US Car Makers Crank Out Cars Around the Clock; Who is Buying the Cars?

Townhall.com ^ | August 18, 2013 | Mike Shedlock

[Kaslin]

US car makers are cranking out cars three shifts a day. The goal is to run plants around the clock, 365 days a year, even eliminating breaks.

Please consider Open All Night: America's Car Factories.

Nearly 40% of car factories in North America now operate on work schedules that push production well past 80 hours a week, compared with 11% in 2008, said Ron Harbour, a senior partner with the Oliver Wyman Inc. management consulting firm.

"There has never been a time in the U.S. industry that we've had this high a level of capacity utilization," he said.

But fresh from a near-death experience during the recession, auto makers are reluctant to put money into bricks, mortar and machinery that could become a drag on profits if car sales fall. Volkswagen new $1 billion Chattanooga, Tenn., factory recently cut 500 workers after sales of its new Passat sedan swooned.

Through a series of agreements negotiated with the United Auto Workers union, the Detroit Three now can schedule work at night and on weekends without paying as much in overtime as they would have in the past. Adding a third shift, as many plants have done, also reduces overtime. Overtime pay also starts after 40 hours a week, not after eight hours a day as in the past. On top of those savings, a newly hired Big Three factory worker now earns about $15 an hour versus $28 an hour for veteran workers, under postrecession labor pacts.

Toledo factory managers recently changed break schedules to squeeze out even more production. Instead of shutting down the assembly line eight times a day for routine breaks, they have hired extra workers to fill in during breaks, so the line doesn't stop running.

GM is running six of its U.S. plants through the night on three-shift schedules. Last year, GM produced 3.24 million vehicles in North America compared with 4.52 million in 2007—when it had five more assembly factories.

Ford has gone a step further, adding a fourth crew of workers at some engine and transmission plants to keep those factories running 152 hours out of the 168 hours in a week.

The techniques have helped expand production by 600,000 vehicles during the past 15 months—the equivalent of about three assembly plants, says James Tetreault, Ford's vice president of North America manufacturing. Ford doesn't plan to build a new North American assembly plant, he says.

"In an ideal world, we'd like all our plants to run around the clock, 365 days a year," says Mr. Tetreault. "That would be a financial dream. But we don't know how to do that yet."

Who is Buying Cars?

So who is buying new cars? It's not millennials struggling to find a job, loaded up in student debt and delaying family formation.

The Wall Street Journal reports Who's Buying 'Youth' Cars? Seniors.

In recent years, auto makers have developed a bevy of pint-size models like the Chevy Sonic, Fiat, Ford Fiesta and Kia Soul, and promoted them using social-media, music festival sponsorships, and in some cases, daredevil stunts. To hype the new Chevy Sonic, General Motors Co. filmed the subcompact parachuting out of a plane for an online campaign aimed squarely at 18-to-30-year-olds.

But the largest customers for these cars, about 42% of buyers this year through May, are closer to retirement age, according to registration data compiled by car-shopping website Edmunds.com. The proportion is up from just 29% five years ago.

Meantime, the percentage of 18- to 34-year-olds buying new subcompact cars fell to 12% through May, down from 17% in 2008, according to registration data.

Of course, 50 and 60-somethings are some of the biggest buyers of all cars.

"The baby boomer generation is the largest cohort in the marketplace," Kia's Mr. Sprague said. "Just by virtue of their numbers being so large, we'll continue to see them skew the data for a long time."

Last year, buyers 55 and older accounted for more than 40% of all new car sales, up from 33% in 2008 while buyers between the ages of 18 and 34 represented only 12% of new-car purchases. And that is down from 14% five years ago, according to Edmunds.com.

Auto makers' big prize is the "Millennial Generation"—that group of consumers in their 20s and 30s whose numbers could rival the postwar baby boom that has dominated the auto market for decades.

Millennial Generation "Big Prize"

As more and more seniors stay employed longer (because they have to),  the demand for cars has kept pace. I keep wondering how long that can last. The average age of those working at fast-food restaurants is telling.

There is no pent-up demand that I can see, at least in the age group of those buying.

Auto makers are targeting the big prize, the millennial generation, and curiously even youth cars are not going to the youth. And I do not think they will.

The generation of millennials is nowhere near as big as the boomers, and as a class, the millennials are struggling in low-pay jobs (if they can find work at all), and burdened down in student debt to boot.

And look at the pay differential of the car makers: $15 an hour for new workers versus $28 an hour for veteran workers.

Most importantly, a secular shift in attitudes towards cars and debt have changed. Millennials are not boomers nor do they have boomer attitudes. Carmakers should enjoy the boom while it lasts. The "big prize" is not around the corner.

[Cringing Negativism Network]

I disagree.

Buy American.

[matt04]

Toledo factory managers recently changed break schedules to squeeze out even more production. Instead of shutting down the assembly line eight times a day for routine breaks, they have hired extra workers to fill in during breaks, so the line doesn't stop running.

So the UAW gets hourly breaks? I could see a lunch break and maybe two short 15-20 minute coffee breaks.

[RKBA Democrat]

Who is buying the cars? We are, silly. Or at least we will be when those folks who bought cars on credit while holding minimum wage jobs go ahead and default.

See “channel stuffing.”

[staytrue]

Yes, those cars are fleet cars, most of them are from rental car companies.

[inchworm]

then you are buying liberalism.

[familyop]

"I work. Every day. And I was a buyer of an American car.

Don’t stereotype please."

That's where most of the money is, and that's why both political parties are working for the same constituent groups. As for hard work, many are working hard at preventing personal uses of private property, surveillance of law-abiding citizens, collecting "impact fees," behavioral conditioning to instill social pathologies and preventing small production. Granted, there are many volunteers, too--pensioners on the lookout for any perceived flaws in the personal effects of their neighbors.

[steve86]

Apparently nearly everyone in my trailer park (except for me). Even the illegals are buying cars with Bernanke funny money.

[FreeReign]

GM is running six of its U.S. plants through the night on three-shift schedules. Last year, GM produced 3.24 million vehicles in North America compared with 4.52 million in 2007—when it had five more assembly factories.

Gee wow. GM is producing less cars with less assembly factories. Is this supposed to be a good thing?

Why all the hype??

[familyop]

"I work. Every day. And I was a buyer of an American car.

Don’t stereotype please."

Sorry that you took it personally, as my comment was not directed at any one person. Most of the people buying new cars receive incomes from government (examples: land use planners, teachers, social workers, pensioners) or businesses that rely heavily on government debt/revenues (restaurants, convenience stores, others).

That's where most of the money is, and that's why both political parties are working for the same constituent groups. As for hard work, many are working hard at preventing personal uses of private property, surveillance of law-abiding citizens, collecting "impact fees," behavioral conditioning to instill social pathologies and preventing small production. Granted, there are many volunteers, too--pensioners on the lookout for any perceived flaws in the personal effects of their neighbors.

[Cringing Negativism Network]

I’m just saying.

The GOP has become almost anti-American in its approach to US jobs.

I have a big problem with that, and so do a lot of voters I believe.

I think the GOP is in the midst of committing suicide via converting its own voters, to Democrats. Not that I believe the GOP principles are driving people away - I think the GOP principles are far and away superior to anything the democrats are standing for.

But STOP EXPORTING JOBS.

Bring back US jobs now.

I’m completely serious.

Stop sending US jobs to other countries. And BUY AMERICAN.

Stop sending US jobs abroad.

That is killing the GOP.

[familyop]

I agree with every word in your comment #30. There might be more to the problem, though. As I’ve said so many times before, I live in a very sparsely populated county. The acreages of lots are large. There are no people within eyesight of here, yet there’s a county zoning ordinance (called a “law” here) against any new, small manufacturing business regardless of how small. Repair work is also illegal. This is not the only rural county with such a zoning ordinance.

Sorry about the repeat of my comment earlier. Some comments were posting with only part of the text that I typed in. First time I’ve seen that here.

[Cringing Negativism Network]

I just want the GOP to be for American jobs.

Hire Americans. Build stuff in America.

Buy American. I’m series. China now exports more than America. And is growing.

[RugerMini14]

I disagree.

Buy American.

I disagree.

Buy non-UAW.

I haven't bought a UAW built vehicle since the '90's and I will never do so again.

The UAW is the enemy of everything I value.

[Cringing Negativism Network]

The UAW is not a friend of mine.

Unfortunately we have sold off far too much of America.

I have decided it is more important to be for American manufacturing, than it is to oppose the UAW.

They are a part of America.

They are not the biggest problem now.

However if you’re going to oppose the UAW, then I hope you will also likewise oppose all goods, made by any employee who is likewise, lacking a specific individual set of rights.

Which eliminates quite a lot of what you buy every day.

Including every single thing bought, which is made in China.

Are you opposed to anything made in China?

[Cletus.D.Yokel]

Shedlock is an idiot; a fellow traveler.

UAW cvontracts are tied to production level not sales levels.

No mater the economy, to satisfy the contract, GM/Ford/Xysler are ^^contractually obligated^^ to produce ‘x-amount’ of vehicles in a contract year to keep UAW members employed. (Failure Business Model).

Sales be damned, it is all about keeping the slackers employed and the union-dues coming in!

Here’s a trick, call your local GM dealer and ask them if they can negotiate on a new, ^2011^ Chevy TrailBlazer with 4WD and a factory installed tow-hitch...Oh, thay can find one and they WILL NEGOTIATE to sell it to you.

[inchworm]

Just glad people realize that about the UAW and I'm not the only one.
As for the GOP, what's killing them is signing their names to laws that add thousands of pages to the bureaucracy to make it harder for American jobs to exist. And when they aren't adding to it they fail to take away from it when they have an opportunity like defunding Obamacare (listening John McStain?). Unless the GOP becomes more "tea partyized" it will continue to stand for nothing but soft liberalism.

[2 Kool 2 Be 4-Gotten]

Here’s a theory.

The way CAFE works - they have to pump out so many high mpg cars to allow them to sell the vehicles they really want to sell and the public really wants to buy - trucks, suv’s, luxury cars etc.

Maybe they’re pumping out all sorts of high mpg cars which they sell at a wash or even at a slight loss in fleet sales to allow them to sell enough trucks, suvs and luxury cars where the profits are really made.

Just a thought. But, if true, would be yet another example where gubermint “environmental policies” reinforce the law of unintended consequences. And, as others have pointed out, it would keep the unions happy as well.

[RugerMini14]

However if you’re going to oppose the UAW, then I hope you will also likewise oppose all goods, made by any employee who is likewise, lacking a specific individual set of rights.

The ChiCom workers are not actively undermining my rights and liberties as an American. A portion of every dollar that I would spend on a UAW car goes to an organization which seeks to deprive me of my rights and liberties.

I'd buy a car built by slave Muzzie labor in a ChiCom factory in Pakistan before I would buy a UAW car. I don't have the luxury of worrying about foreign threats when the domestic ones are so virulent.

(And the Japanese and Germans make excellent cars anyway.)

[inchworm]

If the UAW employees don’t want that Liberal crap, then their membership needs to take a stand and direct what their union is promoting, and who their union is promoting in the latest Liberal politics. The UAW has done it over and over and over and over again. Too late now. They’ve lost me. An I did put my money where my mouth. I was a bit apprehensive to sign the dotted line. Then my wife whispered to me. “Remember Obamacare”? I grabbed the pen and signed the contract. I feel better now than I would have had I purchased the UAW car all while knowing what they’ve done, and continue to do.

[Cringing Negativism Network]

We completely disagree on this then.

Buy American.

:D