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Mr. Lowry,
Not to pile on the margins debate, but I think it’s important to understand something about legacy costs. (I’m an accounting prof with a PhD and practice experience, so I know not to take ideas like “cost” and “they lose money on every one they sell” at face value.) Media stories that estimate retiree health-care costs at something like $1500 per vehicle are misleading, because that implies that more vehicles means more health-care costs. Not so. Most of the “legacy costs” aren’t variable with production — that is, Ford or GM making more small cars made doesn’t increase the amount of health care payments for retirees. Those costs are basically fixed — a giant cash outflow whose amount is relatively unaffected by production or sales volumes. They shouldn’t be factored into “margin” if we think of margins as the additional profit Ford will make by selling an additional Focus. Ford will have to pay those costs regardless of whether it sells that additional Focus.
Ford and GM will benefit from selling Focuses (Foci?) and Cobalts as long as the marginal revenue from selling an additional car exceeds the marginal cost of producing that car. Domestic production at UAW labor rates may mean that’s not so — but the legacy costs don’t contribute to losing money “on every car they sell.” They contribute to losing money as a whole company, but not on a per-car basis. So, I’m not sure it’s as gloomy for Ford, GM and Chrysler as your correspondent says.
It’s still awfully gloomy for the taxpayer, though…