Word: auto
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...want to solve one of the central mysteries of today's auto business, consider this tale of two cars: the Ford Taurus, built at plants in Atlanta and Chicago, and the Nissan Altima, made in Smyrna, Tenn. Neither vehicle is fancy; they're mainstream sedans for buyers on a budget. Both sell well. But when you talk about profit, the Taurus wobbles off the road. Ford must entice Taurus buyers with rebate offers and financing deals that slice 13%, or roughly $3,000, off the sticker price. After allowing for dealer profits, that leaves a negative return for Ford...
...told, North American vehicle sales are expected to grow to 18.4 million a year by 2008, an increase of 1.6 million vehicles since 2002. The transplants alone are adding enough capacity for an additional 1 million vehicles. Hyundai is building a plant in Montgomery, Ala.--the first Korean auto-assembly factory in the U.S.--to make Sonata sedans and Santa Fe SUVs. Mercedes-Benz (owned by DaimlerChrysler, based in Stuttgart, Germany) is doubling capacity at its SUV facility in Tuscaloosa, Ala. And BMW recently expanded its plant in Spartanburg, S.C., where lines run overtime to produce Z4 roadsters...
Contrary to popular belief, workers' wages and benefits at the transplant factories--none of which are unionized except for joint ventures with Detroit--are comparable to those at factories organized by the United Auto Workers (UAW). Assembly-line workers, regardless of their location, earn about $45,000 to $100,000 a year (depending on experience and overtime). Bonuses are typically tied to profitability, and health-care and pension benefits vary only slightly...
...production to lower-paying suppliers, GM may have set a precedent with its new Cadillac plant in Lansing, Mich., which opened last year. Be more flexible about work rules, and let us outsource more, GM said, or we'll set up shop in Mexico or Canada (where the Canadian Auto Workers split from its American parent in 1985). The plant is now a model of Detroit lean and mean. Its vehicles rate second, to Lexus, in initial quality. Suppliers deliver components every four hours (vs. every two weeks at some GM plants), and management lets workers freeze the lines...
...Detroit's toughest problems is that as its vehicles and plants improve, so do those of its foreign-based competitors. Today's global auto industry is a race in which it's difficult not only to win but also to survive--a contest that Chrysler, in a sense, lost when it gave up its independence. That prospect stalks other U.S. automakers--and keeps them running hard. --With reporting by Joseph R. Sczcesny/Detroit