Will UAW Strike?

[ultrarunner]

If wages have so little affect why would companies offshore with all that it entails plus the cost of shipping and import logistics…?

 

[Torvy]

One piece of the puzzle that is often forgotten is the employer cost for benefits (vacation, insurance, etc.) When I first started working in the early 80s, it was about 35% of wages for benefits. Now it is 55% and up.

I wouldn't say it is the worker's fault, per se. There are certainly some workers who prefer a system where they do not need to be good to get a raise. The union leadership is more of the problem. They get paid more if more people are members and the pay rates go up. In other words, there is zero incentive (actually a disincentive) for worker productivity to improve. That's why most improvements in productivity come from automation. (At least in a union environment).

It is also why it is in the company's best interest to move more work to places where the union has little or no sway. Those companies are owned by us regular people who invest in 401k and the like. We all do better when the company does better. If they pay more for the same work, it just takes money from the rest of us.

 

[milkman636]

If wages have so little affect why would companies offshore with all that it entails plus the cost of shipping and import logistics…?

I know that NAFTA rolled through Michigan in the 1990’s and factories were closing left and right around here. Auto companies and parts suppliers were racing to mexico for labor at $2 an hour instead of $25 an hour. Plus they saved on compliance with labor laws, environmental laws, safety laws, benefit packages etc…….

Truck prices did not go down even though the big three were saving boat loads of cash on labor and parts. My supporting evidence is experience. My first new f150 in 1989 cost $9732.36 out the door. My next new f150 in 1997 cost about $18000 for basically the same configuration.

Fast forward to today with even more globalization: My current F150 cost $28000 in 2007. The direct replacement was quoted at $51,000 last week, and it’s nothing fancy. Thats a 92% increase in 16.5 years.

Every cost component in that new truck has gone up since 2007. And, the majority seems to be accepting of paying more for every component of a new truck except wages. Why is that?

Can anyone out there tell me of a company that sets prices based on input costs? Or is there a chance prices are based on what people are willing to spend?

Do you think the Chinese will come in here and sell vehicles in the US at 10% above costs after the big 3 are gone? Or will they set prices based on market analysis of what we can afford every month. Just like the current salespeople, they are going to extract what they can from you.

More money=more spending=higher prices independent of input costs. The fed is using the reverse formula right now: less money=less spending=lower prices. It doesn’t matter what you paid for your stocks, house, income property, etc….fed policy is driving its price right now.

 

[Torvy]

Pricing is both-and, not either-or. Money supply is definitely a factor, more supply, higher prices. The fed actions were just tapping the brake while fiscal policy created money out of nothing (see inflation). Prices are also subject to the demand side. When people decided they wanted trucks as daily drivers (especially in situations where it was more status/ego driven than utilitarian need, prices went up on trucks. (Demand-push inflation) Costs also drive prices. Companies are not going to sell at a loss (at least not for long). There are lots of other layers involved here including CAFE standards, alternative goods and profit margin. Every 'for-profit' corporation is legally obligated to maximize returns for its stockholders.

So, hypothetically, if Ford 'sets' prices they start with a bare minimum ROI they can expect. Just for fun, call it 10%. If they cut costs per vehicle by $1000 a vehicle, they could reduce prices by about that much and still make their target ROI. If demand is up, they can still sell for the original price and increase ROI. It would be fiscally irresponsible and likely illegal for them to price below market prices. They also have finite capacity in the short-run, which artificially caps supply at X. Sure, supply and demand set the top end price, but costs go up drives the denominator. The company must do whatever it can to keep costs in line. This is especially true in a competitive market. Ford has competition and people who do not like the higher prices will buy from someone else (or used, of defer buying, etc.) If the UAW got their way, prices of the 'big 3' would go up so far that Nissan, Toyota, Honda, Tesla, etc. would take additional market share based on price. The only option the OEMs would have is to cut costs...close plants, automate, move to RTW states or overseas.

 

[Gale Hawkins]

I know that NAFTA rolled through Michigan in the 1990’s and factories were closing left and right around here. Auto companies and parts suppliers were racing to mexico for labor at $2 an hour instead of $25 an hour. Plus they saved on compliance with labor laws, environmental laws, safety laws, benefit packages etc…….

Truck prices did not go down even though the big three were saving boat loads of cash on labor and parts. My supporting evidence is experience. My first new f150 in 1989 cost $9732.36 out the door. My next new f150 in 1997 cost about $18000 for basically the same configuration.

Fast forward to today with even more globalization: My current F150 cost $28000 in 2007. The direct replacement was quoted at $51,000 last week, and it’s nothing fancy. Thats a 92% increase in 16.5 years.

Every cost component in that new truck has gone up since 2007. And, the majority seems to be accepting of paying more for every component of a new truck except wages. Why is that?

Can anyone out there tell me of a company that sets prices based on input costs? Or is there a chance prices are based on what people are willing to spend?

Do you think the Chinese will come in here and sell vehicles in the US at 10% above costs after the big 3 are gone? Or will they set prices based on market analysis of what we can afford every month. Just like the current salespeople, they are going to extract what they can from you.

More money=more spending=higher prices independent of input costs. The fed is using the reverse formula right now: less money=less spending=lower prices. It doesn’t matter what you paid for your stocks, house, income property, etc….fed policy is driving its price right now.

The Big 3 became the Small 3 decades ago thanks to Japan. Now they will become the Mini 3 thanks to China.

VW announced they are going to use their China factories that they have to make some of the smaller EVs for the European market.

 

[Pixguy]

The Big 3 became the Small 3 decades ago thanks to Japan. Now they will become the Mini 3 thanks to China.

VW announced they are going to use their China factories that they have to make some of the smaller EVs for the European market.

That's unfortunate as China will learn and steal the latest EV technology VW has and use it against us all.

 

[milkman636]

Pricing is both-and, not either-or. Money supply is definitely a factor, more supply, higher prices. The fed actions were just tapping the brake while fiscal policy created money out of nothing (see inflation). Prices are also subject to the demand side. When people decided they wanted trucks as daily drivers (especially in situations where it was more status/ego driven than utilitarian need, prices went up on trucks. (Demand-push inflation) Costs also drive prices. Companies are not going to sell at a loss (at least not for long). There are lots of other layers involved here including CAFE standards, alternative goods and profit margin. Every 'for-profit' corporation is legally obligated to maximize returns for its stockholders.

So, hypothetically, if Ford 'sets' prices they start with a bare minimum ROI they can expect. Just for fun, call it 10%. If they cut costs per vehicle by $1000 a vehicle, they could reduce prices by about that much and still make their target ROI. If demand is up, they can still sell for the original price and increase ROI. It would be fiscally irresponsible and likely illegal for them to price below market prices. They also have finite capacity in the short-run, which artificially caps supply at X. Sure, supply and demand set the top end price, but costs go up drives the denominator. The company must do whatever it can to keep costs in line. This is especially true in a competitive market. Ford has competition and people who do not like the higher prices will buy from someone else (or used, of defer buying, etc.) If the UAW got their way, prices of the 'big 3' would go up so far that Nissan, Toyota, Honda, Tesla, etc. would take additional market share based on price. The only option the OEMs would have is to cut costs...close plants, automate, move to RTW states or overseas.

My point is that price is not derived from input costs. Input costs are engineered into a vehicle based on a forecast of how much money they can sell the vehicle for. That anticipated price gives them a target to engineer to. And they design them to extract the most dollars they can with the different trim levels and such.

We are coming off a sustained period of low interest money. The result has been steadily increasing prices and more and more feature inclusion because people could find a lot of money cheaply to pay for it.

As the fed shrinks the amount of money people have available through raising interest rates, those ROI forecasts become wrong, and prices will have to be adjusted down to sell the cars. If the fed maintains higher interest rates, the car companies will revise their product offerings to reflect the lower transaction prices. We will see lower cost vehicles with better fuel efficiency, not because we decided to be cheap, but because average joe can't afford any more. This is all decided at the policy level, not on an assembly line or in a kitchen flipping burgers.

Labor is an input cost that has to go up with every other cost of a vehicle. I get that. But the 92% increase Ford is asking for a 2023 version of my 2007 F150 seems like it should be enough to cover it.

The plant where the truck is built has 4600 employees and the capacity to build 5300 trucks per week. That's under 35 assembly hours per truck. If each worker gets a $10 per hour raise my inexpensive new truck may cost $51,350 instead of 51,000, assuming that the customer bears the full increased cost of assembly labor. If they get $50 per hour, the total assembly labor cost would be around $1750 on a vehicle that sells for an average of more than $60,000 in 2023. I don't think assembly line wages are the big driver of vehicle cost that most people presume them to be.

 

[Snobdds]

My point is that price is not derived from input costs. Input costs are engineered into a vehicle based on a forecast of how much money they can sell the vehicle for. That anticipated price gives them a target to engineer to.

We are coming off a sustained period of low interest money. The result has been steadily increasing prices and more and more feature inclusion because people can find a lot of money cheaply to pay for it.

As the fed shrinks the amount of money people have available through raising interest rates, those ROI forecasts become wrong, and prices will have to be adjusted down to sell the cars. If the fed maintains higher interest rates, the car companies will revise their product offerings to reflect the lower transaction prices. We will see lower cost vehicles with better fuel efficiency, not because we decided to be cheap, but because average joe can't afford any more. This is all decided at the policy level, not on an assembly line or in a kitchen flipping burgers.

Labor is an input cost that has to go up with every other cost of a vehicle. I get that. But the 92% increase Ford is asking for a 2023 version of my 2007 F150 seems like it should be enough to cover it.

The plant where the truck is built has 4600 employees and the capacity to build 5300 trucks per week. That's under 35 assembly hours per truck. If each worker gets a $10 per hour raise my inexpensive new truck may cost $51,350 instead of 51,000, assuming that the customer bears the full increased cost of assembly labor. If they get $50 per hour, the total assembly labor cost would be around $1750 on a vehicle that sells for an average of more than $60,000 in 2023. I don't think assembly line wages are the big driver of vehicle cost that most people presume them to be.

If price is set via what a market can support...why does the market fail to capture what a buyers willingness to pay is.

The market includes your company, your competitors, existing customers and potential customers. How does that market set a price? Do your competitors know something you don’t know that enables them to set a price? If not, how do they do it? And if you are simply reacting to prices your competitors set, then the market isn’t setting the price, your competitors are.

 

[hiddentacocatneddih]

People keep lining up to pay stupid prices thus they stay stupid high

 

[newbury]

If price is set via what a market can support...why does the market fail to capture what a buyers willingness to pay is.

I think on this forum you will not find the "average" buyer and their willingness to pay.
Around DC and Northeast Mississippi I'm finding lots of F150's marked down from ASTRONOMICAL prices, slightly marked down that is. Most on the lots are loaded with accessories I don't need. So they add on a ton of accessories and it's almost impossible to order a stripped down vehicle unless you can buy a fleet of them.