Rates are crashing and fuel to the moon!

I bet most of the people who say otherwise won't read that but the article basically explains how the market is what determines car prices regardless of labor costs going up. And the proof in that is how new car prices are falling now.

 

Costs of labor probably have more effect on smaller companies that aren’t the big 3 auto makers though.

 

unfortunately, the article is pop-psy economics. The PRICE of the car may not be determined by increased labor costs, but the COST of the car most definitely is.

So if the price of the car can’t go up, but the costs DO, SOMETHING has to give. Investors aren’t going to give anything, they can still make money by moving their investments elsewhere. Suppliers aren’t going to give anything, they are already squeezed to the breaking point.

So, the cost of capital, materials and labor are fixed, or up, and the price is stable….. what, exactly, is going to give? Usually it’s investments into the future. That used to include pension funding, and always includes R&D, marketing, and QUALITY. Pennies have to be shaved, so make it cheaper, lengthen the model cycle, and don’t advertise as much.

In other words, run the thing into the ground. Just like they did in the ‘70’s.

 

It sucks for investors but their profits might be less. It's not the end of the world. Every business has ups and downs. And not all costs are fixed. Commodities like aluminum and steel can tank. There's a lot of moving pieces here. I wouldn't get up at arms about it either way. Seems like most people here would be happy to see the big 3 go the way of Studebaker anyway.

 

Sure, every business has its ups and downs.

That’s very pithy. Piling on a HUGE “down” on one business, but not their competitors, what do you THINK is going to happen?

Perhaps the fact that Warren Buffet sold ALL his GM stock last month should start to form the train of thought.

 

Doubt they're going anywhere. I think they'll be just fine and continue profiting. Just maybe not as much as before. And their competition has already raised wages. The ones that haven't might have to.

 

If labour is 950 per car why the heck do they build in Mexico ???

 

That article is stupid in the first place. They mention the materials making up the majority cost of the car. Those materials take LABOR to produce. So I guess if you want to pick and choose which labor you count, you too can come up with a 7% figure.

It's not like CNN is biased anyways...

 

Just because the car prices are falling doesn't mean the business model of raised labor costs is sustainable? Pretty sure the big three are reported pretty large losses last quarter. Having to drop your prices doesn't mean the cost of production drops as well. It just might mean you're operating at a loss.

 

I'm not losing any sleep over it. It's nothing new and that raise isn't the end of the world.