GOT MY CDL! / And an Automotive Rant

Yesterday, I passed my CDL test! I'm now a CDL licensed driver in the US!

That's really all the trucking related info I have for today except that I'm going to be in Orientation Monday-Wednesday and then I'll be out for 6 weeks with my mentor learning the ropes with truck driving before I get my own truck to drive. WOOHOO!

And now, on with the rant....

(Gets up on soap box)

Todays topic of this Boober rant is the proposed "Big 3" US automaker bailout.

All I have to say is WTF? Why should Congress (and my tax dollars) go to bailing out private industry? Especially those assholes! Ford, Chrysler and (especially) GM deserve what they're getting now. It's been a long time coming and now they go whining and crying to the government for free money which they'll squander away on building a crappy product and in a couple of years time, they'll be back where they are now.

But let's look back for a moment and see why these companies are in trouble in the first place.

Back before the 1950s, domestic care makers had little competition (except from eachother) and everyone wanted their own car, so it worked out nicely. You'd go down to the local showroom and talk with "Pappy" or "Skip" that owned the place and you'd pick a car based on equipment and color, and to show how much he cared, the salesman would throw in floormats or some other "premium", making you think that you'd really gotten a "good deal". There was no haggling over sticker price and no real comparison shopping, so everyone was happy. The Automaker sold cars, the dealer made money, and you drove your new Chevy off the lot thinking you'd made a good deal and enjoying your new car.

Then the automakers opened up franchising dealerships to just about anyone and soon, Smalltown, USA had TWO Chevy dealers! Well, why would you choose one over another? First you'd go to Smith Chevrolet, where your family has been doing business for years. The salesman there was your contact in the car business and offered to throw in those free floormats and undercoating because you were a "valued customer". On the way home, however, you pass Miller Chevy, the new place in town with it's flashy showroom and slick salesmen. Just for fun you stop in to see what all the fuss is about and while there, Slicky McSalesman gets you into a conversation about buying your new car and tells you that he can not only get you those floormats and undercoating, but he can knock $50 off the price of that new car if you buy TODAY. So you go back to Smith Chevrolet and complain to your trusty car adivsor that Slicky offered you the car for $50 less and now, Smith must match or beat the deal to get the business.

Word of this soon got out... CAR DEALERS ARE FLEXIBLE! This action unknowingly began pulling bricks out of the domestic car manufacturer's wall...

Now, thanks to these antics of old, The big three will offer huge savings on cars to get you in the door. For instance, a new Ford F150 has an MSRP of $24,250, but you can get rebates and incentives of $5000 off the MSRP price. Most people's first thought is "Wow! That's a good deal". Is it? Really? Let's look closer.....

So now Joe Customer has a truck for $19,250 and newfound $5000 in his pocket, right? Nope. Slicky's Grandson now works at the dealership and talkes Joe Customer into a Toneau cover for his new F150 and maybe some alloy wheels and an extended warrenty! Cost of add on products is (let's guess) $4500. Now Joe will be financing $23,750 and thinks he's in good shape because he's still paying less than MSRP and getting all those extras to boot. So Joe finances the $23,750 plus tax and tags for a total of $25,387 (figuring $200 for tags and 6% tax)

Not a good deal now, is it? Joe's just put himself on the hook for just over $25K, but that truck is only worth 19K. This is already a $6000 difference. Now Joe drives his new F150 off the lot and a year goes by. Now that F150 is worth about 40% less than it costs new. (about $12,500) so now Joe is stuck with that F150 and it's loan (now about $24,900) for the next 4 years at $500 a month.

Now do you see why people don't want cars from these people?

But why did Joe's truck's value drop like a stone? Several reasons...The same reasons that contribute to the US auto indstry demise.

Over Competition- This drives down the price of the cars, but it also drives down the value as illustrated above.

Fleet departments - Now this is one most people don't understand. Ever gone to Enterprise or Budget and rented a car? What did you get? Probably a fairly new Ford or GM product, right? Maybe a shiney new Pontiac G6 or a Ford Fusion, maybe even a Chrysler 300 if you put down a little more cash. Rental companies always seem to have newer cars, right? Sure they do, they want to attract customers by having nice cars to drive (Mustang convertible, anyone?). So every year, they take all their 2 year old cars and replace them with new ones. The Big 3 give them a great price on the new ones (Afterall, it is kind of free advertising and they are buying 5,000 new cars nationwide) So now you've got 5,000 Chevy Cobalts floating around a rental car company. Two years later, those Cobalts go bye-bye to an auto auction such as Manheim. With 6,000 Cobalts to choose from (5,000 rentals and 1,000 dealer trade-ins), buyers can be very picky. Some of those not so nice cars sell for less due to damage, less desireable color or options, etc. This drives down the average value on the car. Now, this will get back to the dealer in the form of a "blue book value" or "black book value" which is an approximation of what the cars are selling at for auction. Now, Jane Customer wants to trade in her Cobalt and Smith Chevy only wants to offer her $5000 for her two year old Cobalt (Let's say they're averaging $5500 at the auction) so that they can make an extra $500 on the deal (That's right, the dealer keeps the $500 difference between the auction sales price and the trade in value) Jane wonders why the $14,000 Cobalt she got only two years ago is now worth only $5000, the short answer, the "Supply and Demand" drama that is Fleet Sales.

Another reason that the Big 3 are dying a slow and cash hemmoraging death is the Auto Unions. I'm sure that this won't get me any love from the unions, but the unions (United Auto Workers mostly) are slowly choking off the carmakers too. In the early years, car companies paid workers little and gave them fewer benefits. Feeling used and abused, the workers did the only thing they could think of and banded together to form unions. Good idea, right? Sure it is! Better conditions and better pay and benefits? Who wouln't want that. Strikes were organised and car companies came around and began negotiating with workers to settle strikes and get things moving again. Workers 1, Carmakers 0. Now, flash forward to today. A guy in Detriot is getting paid $39 per hour to push a button that starts automated welders working on the car chassis sitting infront of him. He works 8 hours a day, Monday through Friday pusing that button and when he retires in three years, he'll get a pension that he can live on for the rest of his life and a gold watch to go with it. Meanwhile, a non-union Honda or Toyota employee presses the button for $25 per hour and has a company matched 401(k) to retire on. Which one is better for the company? Definately the Honda/Toyota guy and the 401(k). Keeping up the healthcare and pay of a retired union person costs a pretty penny to the auto companies and as their workforce ages, it's costing them more and more. These methods are outdated and can no longer support the retiring workers, nor should they have to. Those workers should have saved their own money with 401(k)s instead of the company sponsored retirement packages. Perhaps the big three could fare better if they changed all operations to non-union with lower wages and had the employees start 401(k)s rather than rely on retirement packages. The companies' costs would be less and I doubt that any of the employees would starve. (Those currently on pensions would have to be taken care of though as it isn't fair to remove someone's pension when they have no other money)

I'll add more to this later. Hope you're enjoying this!
Russ