple facts...

    When a VW leaves Germany for the US, the German government rebates the 19% tax to Volkswagen, because that unit of production isn't considered part of the European system. When a Jeep arrives in Germany, the 19% tax is applied to the MSRP, so "the Jeep" is generating tax dollars for the US and Germany. It also has the desirable "side effect" (lol) of raising the price of imported vehicles in the German (and EU) market.

    In case you think I'm making this up, click this link and have a guy with an economics PhD explain it to you.

    This is exactly what SM speaks to when he talks about European governments acting as "nursemaids to their domestic automakers". VATs also exist in Asia, but they're not even the worst barrier to trade in those regions.
     
  10. duster92

    duster92 Active Member

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    I have a history degree from a highly competitive University. You can make your point without talking down to me. I have been to Japan recently. I know how things work there. It is not all old people hoarding cash, I assure you. Their protectionism doesn't help their economy. It has hurt it. No question.

    The Great Depression had a lot of fathers. The instigator of the Depression in my mind was not Herbert Hoover. It was the Treaty of Versailles. The debt destroyed Germany and the world economy. It allowed Hitler to rise to power. Woodrow Wilson tried to ease the burden on Germany. However, Britain and France wanted harsh penalties which is understandable. At that time, nobody knew the adverse effects that would occur by destroying Germany. Most of us do not realize how interconnected world economies are today.

    Yes, people need to fix robots, but a lot of those jobs can be done remotely or by contract employees. They can design robots in India. They can service the software remotely in India. Automation has wiped out a lot of jobs. That is not a point that can even be argued. This is not 1985. Not by a long shot. It is much worse. It is a major problem, in my mind. It is not just auto workers. Truck drivers and taxi drivers that are threatened. Not everyone is geared for college. How do they survive? How does our economy survive when people don't have the money to buy anything? No politician talks about it. They have no answers.

    We make such a big deal about auto production in Mexico, but nobody is mentioning anything about Canada. Why?

    I do think we should pressure American companies to produce in America. I am not against renegotiating trade agreements. However, we must remember the lessons of The Treaty of Versailles. Every Action Has An Equal And Opposite Reaction. It is one of the laws of the universe. Ignore it at your peril.
     
    Dave Z likes this.
  11. Dave Z

    Dave Z It's me, Dave Staff Member Supporter

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    @duster92, We don’t get upset by Canada because they have strict environmental rules, high levels of education, similar tax structures and freedoms, and health care for everyone — in short, they are on a much more level playing field than Mexico. The Canadian government does not shoot or jail strikers or union organizers, and they don’t dump toxic waste into the middle of a village.

    As for the Great Depression, there were many factors, but also remember that the US had normal cycles of recessions and depressions, complete with bank failures, until FDR. He is the reason we remember the Great Depression — well, FDR and the Dust Bowl. There were horrible economic devastations in the US of similar scope, without the collapse of small farmers in the midwest, before, but thanks to FDR, when banks failed in later times, people did not lose their savings, so the real impact was far smaller; and we now had food stamps and such, too, which have a major impact. And, again, the whole Dust Bowl thing only happened once.
     
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  12. MJAB

    MJAB Active Member

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    I read the article You linked. What could I say, better I say nothing about since he doesn't essentially understand how taxation works in "VAT countries", that are 137, well that what Mr. Corsi writes.

    Some notes:
    1) in "VAT countries" all goods imported or not imported pay VAT tax. There are different taxation (as percentage applied on total value of the good + eventual transport), based on product, for example milk, bread, ... have lower taxation. Usually pharmaceutical products (not all) are not taxed by VAT.
    2) VAT is (in theory) a neutral tax for companies, since the taxation is on the good sold to final user.
    3) not all countries, even inside European Union, has the same rules at what time the VAT is paid.
    For example in Italy You pay VAT at every step (every invoice -> VAT) and, if You are not paid for any reason by your customer, You have to pay it (every month for big companies or three months for smaller, professionals, ...) and than You could after two year ask for rembursement (and maybe You'll wait 10 years to have back your money.. there are around 35 Euro billion of taxes non rembursed to companies in Italy).
    4) for sure an U.S.A. citizen doesn't understand VAT, since U.S.A. taxation system is made to favour purchase of goods and services by final customers (citizens).
    5) You made an export example of a vehicle pricelist or MSRP, why do You think is different for a local european company? At customs a company like FCA does not pay on MRSP, but on the value of the good that is in the invoice of FCA US LLC that for sure is not the price that You , as customer, pay your car.
    The pricelist You see for cars sold in European Union countries is retail the equivalent of MSRP, better to say is similar since what we in Italy is named "prezzo chiavi in mano" (price keys in the hands) include vehicle cost, destination, VAT and any other cost the dealer will charge (the only excluded costs are some small taxes, up to few hundred Euro and registration of the car). This was made so customer had an exact idea of final price of a car without hidden costs not showed with relevance in advertisement.

    Do You really think that here in Europe, and even more in some countries like Italy, there are no taxes on real estate, on labour, on financial service, on loans, social security, insurance of the workers, solidariety funds (for larger companies) for crisis on the sector (economic substain for workers of companies in trouble), ...

    And about Sergio Marchionne and countries government nannies of their automotive industry, well that is more about that that governments, jut to say two names Germany and France, are always ready to go against other companies of other European Union countries when there are infractions or are in difficult situation (no public aid rules).
    This same countries, when for example PSA had troubles, were ready to give aid out of general euuropean rules, with France making an Euro 7 billion loan to PSA and Renault (the last that is since decades partially owned by state) or Germany and France, very influent in BCE, making so that VW, BMW, ... knew before time and pushing them to transform their financial companies became banks so to get loans from BCE at 1% (FCA no since they didn't knew, now they have a bank, but they arrived two years later since a bank creation is no simple).
    Well than Germany and VW scandal, is well known, maybe by not so many, that they started a discredit campaign towards others in the intent to le pass "all guilty, none guilty".
    And before VW scandal, Germany, that always painted themselves as the ones that care about environment, blocked the new rules on car emissions (later we understood why).

    Maybe You should more worried about tax avoidance by large companies, even more for the ones in immaterial sector (for example Google, Apple, financial services, ...).
    Or maybe You should ask which country had increased most in last years the total wealth.
    Maybe You'll find some surprises and the flows maybe should go in a different direction.
    Or maybe it is that instead of looking outside one should look inside, who knows :)

    Publications from Credit Suisse, not some "fanatic sovversive" group.
    Publications
     
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  13. Lee N. Burns

    Lee N. Burns Member

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    I do apologize if you feel I was talking down. Obviously you have an appreciation for history, but really there are numerous pieces written on Japan's "Malaise Era". None that I've ever read talks about them suffering the ill effects of protectionism. In fact, I've explained many times on this forum that their electronics industry exists (and ours doesn't) because of it. You raised the idea of Herbert Hoover as protectionist; his infamy comes from the Great Depression. I don't think his policies caused the depression and I'm glad you don't think so either.

    If being someplace gives you understanding... I've been in the auto industry for decades. Perhaps robots and their associated automation "can" be designed in India by contractors, but they aren't. I would say the bulk of that work occurs in the industrial centers of Germany, Italy, Japan and yes... Detroit. Why in the world should we abandon that? The fact that you think all software can be serviced remotely (created?) in India tells me that you must have no experience in manufacturing. Perhaps for a cell phone app, but not hundreds of millions of dollars in automated tooling. You're also not addressing the other points I raised... Design, prototyping, development, testing, etc. Real physical objects, not lines of code.

    Truck and Taxi drivers are performing services... Isn't the service economy what's supposed to take the place of manufacturing? Weren't we all supposed to Uber each other around; grooming dogs, mowing lawns, eating at restaurants... producing nothing, yet somehow creating wealth?

    Finally I wish I could agree with your assessment of the Treaty of Versailles, but unfortunately it's become an "excuse" for the rise of Hitler in Europe. I'm sure you're aware of the Weimar Republic. I'm going to cut/paste to save myself some typing...

    ...In 1924 the German government adopted a plan for German economic recovery prepared by the American financier Charles G. Dawes. The Dawes Plan attempted to coordinate German reparations payments with a program of economic recovery whereby Germany was required to make only limited payments until 1929. To assist with the recovery, the Reichsbank was founded, and foreign credit, mainly from the United States, was filtered into Germany. As a result, between 1924 and 1929 German industry and commerce made unprecedented progress, and both the standard of living and real wages rose steadily. The Dawes Plan also provided for the withdrawal of French and Belgian troops from the Ruhr district.

    In other words Germany wasn't being crushed with debt, and it had begun to prosper. The 1929 Depression had worldwide consequences, as you mentioned. Hitler capitalized on the sudden downturn and...

    the NSDAP {Under Hitler's leadership}, denounced the republic and the "November criminals" who had signed the Treaty of Versailles. The postwar economic slump won the party a following among unemployed ex-soldiers, the lower middle class, and small farmers; in 1923 membership totaled 55,000. General Ludendorff supported the former corporal in his beer hall putsch of November 1923, an attempt to overthrow the Bavarian government... Had it not been for the economic depression of 1929, however, Hitler might have faded out of Germany's history. The depression greatly augmented political and social instability. By 1932 German unemployment figures had reached more than 6 million out of a population of 65 million. The situation caused the middle class, which had not fully recovered from the inflation of 1923, to lose faith in the economic system and in its future. The NSDAP exploited the situation, making an intensified appeal to the unemployed middle-class urban and rural masses and blaming the Treaty of Versailles and reparations for the developing crisis.

    In other words, to merely lay the rise of Nazism at the feet of the Treaty of Versailles is to buy into Hitler's propaganda. Hitler easily could have, and should have, been stopped when he began to militarize Germany. The war-weary leaders of the British and French governments appeased him instead, allowing him to take Czechoslovakia.
     
  14. MJAB

    MJAB Active Member

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    I am personally favourable to a change in international trade agreements, because the system that there is now is too shift towards biggest companies (and most are U.S.A. based or controlled).

    Deloitte Touche Tohmatsu Limited - "2016 Global Manufacturing Competitiveness Index"
    https://www2.deloitte.com/content/d.../gx-global-mfg-competitiveness-index-2016.pdf

    Maybe the problem in U.S.A. is more about internal redistribution, changing rules that were made to favour few companies.
     
    Last edited: Jan 11, 2017
  15. hmk123

    hmk123 Active Member Level III Supporter

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