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Posts Tagged ‘age’

During the past year, the three major American automakers, Ford, GM and Chrysler have witnessed a ghastly drop in sales with estimates reaching levels not scene in 27 years.  Ford reported sales decreases of 30 percent, while Chrysler’s sales are down 35 percent for this month, leaving GM the biggest loser with its sales declining approximately 45 percent from last year’s.  Robert Shultz, S&P’s lead automotive analyst, has warned that without the help of federal aid, the big three may be endanger of filing for bankruptcy.  Renee Rashid-Merem, a spokeswoman for GM, has denied these claims saying, “Bankruptcy is not an option GM is considering.” 

Investors don’t seem convinced of a speedy recover as stock prices continue to fall in recent months.  According to a report published by Global Insight in early October, auto sales are forecasted to reach recession levels by the end of 2008 and fall even lower in 2009.  It is no surprise that top executives from all three motor companies find themselves before Congress asking for 25 billion in government loans to provide relief in times of economic hardships.  Many critics believe there should be no relief for these automakers, allowing the free market to decide their fate.  If conditions persist, there is a strong possibility that the big three may cease to exist in the near future.  Right now may be the beginning of an automotive ice age.

What factors led up to the rapid decline of auto sales throughout the American auto industry?  In the beginning of the year, high gas prices pushed consumers out of trucks and sport utility vehicles into cars and crossovers.  Automakers saw a small portion of their profits decline as consumer preference changed from vehicles yielding higher margins to less pricy alternatives.  U.S. automakers were especially hit as many consumers switched to foreign automakers like Honda and Toyota because of the smaller vehicles they were offering.  The credit crunch would be another factor attributing to a portion of declining sales.  Because new automobile price tags are a high percentage of the averages consumer’s yearly income, it is no wonder that failure to obtain adequate financing by the average consumer would constitute such a result.  Even with financing, consumers are hesitant to spend money as economic conditions continue to worsen.  The unsettling change in consumer taste is perhaps the biggest factor contributing to the decline of sales throughout the auto industry.  Simply put, people just aren’t buying cars anymore.

Declining sales volume is a big problem for automakers like Ford and GM considering that both motor companies are highly leveraged.  In other words, they exhibit high operating leverage.  Without getting into the technicalities, operating leverage is simply the ratio of a company’s contribution margin to its profits.  Low operating leverage exhibits low fixed costs and high unit variable costs, while high operating leverage exhibits high fixed costs and low unit variable costs.  A higher operating leverage indicates that a change in sales volume will have a relatively greater impact on profits.  This is desirable for a company who is operating above the breakeven point, or where revenues exceed costs.  As sales volumes increase, fixed costs remain the same and variable costs are low so increasing sales volume does not drastically impact costs.  Both Ford and GM are operating below the breakeven point and because they exhibit high operating leverage their profits have suffered by a larger degree due the burden of high fixed costs.  High operating leverage is the reason why sales volume is such a crucial factor for the survival of these U.S. automakers.  Revenues must exceed costs so profits remain respectively less effected by higher fixed costs. 

A large factor contributing to Ford and GM’s fixed costs is their labor force.  United Auto Workers’ union has set up negotiations for job banks in which workers are paid while there is no work at the plant.  If Ford and GM aren’t selling high volumes of motor vehicles and workers are still receiving pay checks, than these automakers won’t be able to cover their fixed salary expenses with such low sales volume.  To try and alleviate a great portion of their fixed costs, Ford, GM, and Chrysler are offering buyout programs or early retirement offers to employees on salary.  Chrysler says they are attempting to reduce their salaried staff by 25 percent by the end of the year.  GM has already eliminated about 5,100 salaried employees and cut benefits for current employees and retirees.  At the same time, all three automakers are cutting prices and starting their year-end sales early in attempt to boost sales volume.  If the big three can decrease their fixed expenses and increase their sales volume enough to cover costs and exceed the breakeven point, they will have a chance of survival.  It is hard to reach any conclusion about what the future holds for Ford, GM and Chrysler. It is possible that the world may be witnessing the first ever automotive ice age. 

For the legendary Lamborghini sports car stable of fantastic ultra high performance and styled vehicles it all started with ordinary Fiat automobiles and tractors.

Mr. Lamborghini – fully named – Mr. Ferruccio Lamborghini got his start with Fiats and then went on to a large successful manufacturing concern that grew from a small manufacturing shop into a major producer of tractors. However at a certain point in every person’s life they search out to complete what their real passion is. In the case of Lamborghini was finely styled and crafted motor cars. At 60 years of age, an established manufacturer of agricultural tractors – Mr. Lamborghini – decided that he could a better job of building a high end, beautifully styled, performance racing automobiles than either of the two dominant Italian auto firms of that auto industry sector – Ferrari and Maserati.

The first product out of the door had a chassis that was multi-tubular; the engine was front mounted sporting a 3.5 liter 12 cylinder V-12 engine. The V-12 engine itself was fitted with six Weber carburetors and ran four overhead camshafts. It all clocked at 360 ultra smooth horsepower with the transmission drive being through five speed stick shift. Suspension involved a coil and wishbone independent suspension set up. In one word it was wow – both in terms of performance of the hop as well as the automotive styling.

Although the styling of those early Lamborghini models may be considered standard Italian sports car design – designs which have worked their way into the so called standard “sport scar designs “and “sport scar flair”, at the time it was new and innovative and for the most part if was twenty five years ahead of anything produced in the good old U.S.A. . The one American sports car which might be considered an exception to that point was the Chevrolet Corvette. For years to come nothing else really matched or was similar to the clean aerodynamic lines and styling of the early Lamborghini classic autos.

Even then Lamborghini had such innovative products the establishment and reputation of the Lamborghini product line was no easy road to hoe. Although the first cars were produced in 1963 it was not for two years later – at the Turin Motor Show that the car began to attract solid interest and for the reputation of the car and its studio to grow and begin to become accepted for what it should be.

The first real product of record for Lamborghini was what was marketed as Miura T 400 model automobile. Its first year of manufacture was the 1966 model year. The basic layout and design of the Miura T 400 was a mid-engined coupe with a slightly larger version of the overhead cam engine – the classic V-12 laid out transversely behind the two seats of the car. The rear wheels were then driven by this engine through” spurs gears”. Interestingly the gear boxes and rear axles were Lamborghini products all by themselves -so they shared a lineage that was unique and not the same as any other of the competitor’s models.

What was performance of this little cat? The V-12 engine could pour out a total of 385 barrel horsepower. Top speed of this little coupe was over 180 miles per hour. It could more than carry its weight with the local Italian contenders – even the famed Ferraris.

If the was one complaint from drivers or riders it was of noise levels in the car’s cockpit. It can be said that this was the price to be paid for success or in this case speed and performance. If you cannot stand the heat don’t stay in the kitchen. Certainly the buyers of Lamborghini fine motor cars who bought the product and established the revered name for its performance and advanced styling and forgo this small shortcoming or foible as the car as an assumed fact – even a luxury.

The next model in the Lamborghini stable was introduced approximately two years later. The entire life of the production run of the popular Miura model was nine years – with two cars being produced a week ( a production figure of only 100 or so cars a year). The name of this vehicle was the Espada. For the new Lamborghini model, the Espada, Lamborghini went back to a more standard front engine layout. Perhaps this was in response to concerns over noise levels in the cockpit of the Miura and the need to produce a more “standard” or “civilized “vehicle product. No one really knows what went on in the mind of the genius Ferruccio Lamborghini. However what was retained for sure were the Lamborghini basics – the four liter V-12 massive highly tuned engine with whizzy overhead cams and multiple choke carburetors all putting out massive automotive performance and handling.

In the end it can be said that the Lamborghini automotive and automotive styling and performance legends are more than unique and reek of power, thrust and acceleration.