Stock Investing has told us that it has been more than 25 years since Japan’s automotive juggernaut served notice on Detroit that we are going to eat your automotive base for lunch. Each successive year since then, our domestic car manufacturers have given away market share to the Japanese. For General Motors, Ford and then Chrysler before the Daimler merger, the only question was how many car sales are we going to lose this year to the Japanese.

Each of the Big Three must put together 3 to 5 year budgets in order to project their cash flow needs. Ford for the next three years in their budget process is showing continued market share erosion in each of the next three years. It is likely that both General Motors and DaimlerChrysler are acting out the same scenario.

UAW Union Caving to Facts of Life

Jerry Sullivan is the head of the largest UAW car worker’s union at Ford. He has 36 years with Ford, and the last 10 years as head of UAW Local 600. Sullivan is urging his fellow workers to accept the present Ford buy-out agreement which is on the table for Ford workers to consider.

Ford lost almost $13 billion in the last 12 months. The union recognizes that Ford’s back is up against the wall, and it’s time to try to save the company. Ford is reorganizing the way it builds cars, more along the lines of Japanese manufacturing techniques. As an example, many of their employees are now working 4 day shifts of 10 hours. These shifts can include weekends. The workers are agreeing to work at regular wages as opposed to overtime rates.

This summer, the national Union will be negotiating health care benefits among other issues. Right now health care costs are at least 50% higher than overseas employees. It’s very tough for Ford, or anyone for that matter to make up the incremental difference in these costs, and still sell cars at a competitive price in view of world markets. The Japanese operating under a different pricing structure are in a position to simply put more goodies into the cars, and still sell them at a cheaper price than our domestic products, and then there’s the quality issue.

Let’s look at it this way. Our stock research shows that the average car Ford produces compared to Japan has about $2400 of additional profits built into the Japanese car compared to the American produced vehicle. About half of that gap is higher labor costs for the American product, and about half of the labor costs are higher medical care costs for retired automotive workers. The Japanese companies have -0- costs, that’s right, zero associated medical care costs for their RETIRED employees. This is because in Japan those medical care costs are picked up at the national level by the government, who picks up medical costs for all retired people.

General Motors Delays Filing

General Motors like all publicly traded companies must file its annual report with the Securities Exchange Commission on a timely basis. Would you believe that GM has asked the SEC for an extension for its filing to March 16th of this year? GM continues to be unable to act its financial act together. This coupled with an inability to manufacture cars that people want to buy makes the future not altogether too bright for America’s largest car producer.