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HOT TOPIC I think Detroit is Dead

tbsells

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Jul 27, 2007
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Not the city itself, but the American auto industry it symbolizes. I drove through the local auto mall tonight looking for something to replace my Toyota LandCrusier. I like big SUV's. They just work well for my family and business. There are also generous tax deductions available for business use of SUV's and trucks in excess of 6,000 pounds. I could write off up to $25,000 the first year. With all this in mind I stop at the GMC dealer. First thing I see is a leftover 2007 GMC Yukon with a big 0%, 60 months sticker on it. It takes only a second to see why its left over-the sticker is $50,500. This Yukon is fairly well equipped but not loaded, no navigation system, no chrome wheels, no Denali package which is top of the line. Just fairly nice and totally unremarkable, but $50,500. No wonder the thing is leftover. A quick look around the lot shows 6 or 7 more just like it. I walk away in disgust. I then check out a new GMC Acadia crossover SUV. Not bad, but not worth the $44,000 sticker. My question is who is going to buy these things? $50,000 or a car payment of $800 to $900 a month for 5 years. No thanks. I'll keep my LandCruiser and buy another one like it when the time comes. I have to think I'm not the only one walking. I saw a report tonight that Ford lost $2.8 billion in 4th quarter 07. It was spun as good news because the loss was only half of the 4th quarter 06 loss of $5.8 billion. How can any company sustain these types of losses? I think the American auto industry is headed for extinction.
 

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Redshft

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I am 100% in agreement with you. It amazes me people buy these things, I guess solely for status. I went looking on a Chevy/Caddy lot not too long ago, soon after the new models cames out. While looking at the Escalade I noticed all the "chrome" is plastic. The same was with the Acadia. The interior is rental quality at best. I noticed too much "looseness" and parts that were easily manipulated. American build quality is embarassing unfortunately.

I think the new Sequia may tickle your pickle if you want to stay with Toyota(which you can never go wrong with Toyota). There is also the Nissan Armada. Rumor is Nissan has a turbo diesel in development!
 

Runum

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Got to agree. How is the average working Joe paying for these average cars costing $40k or more? Too much $$$ in depreciating assets. I had never owned an import in my life(owned mainly GM) until our last purchase. Bought a Jetta in June and have never looked back.
 

mtnman

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I ran into the same here in Orlando.....52k for an Avalanche. I find it ironic that GM especially expects me to pay a hefty price for a new truck that has orange peel in the paint all down the side of it. The body panels look like saltine crackers!
 

PurEnergy

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Jan 4, 2008
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I too agree that something is wrong with the American new car market. My business is doing paint work for car dealerships, used cars mostly. This could be the best year we've had in the last five. I'm seeing a lot more people buying USED cars even at my Toyota customers. Then again, dealers might cut everything to the bone. Overall numbers are weak right now but it's typically slow this time of year. I believe I just read somewhere that new car sales are expected to be at a ten year low this year.

I think we are moving into some very different times over the next few years. For most people the bottom line is the monthly payment. That and fuel economy seem to be what's driving the market right now. Then again my neighbors 21 year old son just traded in his Mazda 6 for a 2005 Yukon yesterday. :smx4:

That Seqouia is a BEAST.
 

HenkHolland

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There are also generous tax deductions available for business use of SUV's and trucks in excess of 6,000 pounds. I could write off up to $25,000 the first year.
I'm surprised to read that a higher weight is a reason to get tax deductions for heavier SUV's and trucks. In Europe the trend is that you receive tax deductions and other benefits when you buy or lease vehicles that consume less fuel and hence create less environmental damage. Toyota and a few other non-American automobile manufacturers understand these trends. I have the impression that the American car manufacturers (and the government for that matter if they continue promoting the use of heavier, i.e. less fuel efficient vehicles by means of tax deductions) are still missing the point. If that continues for too long I guess it will lead to extinction of the American industry.
 

camski

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Jul 24, 2007
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Like anything someone will come along a build a better mousetrap (or in this case car), and either the big three will change or go the way of the dinosaurs. With the credit crunch (if banks wont lend people 100k to buy a house why would they loan the same people 50k to buy a car), new car costs will have to drop dramatically if they expect to sell any. Not to mention the glut of used cars that are out there right now. At some point the UAW will probably have to make some major concessions or they will put their owners right out of business. side note-- this is not a knock on unions or anyone else, they asked and mgmt gave, you cant blame them for that. But unless thsy start working cheaper that industry is in deep trouble
 
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tbsells

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At some point the UAW will probably have to make some major concessions or they will put their owners right out of business. side note-- this is not a knock on unions or anyone else, they asked and mgmt gave, you cant blame them for that. But unless thsy start working cheaper that industry is in deep trouble
I think you're right.
 

kimberland

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Jul 25, 2007
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At some point the UAW will probably have to make some major concessions or they will put their owners right out of business.
Yeah, that was my understanding of Detroit's issues,
that the legacy costs (pension and health care) were making them uncompetitive.

Just curious....
Has there been a comparison done between household income and price of car?
Googling it, I see many comparisons with price of housing
but I can't find one with price of car.
 

8 SNAKE

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Aug 15, 2007
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I'm a bit torn by the current pricing model used by the Big Three. Customers have been trained to expect huge rebates and incentives when buying their SUVs and trucks. As a result, the Yukon that you saw stickers above $50k. In reality, that vehicle will sell somewhere south of 40 grand if the buyer has any clue what he/she is doing.

Would sales go up if the Big Three put realistic sticker prices on their vehicles and did away with the $10k discounts? I don't know, but I'd be curious to find out.

I also disagree with everyone jumping on the import bandwagon (not here, but in general). Look at the progress that GM has made in the last couple of years. There are a lot of good vehicles coming out now and in the near future. The CTS, Malibu, Corvette, Silverado and various SUV's are among the best in their respective classes. The biggest hole that I see in the GM line is an attractive compact car to compete with the likes of the Civic, Jetta, etc.
 

andviv

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But unless they start working cheaper that industry is in deep trouble
I read that japanese automakers are paying around $23/hour to their employees (non-unionized, mind you) in their plants in the south (Louisiana, Alabama, if I recall correctly), compared to $25/hour or so to the UAW. If what I read (and I recall correctly) is true then this is not the real problem.
 

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NoMorePay

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I'm a bit torn by the current pricing model used by the Big Three. Customers have been trained to expect huge rebates and incentives when buying their SUVs and trucks. As a result, the Yukon that you saw stickers above $50k. In reality, that vehicle will sell somewhere south of 40 grand if the buyer has any clue what he/she is doing.

Would sales go up if the Big Three put realistic sticker prices on their vehicles and did away with the $10k discounts? I don't know, but I'd be curious to find out.

I also disagree with everyone jumping on the import bandwagon (not here, but in general). Look at the progress that GM has made in the last couple of years. There are a lot of good vehicles coming out now and in the near future. The CTS, Malibu, Corvette, Silverado and various SUV's are among the best in their respective classes. The biggest hole that I see in the GM line is an attractive compact car to compete with the likes of the Civic, Jetta, etc.
The book Punk Marketing (recommended) has a section about the Big Three training consumers to expect big rebates and incentives. Saturn was different when they came out with their no haggle policies. It addressed a need of some consumers- those who just want to buy a car and be done with it. For the deal hunters, they still have the Big Three, where they can feel better about the deal they are getting because look - Im getting a $50,000 vehicle for only $10,000 after rebates and double coupons. Its all marketing. Punk Marketing applauds Honda and Toyota for their focus on innovation and cost savings. Look at how many accords are getting 300k miles.

I don't know Detroit is dead, but I think they need to realize that cosumers are in charge.
 

8 SNAKE

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I read that japanese automakers are paying around $23/hour to their employees (non-unionized, mind you) in their plants in the south (Louisiana, Alabama, if I recall correctly), compared to $25/hour or so to the UAW. If what I read (and I recall correctly) is true then this is not the real problem.
The wage is small potatoes in the grand scheme of things. Healthcare and pension costs are what cripple the Big Three.
 
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tbsells

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Would sales go up if the Big Three put realistic sticker prices on their vehicles and did away with the $10k discounts? I don't know, but I'd be curious to find out.
I think sales would go up if the product was priced realistically. Pricing is key no matter what you are selling. In my case, and I'm sure in many others the salespeople don't even get a chance to talk to the potential buyer because the sticker shock runs them off the lot. I sell for a living so I'm not thin skinned or adverse to negotiation, but $50K for an average Yukon was it for me. It was very close to an insult.
 

camski

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Jul 24, 2007
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one other thing that hurts the auto industry is cutback in fleet sales. When an economic downturn hits companies try to milk extra miles or years out of their fleets and fleet sales are a huge part of the detroits business
 

8 SNAKE

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I think sales would go up if the product was priced realistically. Pricing is key no matter what you are selling. In my case, and I'm sure in many others the salespeople don't even get a chance to talk to the potential buyer because the sticker shock runs them off the lot. I sell for a living so I'm not thin skinned or adverse to negotiation, but $50K for an average Yukon was it for me. It was very close to an insult.
I tend to believe that you're right. A lot of people window shop on Sundays or other times when the dealerships are closed. I'd imagine that others, like you, experience the sticker shock and move on to something else.

To me, it doesn't make sense to train your customer base to expect huge discounts and incentives.
 

8 SNAKE

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one other thing that hurts the auto industry is cutback in fleet sales. When an economic downturn hits companies try to milk extra miles or years out of their fleets and fleet sales are a huge part of the detroits business
Fleet sales help drive volume, but do they really add much to the bottom line?

Note: I honestly don't know, so I'm asking.
 

Redshft

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Nov 5, 2007
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As a result, the Yukon that you saw stickers above $50k. In reality, that vehicle will sell somewhere south of 40 grand if the buyer has any clue what he/she is doing.
This is true! Mention the words "dealer invoice" to your salesman and he will go running and crying like a baby to his sales manager. Most people are intimidated by car sales people because in all reality, they are damn good at what they do. Most dealers have a system that works. They put pressure on you, they play number games, they manipulate numbers so they make sure they get their profit. Most people feel that they can't go in and tell them what THEY want. I was able to get my 350Z and motorcycle at used car/bike value when I purchased them brand new. They stay(ed) below retail value on my depreciation as well. Just like there is a system for selling cars to maximize profit, there is a system for buying to maximize value.

Anyway, I think one of the major problems with the American companies(ESPECIALLY GM) is they have built too many brands off one. Look at the trucks for example. You have the Tahoe, the Yukon, The Yukon Denali, The Escalade, and the Hummer H2!! All based off the same platform just with minor cosmetic and mechanical changes to differentiate them. I think there is a lot of money wasted b/w the Tahoe and Yukon. Same goes for the Sky/Solstice. Why do you need TWO of the same car?? I can understand, I guess, the desire differences b/w a Tahoe and an Escalade. But there is very little difference b/w the Escalade and Denali. Yet GM is spending money in producing the different headlights, grills, , body panels, badges, interiors, or whatever other differences there are. BOTH ARE LUXURY SUVs WITH THE SAME PERFORMANCE!!!
 

Autospun

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I think the new Sequoia may tickle your pickle if you want to stay with Toyota(which you can never go wrong with Toyota). There is also the Nissan Armada. Rumor is Nissan has a turbo diesel in development!
I have a Chevy 3500 dually, If Nissan or Toyota would beat that with a turbo diesel, I'd be first the first to get.
Personally, My daily drive is a German import but for the trucks I go for American, I think thats whats saving Detroit at some level. I think I see way too many camrys compared to F-Focus or Malibu, but alot of F123-50 and chevys compared to tundras. I guess there is some equilibrium there.
How come there isn't any American rides in Japan but alot of Japanese rides here?
 

8 SNAKE

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Anyway, I think one of the major problems with the American companies(ESPECIALLY GM) is they have built too many brands off one. Look at the trucks for example. You have the Tahoe, the Yukon, The Yukon Denali, The Escalade, and the Hummer H2!! All based off the same platform just with minor cosmetic and mechanical changes to differentiate them. I think there is a lot of money wasted b/w the Tahoe and Yukon. Same goes for the Sky/Solstice. Why do you need TWO of the same car?? I can understand, I guess, the desire differences b/w a Tahoe and an Escalade. But there is very little difference b/w the Escalade and Denali. Yet GM is spending money in producing the different headlights, grills, , body panels, badges, interiors, or whatever other differences there are. BOTH ARE LUXURY SUVs WITH THE SAME PERFORMANCE!!!
To an extent, I agree with you. A decade ago, GM was terrible about offering the same vehicle under three or four different badges. Now I think that they've trimmed it down pretty well. What I'd really like to see (but might not be financially feasible) is more visual differentiation between the GM and Chevy lines. They obviously need to keep the same underpinnings, but GM should be able to offer two different looking vehicles to appeal to a wider audience (like the Tahoe and H2, Trailblazer and H3). The Denali is just a trim level on the Yukon, so I wouldn't count it as an entirely different model. The Escalade was a bit of a surprise hit for GM, so that one will stay in the stable as GM's most upscale SUV. Again though, I'd like to see a bit more to differentiate the Escalade from the rest of the pack.
 
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tbsells

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Jul 27, 2007
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Personally, My daily drive is a German import but for the trucks I go for American, I think thats whats saving Detroit at some level.
I think you're right. I live in southern Ohio which has always been the land of the F-150 and Chevy Silverado pickups. Lately, I've been seeing alot of the new Toyota Tundra pickups. They are impressive. When Joe sixpack from southern Ohio is buying a Toyota pickup the fat lady is warming up. I don't want to sound happy about this. I'm not. The Ohio economy is heavily dependant on the BIG Three. I wish it were better, but years of mismanagement is really taking its toll. Market share (like any kind of momentum) is really hard to regain once its lost.
 

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hakrjak

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I dunno... We have an Acura MDX and a Dodge Durango in our garage... The Acura's doors are all really flimsy, and when the wind blows -- they fly open like paper and smack into the car next to us at the grocery store. The Durango is a big tough beast, and when you close the hatch on it -- you really feel like you are closing the hatch on a tank.

When we go off roading or camping, we always take the Durango, but the Acura is a cute little grocery getter my GF can drive around town and get lower mileage in.

My last car was a BMW 328 convertable, and after paying the constant repair bills on that -- I can honestly say I'll never buy another European car in my life. Every time I took it to the shop the bill was $500 minimum, and just for a break job it was $1000-1200 bucks. Tires were insanely expensive, and just getting the check engine light reset was usually $200 bucks. Yeh it looked hot driving around town, but once I had it paid off -- it was like I still had a car payment. No thanks! :)

I think the reason why I primarily favor American autos now is just because if I need to get something fixed (And I drive the hell out of my cars... 5-10 years now) -- It's a lot cheaper to get the repairs done most of the time than those foreign jobs. The foreign jobs may last longer, but that's even debateable... I dunno if I'd trust a little toyota truck off road in some of the places I go here in Colorado to camp & fish.

- Hakrjak
 

Redshft

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My last car was a BMW 328 convertable, and after paying the constant repair bills on that --
This is surprising. I am a firm believer in BMWs quality. I own two BMW's that have clocked over 200K miles. The other I suspect is over 300K miles(The odometer stuck at 150ish about 10 years ago). The only problems with BMWs is they have small annoying problems like something with the moonroof or a problem with power windows after a while, but that happens with anything. Their motors and drivetrains are bulletproof. I have a little beater BMW 318 I paid 1800 bucks for about 2.5 years ago. I've changed the oil on it once and it still runs like a dream, haha. If you look around online you can find cheap parts and do the repairs yourself.
 

Autospun

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Jan 14, 2008
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I ran to the bank and counted at least 9 dealerships, new cars at that, this is Des Moines, IA and I'm just curious, where will all this "new 07's" go since its already 2008, what happens to the new 2006 models? How do dealerships acquire franchise to all those models, ie Betts:Volvo, Cadillac*, Toyota, Lexus, gmc* and pontiac (I thought Pontiac and cad. are by Gmc). I've been to a few countries now and I think U.S has the most dealership per city. does that means it maybe a good business here? excuse my questioning.
 

8 SNAKE

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Aug 15, 2007
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I ran to the bank and counted at least 9 dealerships, new cars at that, this is Des Moines, IA and I'm just curious, where will all this "new 07's" go since its already 2008, what happens to the new 2006 models? How do dealerships acquire franchise to all those models, ie Betts:Volvo, Cadillac*, Toyota, Lexus, gmc* and pontiac (I thought Pontiac and cad. are by Gmc). I've been to a few countries now and I think U.S has the most dealership per city. does that means it maybe a good business here? excuse my questioning.
I'm not entirely sure that I understand your questions, but I'll take a stab at it.

1. Dealers will cut prices on old models (in this case '07's) to move them out of inventory. They did the same thing last year with '06's.

2. Each manufacturer has different requirements to get a franchise. Some people start new franchises and others buy existing franchises that are for sale.

3. General Motors (GM) owns Chevrolet, Pontiac, GMC, Cadillac, Saab, Hummer, etc.

4. Auto dealerships are like anything else. Some do really well and others go broke. The industry is heavily influenced by economic conditions. Right now, it's a very tough market to sell in.
 

WheelsRCool

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Aug 12, 2007
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Cadillac is doing just fine, as for "American" build-quality, it depends on how you define it:

All the Toyota and Nissan pickups and SUVs sold in America are built here in America, by Americans. America can design and build great vehicles, it's the unions that have screwed up the Big Three.

The Japanese manufacturers really gave the American manufacturers a wake-up call to get their quality up. I think it was Ford, had two transmissions available for one of their trucks, one made in Japan and one made in the United States. Well the one made in Japan got overwhelming demand, with customers even saying they'd wait extra long to get a truck with the Japanese tranny, because the American-built one was such crap.

The great irony here is that the Japanese adapted American quality-control standards into their vehicles to up the quality so much, they had a legendary American quality-control expert (I forget his name). Originally, Japanese products were of horrid quality, so the Japanese fixed this really fast.

American manufacturers had let the quality slide for a bit, basically not implementing their own standards, but then got the picture, unfortunately they have been hit with very high healthcare and high pension costs that they underestimated a great deal, plus unions, so implementing quality-control is tougher for them, but they are managing to do it from my understanding now.
 

Eric

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Dec 9, 2007
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IMO not only is the build quality better, but you cant beat the resale of a japanese vehicle.

My brother bought a 04 tacoma prerunner in 04 for $500 over invoice (via costco's auto buying program). One year later almost to the day, he rolled it 3 times on a rainy freeway. It landed on its wheels, and he was able to drive it to the shoulder! He didnt have a bruise or scratch on him, and the insurance company gave him $200 MORE THAN WHAT HE PAID FOR IT!!!!

He drove it for a year, totaled it, and got $200!

If you are going to buy a depreciating asset, why not buy the one that depreciates the slowest? And if it just happens to be the most reliable at the same time, why buy anything else?
 

WheelsRCool

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Aug 12, 2007
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From my understanding, the Toyotas have had certain quality-control issues as well as of late, you just don't hear as much about them, I don't know how true that is though. Toyota does have a fabulous reputation for quality though.
 
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tbsells

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Jul 27, 2007
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All the Toyota and Nissan pickups and SUVs sold in America are built here in America, by Americans. America can design and build great vehicles, it's the unions that have screwed up the Big Three.
I think this is a true statement. I guess the big question is- Can anything be done about it? There is so much power in the unions. So much of the Big Three's cost structure is predetermined by existing legacy costs and ongoing union contracts. Can it be fixed? If the smartest guy out there were to take control of GM and try to fix it would he have any tools to work with?
 

Eric

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Dec 9, 2007
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All the Toyota and Nissan pickups and SUVs sold in America are built here in America, by Americans. America can design and build great vehicles, it's the unions that have screwed up the Big Three.
It doesn't really matter who builds the vehicles, it comes down to how the companies want the vehicles built (it is nice to see the japanese employ american workers though). My father and grandfather both worked for chrysler, and I have a uncle who use to work for GM. All of them said that if anyone stopped the line for any reason, there was hell to pay. If something was not going together properly, they were suppose to let it go and someone else would fix the problem. And most of the time it never got fixed.

Toyota's thoughts are, stop the line, get the problem fixed right now, so we are sure the problem is solved and then proceed.

I think years and years of QC issues has put a bad taste in peoples mouth about the big 3, and they are going to have a hard time changing people's perception of them.

Plus the fact that instead of investing in hybrid technology years ago like toyota did, they invested in V8's and SUV's and now are trying to play catch up. I don't know if this is true or not, but I heard ford just bought toyota's 2nd generation hybrid technology. Toyota is on their 5th generation.

Dodge just announced that they are going to stop making the hemi, and start producing more fuel efficient V6's. So much for the SRT line ups.
 

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