If one or more of the big three go under and never come back, if your vehicle needs to be repaired, you could be stuck. Stuck with a dead vehicle and car payments for xx number of years. To me, that doesn't sound like much fun.
I recently purchased an urban assault vehicle, otherwise known as a Chevy Suburban. It is three years old and I've got a car loan on that thing for a lot longer than I ever want it to be. I have a wife and six kids. So my options for vehicles are limited. I'm concerned about GM going under. If GM goes under, what am I going to do with this beast if something major goes out on it? When I go to trade it in, I won't get much on trade for it. If it dies, it will be like paying for a dead horse. I'm not real thrilled about paying on a dead horse.
So what happened with the US car manufacturers? Why are they in such dire straits? Here are the reasons that I can see that caused chaos in the US car market.
- Domestic automobile manufacturers gave up on the small car market and let the imports (Toyota, Honda, Nissan, Mazda, Subaru, Kia, Hyundai, VW, etc.) own the segment. Instead, they decided to focus their fleet on large SUV type vehicles. Why? Because there is more margin in the larger vehicles. And the larger margin is there to pay for higher domestic costs.
- The benefits paid to union employees at the big three are greater than the benefits paid to the imports. That increases manufacturing costs which makes it harder to build small vehicles and sell them at a profit.
- Resale value. The big three are known to heavily discount their vehicles. That is due to the fact that they have more manufacturing capacity than they have ability to sell cars. This causes their vehicles to depreciate at a much faster rate than the import vehicles. We were able to purchase our Suburban for about half the cost of a NEW vehicle. We're talking about an SUV that is three years old. Now its worth half of what it was three years ago when it was sitting on a dealer's lot. Honda does not directly discount their vehicles. They do offer the dealers incentive cash, but they do not offer direct cash like other automobile manufacturers do. If you look at Honda's resale value, it is near the top for resale value.
- Styling. Honda updates the styling on their vehicles, especially the Accord and Civic, every four years. Toyota updates their models every five years. GM updates their models whenever. I think some models don't get updated for up to nine or ten years. Folks, in car terms, that is an eternity. Besides, have any of you ever been to Detroit, Michigan? I've been there. Once. I drove past the Ford facilities in Dearborn. The buildings are like square blocks. The landscaping is bleak. The whole area has no style. Everything looks the same. Boring. Boring. Boring. The Detroit airport is run down and boring. With that kind of environment, no wonder American cars are boring. There just isn't any inspiration to be bold, new, and exciting. (NOTE: I do love the new Chevy 2010 Camaro. Great style and design. In fact, I have a photo of the concept Camaro as my background on my computer. If GM goes under, this new Camaro may never see the light of day.)
- Quality. I've seen the TV commercials from Ford and GM that their vehicles are as reliable as Honda and Toyota. They may be right. But with crappy resale value, would I rather purchase a domestic or import? And initial quality may be the same, but how does the car hold up over time? Will I need repairs? Does the car squeak and rattle? Does the interior look cheap? I get into a Toyota or Honda and the styling is clean and crisp. I get into an American car and I'm not impressed. Too much holdover from an earlier period. I grew up with parents that purchased domestics for a long time. We had Ford LTDs. Chevy Chevettes. Plymouth Satellites. Buick Skylarks. Ford and Chevy trucks. All crap. These vehicles were prone to rust. The Chevette was absolute crap. I think it got like 13 MPG (it had a 3-speed automatic) and was a gutless wonder (0 - 50 in like 2 years). These domestic cars that I rode in when I was a kid was uninspiring. Crap quality - always in the shop. My parents finally woke up to the imports. They purchased a Toyota Corona. Then another Toyota (Corolla). And then another Toyota (Corolla). Then another Toyota (Tercel). And then another Toyota (Cressida). And then a Honda Accord. I got in on the action with the Tercel, Cressida, and the Accord. And I was hooked.