6 ms·

Were that the case, we'd see a prevalence of people unable to afford cars. This is not the case. The cost of an automobile is an even smaller fraction of an ave

Were that the case, we'd see a prevalence of people unable to afford cars. This is not the case. The cost of an automobile is an even smaller fraction of an average person's disposable income than it was during Henry Ford's day. And this isn't considering the fact that a modern car is far safer, more comfortable, more fuel efficient, and just broadly way better than a model T. American workers are too highly paid to make many manufacturing jobs viable in the US. If GM et al. were to pay American workers more they would either not be making enough money to stay afloat, or the cost of their cars would rise considerably (and likely lose sales and not be profitable anyway).

chillwaves 7y ago
Financing is a thing.
ejanus 7y ago
But Fiat doubled headcount, how was that possible if your argument that labour cost is the issue ? Let's not follow garden economics, greedy and laziness may be the root. BTW other auto companies are expanding except GM. The real storm would be when next time they need bailout , would they be bailed out as US company?
- adventured 7y ago
  > But Fiat doubled headcount ... BTW other auto companies are expanding except GM GM's business is shrinking while most automakers have expanded in the last five years. It makes perfect sense that GM would contract their employee count as sales decline backwards by nearly two decades. GM sales 2014: $155b | 2018: $147b Their sales in 2005 were $193b by comparison. Automotive sales were $158b that same year. Fiat sales 2014: €96b | 2018: €110b Volkswagen sales 2014: €202b | 2018: €235b Toyota sales 2015: ¥27.2t | ¥30.2t Ford sales 2014: $144b | 2018: $160b Honda sales 2015: ¥13.3t | 2019: ¥15.9t
cityzen 7y ago
I think the only American workers that are paid too highly for manufacturing jobs to thrive in the US are folks like this: As Chairman and Chief Executive Officer at GENERAL MOTORS CO, Mary T. Barra made $21,870,450 in total compensation. Of this total $2,100,000 was received as a salary, $4,452,000 was received as a bonus, $3,425,006 was received in stock options, $11,081,760 was awarded as stock and $811,684 came from other types of compensation. This information is according to proxy statements filed for the 2018 fiscal year.
jtdev 7y ago
> The cost of an automobile is an even smaller fraction of an average person's disposable income than it was during Henry Ford's day. I seriously doubt that... at $50,000+ for a new pickup, and $35,000+ for a new car? And used vehicles are still quite expensive as well (unless you buy an absolute pile of junk). Financing terms keep stretching longer to keep the appearance of an affordable monthly payment, but many Americans have become wary of the overall cost of a vehicle, which is by no means low today.
- bumby 7y ago
  I agree, but this seems to be driven by people wanting more car features. You can still get manual transmission/manual window cars for $11k.
- javagram 7y ago
  You can get a brand new car for under $20K (e.g. Honda Civic or Honda Fit) People buy $35K cars because they can. Look at sales of something like the SmartCar. They were very low despite the car being $12K-15K as people were willing to pay more.
  - JoeAltmaier 7y ago
    I think the SmartCar didn't sell in the US because the mileage was shockingly bad. You'd expect 100mpg for something that small and light. It didn't seem 'smart' to American buyers at all.
    - javagram 7y ago
      33 city, 41 hwy ? Yeah it’s not amazing but people are buying trucks and SUVs with much worse MPG for more $$$. People want the additional capabilities, safety, or even just the status symbol of having a nice truck or expensive car.
      - JoeAltmaier 7y ago
        Yeah they improved it (double?) because it wasn't selling as it was? Few were going to sacrifice comfort, room, performance for a tiny car with bad mileage. Just because its manufacture was 'eco-friendly'
grecy 7y ago
> Were that the case, we'd see a prevalence of people unable to afford cars. Actually, I'd say that is precisely the case. The vast majority of cars in the US are bought on credit, which means people can't actually afford a car, they can only afford to borrow money to pay for a car for a few years, then get out of that one and move onto another one. The massive, massive majority of vehicles are not owned by the person driving it, they're owned by banks.
- manfredo 7y ago
  Here's some quick math. The price of a model T in 1908 was $825 or $850 (google results vary). The median annual income was between $450 and $525 (again, sources vary). So a Model T cost 1.6 to 1.7 times the median income of a US worker. For a car that had no air conditioning, no radio, no airbags, and a top speed of 45 mph. Near the end of the production run (mid-late 20s) the cost of the model T had gone down by over half - thanks to production line manufacturing. This site provides a breakdown for the cost as a fraction of median annual income of Chevys over the course of the 20th century: https://cars.lovetoknow.com/Car_Ownership_Statistics https://cars.lovetoknow.com/Car_Ownership_Statistics By comparison, the current US median income is just over $60k. You can buy many of these cars for less than half of that. Some less than a third: https://www.truecar.com/prices-new/kia/ https://www.truecar.com/prices-new/kia/ Each of these cars is drastically safer, more comfortable, and with amenities like aircon radios and more.
  - devonkim 7y ago
    Almost all the price-market comparisons from decades ago forget utility value of monetary and the shifting of disposable income for non-essential goods and services. Houses then cost the equivalent today of perhaps $80k as well. A better comparison may be around disposable income though which at the national average household income of about $70k to be a safe $15k, so cars should be about $20k. Except new car sale prices nowadays are about $30k and yet we know that most people making $70k for a family of four probably aren’t going around getting a new car. Elizabeth Warren’s paper from a decade or two ago did a fair job doing some pricing comparisons of the day to turn of the century American household microeconomics and demonstrated the primary change in the past 100 years was the additional cost of a second bathroom.
MrGilbert 7y ago
So, let's compare the automotive industry then. I might be mistaken, but I'll try my best. And yes - I totally ignore taxes, healthcare, and anything else - which might be important, so... take it with a grain of salt. In the year 1916, Henry Ford lowered the price of the Model T to 345 USD[1]. Using an inflation calculator[2], this tranlates to roughly 8120 US-$. At the same time, Ford raised the salary to 5 US-$ per day[1]. That makes 160 US-$ per Month (calculating with 4 x 5 days). Using the same calculator as in[2], we end up with a value of 3766 US-$. So a Model T costs 2.5 months of labour for an average worker. Fast forward 2019 - the avarage salary is maybe 40k US-$ a year for an automotive worker?[3] So, using the same reference as above, this would translate to 166 US-$ per day, and 3320 US-$ per month. Now, what's the successor of the Model T nowadays? I don't know - so I followed the "successor" links in the Model T wiki article[4], and ended up at the Ford Fusion. Ford says, it's starting at 23.170 US-$[5]. That's 7 months worth of labour for an average worker. So, yes - compared to 1916, it's 2.5 times more expensive. I'm surprised. [1] https://www.fomcc.de/t.htm https://www.fomcc.de/t.htm (German page, sorry) [2] http://www.in2013dollars.com/us/inflation/1916?amount=345 http://www.in2013dollars.com/us/inflation/1916?amount=345 [3] https://www1.salary.com/Automotive-salaries.html https://www1.salary.com/Automotive-salaries.html [4] https://en.wikipedia.org/wiki/Ford_Model_T https://en.wikipedia.org/wiki/Ford_Model_T [5] https://shop.ford.com/build/fusion https://shop.ford.com/build/fusion (I used 10005 as postal code, cause I'm not from the US)
- bumby 7y ago
  Appreciative of the breakdown, but I think there might be some issues with your methodology. For one, far fewer households today are single salary. Say what you will about whether this is a good or bad thing, but I think it's probably more appropriate to base the numbers on an "automotive household income" if that's such a thing. Also, your salary resource is a little weak. It has a huge range ($34k-$144k average). I speculate this isn't relegated to just using automotive manufacturers but also includes their suppliers. Anecdotal experience shows me that the lowest paid Tier 2 union employees on a line make that much if you include overtime. Tier 1 workers make much more (close to double, in my experience). Then you take the skilled trades (e.g., electricians and machinists) where its more common than not to make six figures, all things considered. This is all before we're getting to the degreed engineers. Payscale.com shows average Ford engineer salary nearing $90k. Engineers on the line generally make more because of the work conditions and overtime (it wouldn't be uncommon for a process engineer to make double that). I don't know what the actual numbers are, but I wouldn't balk at data that's easily double the numbers you covered. It could easily be on-par or even below the Model-T numbers when it comes to monthly household income.

chillwaves 7y ago

Financing is a thing.

ejanus 7y ago

But Fiat doubled headcount, how was that possible if your argument that labour cost is the issue ? Let's not follow garden economics, greedy and laziness may be the root. BTW other auto companies are expanding except GM. The real storm would be when next time they need bailout , would they be bailed out as US company?

adventured 7y ago
> But Fiat doubled headcount ... BTW other auto companies are expanding except GM GM's business is shrinking while most automakers have expanded in the last five years. It makes perfect sense that GM would contract their employee count as sales decline backwards by nearly two decades. GM sales 2014: $155b | 2018: $147b Their sales in 2005 were $193b by comparison. Automotive sales were $158b that same year. Fiat sales 2014: €96b | 2018: €110b Volkswagen sales 2014: €202b | 2018: €235b Toyota sales 2015: ¥27.2t | ¥30.2t Ford sales 2014: $144b | 2018: $160b Honda sales 2015: ¥13.3t | 2019: ¥15.9t

cityzen 7y ago

I think the only American workers that are paid too highly for manufacturing jobs to thrive in the US are folks like this: As Chairman and Chief Executive Officer at GENERAL MOTORS CO, Mary T. Barra made $21,870,450 in total compensation. Of this total $2,100,000 was received as a salary, $4,452,000 was received as a bonus, $3,425,006 was received in stock options, $11,081,760 was awarded as stock and $811,684 came from other types of compensation. This information is according to proxy statements filed for the 2018 fiscal year.

jtdev 7y ago

> The cost of an automobile is an even smaller fraction of an average person's disposable income than it was during Henry Ford's day. I seriously doubt that... at $50,000+ for a new pickup, and $35,000+ for a new car? And used vehicles are still quite expensive as well (unless you buy an absolute pile of junk). Financing terms keep stretching longer to keep the appearance of an affordable monthly payment, but many Americans have become wary of the overall cost of a vehicle, which is by no means low today.

bumby 7y ago
I agree, but this seems to be driven by people wanting more car features. You can still get manual transmission/manual window cars for $11k.
javagram 7y ago
You can get a brand new car for under $20K (e.g. Honda Civic or Honda Fit) People buy $35K cars because they can. Look at sales of something like the SmartCar. They were very low despite the car being $12K-15K as people were willing to pay more.
- JoeAltmaier 7y ago
  I think the SmartCar didn't sell in the US because the mileage was shockingly bad. You'd expect 100mpg for something that small and light. It didn't seem 'smart' to American buyers at all.
  - javagram 7y ago
    33 city, 41 hwy ? Yeah it’s not amazing but people are buying trucks and SUVs with much worse MPG for more $$$. People want the additional capabilities, safety, or even just the status symbol of having a nice truck or expensive car.
    - JoeAltmaier 7y ago
      Yeah they improved it (double?) because it wasn't selling as it was? Few were going to sacrifice comfort, room, performance for a tiny car with bad mileage. Just because its manufacture was 'eco-friendly'

grecy 7y ago

> Were that the case, we'd see a prevalence of people unable to afford cars. Actually, I'd say that is precisely the case. The vast majority of cars in the US are bought on credit, which means people can't actually afford a car, they can only afford to borrow money to pay for a car for a few years, then get out of that one and move onto another one. The massive, massive majority of vehicles are not owned by the person driving it, they're owned by banks.

manfredo 7y ago
Here's some quick math. The price of a model T in 1908 was $825 or $850 (google results vary). The median annual income was between $450 and $525 (again, sources vary). So a Model T cost 1.6 to 1.7 times the median income of a US worker. For a car that had no air conditioning, no radio, no airbags, and a top speed of 45 mph. Near the end of the production run (mid-late 20s) the cost of the model T had gone down by over half - thanks to production line manufacturing. This site provides a breakdown for the cost as a fraction of median annual income of Chevys over the course of the 20th century: https://cars.lovetoknow.com/Car_Ownership_Statistics https://cars.lovetoknow.com/Car_Ownership_Statistics By comparison, the current US median income is just over $60k. You can buy many of these cars for less than half of that. Some less than a third: https://www.truecar.com/prices-new/kia/ https://www.truecar.com/prices-new/kia/ Each of these cars is drastically safer, more comfortable, and with amenities like aircon radios and more.
- devonkim 7y ago
  Almost all the price-market comparisons from decades ago forget utility value of monetary and the shifting of disposable income for non-essential goods and services. Houses then cost the equivalent today of perhaps $80k as well. A better comparison may be around disposable income though which at the national average household income of about $70k to be a safe $15k, so cars should be about $20k. Except new car sale prices nowadays are about $30k and yet we know that most people making $70k for a family of four probably aren’t going around getting a new car. Elizabeth Warren’s paper from a decade or two ago did a fair job doing some pricing comparisons of the day to turn of the century American household microeconomics and demonstrated the primary change in the past 100 years was the additional cost of a second bathroom.

MrGilbert 7y ago

So, let's compare the automotive industry then. I might be mistaken, but I'll try my best. And yes - I totally ignore taxes, healthcare, and anything else - which might be important, so... take it with a grain of salt. In the year 1916, Henry Ford lowered the price of the Model T to 345 USD[1]. Using an inflation calculator[2], this tranlates to roughly 8120 US-$. At the same time, Ford raised the salary to 5 US-$ per day[1]. That makes 160 US-$ per Month (calculating with 4 x 5 days). Using the same calculator as in[2], we end up with a value of 3766 US-$. So a Model T costs 2.5 months of labour for an average worker. Fast forward 2019 - the avarage salary is maybe 40k US-$ a year for an automotive worker?[3] So, using the same reference as above, this would translate to 166 US-$ per day, and 3320 US-$ per month. Now, what's the successor of the Model T nowadays? I don't know - so I followed the "successor" links in the Model T wiki article[4], and ended up at the Ford Fusion. Ford says, it's starting at 23.170 US-$[5]. That's 7 months worth of labour for an average worker. So, yes - compared to 1916, it's 2.5 times more expensive. I'm surprised. [1] https://www.fomcc.de/t.htm https://www.fomcc.de/t.htm (German page, sorry) [2] http://www.in2013dollars.com/us/inflation/1916?amount=345 http://www.in2013dollars.com/us/inflation/1916?amount=345 [3] https://www1.salary.com/Automotive-salaries.html https://www1.salary.com/Automotive-salaries.html [4] https://en.wikipedia.org/wiki/Ford_Model_T https://en.wikipedia.org/wiki/Ford_Model_T [5] https://shop.ford.com/build/fusion https://shop.ford.com/build/fusion (I used 10005 as postal code, cause I'm not from the US)

bumby 7y ago
Appreciative of the breakdown, but I think there might be some issues with your methodology. For one, far fewer households today are single salary. Say what you will about whether this is a good or bad thing, but I think it's probably more appropriate to base the numbers on an "automotive household income" if that's such a thing. Also, your salary resource is a little weak. It has a huge range ($34k-$144k average). I speculate this isn't relegated to just using automotive manufacturers but also includes their suppliers. Anecdotal experience shows me that the lowest paid Tier 2 union employees on a line make that much if you include overtime. Tier 1 workers make much more (close to double, in my experience). Then you take the skilled trades (e.g., electricians and machinists) where its more common than not to make six figures, all things considered. This is all before we're getting to the degreed engineers. Payscale.com shows average Ford engineer salary nearing $90k. Engineers on the line generally make more because of the work conditions and overtime (it wouldn't be uncommon for a process engineer to make double that). I don't know what the actual numbers are, but I wouldn't balk at data that's easily double the numbers you covered. It could easily be on-par or even below the Model-T numbers when it comes to monthly household income.