How much does it cost to build a Falcon

[ratter]

Originally Posted by ED Classic

I cant think of a dealership in my city that hasnt done a millions of dollors showroom upgrade over the last few years i dont think they make that much out of labour intensive serivicing etc...they make profit on new cars beleive me

They make a hell of a lot more money through fixed operations than they do through new cars sales, I worked in a dealership for a long time and saw it first hand.

If every new car buyer paid retail, I'm sure the profits would be greater, but we all bargain them down as low as we can go.

[trippytaka]

Originally Posted by 4Vman

At the moment it costs them money to make each car...
As a guide a few years ago Toyota bragged they made about $2000 (on average) profit from each vehicle made..

Very true. Not sure if you remember, but when the big three were going under and getting bailed out, it came out that the Auto Workers Union in the US was responsible for GM cars costing about $4900 on average.

This difference in cost was all due to the ridiculous amount of benefits and the fact that the Auto Workers Union members get a lifetime pension after they leave! I'm pretty sure that part of the bail out was to eradicate that pension... I mean, really, talk about how unions can help strangle a company to death!

[SB076]

Originally Posted by Gobes32

To all the people who think Ford are screwing over the ATO, just remember. They still have 2000 employees each paying an average 10k in tax each year......

Add to that all the other taxes (G.S.T. fuel, stamp duty plus others depending on each persons individual situation)

Ford would make a bit on each car but it depends on how you allocate overheads, R&D costs, Marketing, Sponsorship etc. There certaintly is a bit of money spent on new projects for tooling etc (which is required) and they would have to get that back and that would be dependent on the total number of vehicles they build utilising that tooling.

[RATT]

It seems we are lost here. I thought the original question was how much we think it costs to build a new car, not how much profit a dealership is making??

I would say there is no profit in manufacturing cars for anyone right now.

[Fordman1]

Originally Posted by RATT

It seems we are lost here. I thought the original question was how much we think it costs to build a new car, not how much profit a dealership is making??

I would say there is no profit in manufacturing cars for anyone right now.

Correct...

FoA are NOT making money right now......

So take the dealer markup off a $36,000 Falcon -- $4,000 ? = $32,000

Take 10 % GST off again = $28,000 ,

Then wholesale tax another $3,000 ? = $25,000.

I figure it's about $23,000 normally, at the moment ? I reckon $24,000 on a base Falcon - anyone else ?

The problem is that FoA have a huge dept in bank loans so until that is relieved with some big repayments the profit will be next to nothing...

[Ohio XB]

Originally Posted by trippytaka

Very true. Not sure if you remember, but when the big three were going under and getting bailed out, it came out that the Auto Workers Union in the US was responsible for GM cars costing about $4900 on average.

This difference in cost was all due to the ridiculous amount of benefits and the fact that the Auto Workers Union members get a lifetime pension after they leave! I'm pretty sure that part of the bail out was to eradicate that pension... I mean, really, talk about how unions can help strangle a company to death!

When the pensions were negotiated the Big3 owned at least 85% of the US market. Japanese cars were considered trash as they started rusting when you got the car home. The Big3 had no fear of losing market share to rusting Japanese cars or "weird" looking European cars. The pensions were negotiated in contract talks and the companies never imagined that the pensions would be a problem since the US market was their's. Profits were great and getting even better. Ford sold 1 million Mustangs in 12 months alone. It was a different time (1960's). Alan Mulally will even tell you this.

The Big3 were not the only places a factory worker could get a lifetime pension, as the press would like to have you believe. There were other companies that offered a pension and it was considered a good thing if you could get it. Now people are demonized for having a pension if they are not an Executive. How times change.

The pensions are no longer available to new workers. They only have the 401K plans that are funded by the employee's voluntary payroll deduction, like many other companies. I imagine in another 25 -30 years people will complain that there is even this.

For accuracy, only 2 of the Big3 got bailed out.


A large reason for the disparity between the Japanese auto makers in the US and GM was the fact that GM had over 100,000 retirees who get paid healthcare, which is also offered to the Japanese employees when they retire, but the Japanese had less than 300 retired employees in the US, combined. Let's see how things go as Toyota's retiree roles grow, if they don't shut down plants before people have a chance to retire, that is, like in California.


I have been told by a plant manager and a manufacturing engineer that the biggest cost for actually assembling a vehicle (past R&D and such) is the parts. Also, in a Ford vehicle, there is about $1,300 - $1,800 in UAW labor in each vehicle, at least in my inside research. It could be more than this in some cases but not by much. Ford is the most efficient of the Big3 auto makers.

I know this is info for the US but I figure you may be able to use it to gauge what may be going on in Australia.


Steve

[mrbaxr6t]

it is very difficult to figure out how much ford is making "per car" as lots of money is spent on r&d and tooling and then it is used for a very long time - example the 250 xflow engine block - the cast one Ford used it for well over a decade, and the 4 litre EA ohc block - again same block used right up to AU III so the r&d on the engine and the tooling would be fractioned out over maybe a million plus engines in each case - and in the same way parts/panels would be the same, make the press which would cost a motherload then press out X units spreading the cost to r&d and tool over all the units "X" it is very complicated to work out what they cost if you factor in r&d and the like. Its a very difficult question to answer. I think it cannot be known until a given model has ceased production - can look back at the costs to r&d and everything else and then calculate how much each vehicle cost to produce.

[tranquilized]

Originally Posted by mrbaxr6t

it is very difficult to figure out how much ford is making "per car" as lots of money is spent on r&d and tooling and then it is used for a very long time - example the 250 xflow engine block - the cast one Ford used it for well over a decade, and the 4 litre EA ohc block - again same block used right up to AU III so the r&d on the engine and the tooling would be fractioned out over maybe a million plus engines in each case - and in the same way parts/panels would be the same, make the press which would cost a motherload then press out X units spreading the cost to r&d and tool over all the units "X" it is very complicated to work out what they cost if you factor in r&d and the like. Its a very difficult question to answer. I think it cannot be known until a given model has ceased production - can look back at the costs to r&d and everything else and then calculate how much each vehicle cost to produce.

This is exactly right.

In addition to R&D you also need to factor in spare parts support, technical support, vehicle/parts transportation, marketing, plant/factory maintenance, and no doubt plenty of other things I've forgotten/dont know about.

In terms of materials and labour only, theres no way a Falcon could cost FoA any more than $15,000 to build.

I heard from a friend who works at Toyota that a Camry cost about $8000 to build (materials and labour only) a few years ago.

[gtfpv]

Originally Posted by Joe5619

This world "write off" is used far to much when talking about businesses I think.. A "write off" is not free money!!

FYI: you only pay tax if you make a profit, Ford AU have made losses for years now & would not have paid tax for years now!

too true a write off is a bill , if a business writes everything off , that means there is nothing left over to live on .
if you write your electricity bill off, big deal, you still paid it and dont have that money in your pocket , its gone.

[gtfpv]

Originally Posted by trippytaka

Very true. Not sure if you remember, but when the big three were going under and getting bailed out, it came out that the Auto Workers Union in the US was responsible for GM cars costing about $4900 on average.

This difference in cost was all due to the ridiculous amount of benefits and the fact that the Auto Workers Union members get a lifetime pension after they leave! I'm pretty sure that part of the bail out was to eradicate that pension... I mean, really, talk about how unions can help strangle a company to death!

ohhh c'mon . theres always a dill in the mix. !!!! and the executives in white suits jetsetting around the world attending tennis matches and golf tornaments really help out in car manufacturing :

[7apples]

i was with one of the first posts on here, id be saying about 8-10,000,

but yes the costs of r&D ect would push each car up maybe 2000 tops. if for sell 75000 cars, R&D tooling, upkeep on machinery ect. that 2000 x 75000 =$1500000000 to run fords plant for say 3 years.

they wouldnt be doing it for free so there must be some money in it.

right?

[Gobes32]

Originally Posted by 7apples

i was with one of the first posts on here, id be saying about 8-10,000,

but yes the costs of r&D ect would push each car up maybe 2000 tops. if for sell 75000 cars, R&D tooling, upkeep on machinery ect. that 2000 x 75000 =$1500000000 to run fords plant for say 3 years.

they wouldnt be doing it for free so there must be some money in it.

right?

But the FG cost Ford half a Billion???? You are 350 million off? Believe me, for each Commodore, Falcon, Aurion etc, factor in 8k for parts and labour at the most. Then alloctate 12k for plant upkeep, maintenance, finance dept, marketing, R&D, workcover premiums, plant security and medical facilities and the list goes on.

[Gobes32]

If Ford build the FG for the next twenty years then they may be able to bring the price down by up to 15k, or they could steal someone elses car design, move to a country with cheap labour and no safety reuirements, and bring the price down that way?

[damir05]

why dont car makers have their own dealerships, imagine how much more profit they could get that way

[Fordman1]

I stand by my $24,000.

Thant includes everything......

R&D, tooling, facilities, Product development and testing, material costs, labour, insurance, loan repayments, etc, etc, etc....

[Fordman1]

Originally Posted by 7apples

i was with one of the first posts on here, id be saying about 8-10,000,

but yes the costs of r&D ect would push each car up maybe 2000 tops. if for sell 75000 cars, R&D tooling, upkeep on machinery ect. that 2000 x 75000 =$1500000000 to run fords plant for say 3 years.

they wouldnt be doing it for free so there must be some money in it.

right?

Nope....

You're way off......

[tranquilized]

As has been mentioned, its impossible to work out the exact cost per car including R&D and all other expenses until the model run has finished.

Theres a break even point, which is the number of FG's (for example) that need to be sold for the half billion in R&D to be covered. The longer the model sells for, and the more units that are sold, the less the overall cost per car is. Parts & labour however, can be reasonably accurately calculated at any time, and remain relatively constant in the short term.

If you want to know the total cost to Ford for each car sold last year, a good start would be to look up their 2008/09 profit/loss, and divide that by the number of units sold.

And about the whole "writing off" of expenses, I find it amusing as well how often that term is busted out by people who obviously know nothing about business, as though writing off expenses means said expenses dont cost you anything. All "writing off" means is your not paying tax on the money you've used to pay those expenses - you still have to earn/borrow/steal/find that money from somewhere!

[tranquilized]

Originally Posted by damir05

why dont car makers have their own dealerships, imagine how much more profit they could get that way

Ford tried that a few years ago in the US under Jac Nasser. As soon as Nasser was fired, the company owned dealerships were as well. Obviously not a good business model, although I couldn't tell you why.

[4Vman]

Originally Posted by Barraxr8

I stand by my $24,000.

Thant includes everything......

R&D, tooling, facilities, Product development and testing, material costs, labour, insurance, loan repayments, etc, etc, etc....

For the base model i think you're definitely close.
Im thinking 24-28 ish...

[vztrt]

Originally Posted by tranquilized

As has been mentioned, its impossible to work out the exact cost per car including R&D and all other expenses until the model run has finished.

Theres a break even point, which is the number of FG's (for example) that need to be sold for the half billion in R&D to be covered. The longer the model sells for, and the more units that are sold, the less the overall cost per car is. Parts & labour however, can be reasonably accurately calculated at any time, and remain relatively constant in the short term.

Seeing as every department has a budget to work with, they can get the number down to a figure to work out how much each car will cost. Monies are worked out prior as no organisation will go into investing huge amounts of money without doing the sums.

[bathurst77]

Reminds me of a quote from "The Westwing" TV show.

Someone was having a go at Big Pharma for charging so much for life saving medications

"How can you justify charging so much, when we all know that pill only costs you $2.00 to make?"

"The SECOND pill cost us $2.00 to make. The First one cost us $2 million."

[Dr Smith]

Originally Posted by bathurst77

Reminds me of a quote from "The Westwing" TV show.

Someone was having a go at Big Pharma for charging so much for life saving medications

"How can you justify charging so much, when we all know that pill only costs you $2.00 to make?"

"The SECOND pill cost us $2.00 to make. The First one cost us $2 million."

So perfectly summed up.
Even before the first scetch is drawn, there is the market research on what customers want, the positives and negatives of the previous model, then comes the new car R & D, designing and redesigning, clay modelling (now less often) component design, supplier interfacing, initial build of components, testing on new components in old mules, factory upgrades and tooling manufacture, redesigning components based on the results of tests in old model mules, testing again of newly designed components, build early new model bodies and test components, alter body if necessary, validate components in real world testing, build final evaluation vehicles, final sign offs, then get to build customer job #1, marketing budgets....then make money to recoup all these expenses, warranty costs have to factored in as well although you hope these drop as your R & D is improved. Then comes the cost of actually building each car from job #1 onwards, the factory running expenses including utilities, labour, supplier expenses, freight of finished cars, I may have got the order wrong but you get the idea....and then you hope Graham Smith doesn't bag the crap out of the car or Paul Gover leaves behind his HSV jacket when he's on the roadtests....

[last fairlane]

If it cost Ford Australia $5 Billion to make a BA out of an AU
they would have to sell 5 Billion cars to cover costs @ $1 per car
5 Million would make it $100 per car lets keep going here 500,000 would be $1000 per car 50000 would make it $10000 per car which would be close to the number of Falcons sold
am I right here or have I got it all wrong both mathematicly as well as finacially
can some one help me out here or am I totally up the creek with these thoughts
By the way I have an AU Fairmont and the Mrs has a BA Ghia so some where along the line I helped them out
thanks John

[Gobes32]

Originally Posted by last fairlane

If it cost Ford Australia $5 Billion to make a BA out of an AU
they would have to sell 5 Billion cars to cover costs @ $1 per car
5 Million would make it $100 per car lets keep going here 500,000 would be $1000 per car 50000 would make it $10000 per car which would be close to the number of Falcons sold
am I right here or have I got it all wrong both mathematicly as well as finacially
can some one help me out here or am I totally up the creek with these thoughts
By the way I have an AU Fairmont and the Mrs has a BA Ghia so some where along the line I helped them out
thanks John

Five Billion is probably BMW's budget for the 7 series development. The number you want is 500 million.

[trippytaka]

Originally Posted by gtfpv

ohhh c'mon . theres always a dill in the mix. !!!! and the executives in white suits jetsetting around the world attending tennis matches and golf tornaments really help out in car manufacturing :

I'm not saying that executive pay or decisions have been a benefit, but I think getting a pension for working for a company is just as ridiculous.

[Ohio XB]

Originally Posted by tranquilized

Ford tried that a few years ago in the US under Jac Nasser. As soon as Nasser was fired, the company owned dealerships were as well. Obviously not a good business model, although I couldn't tell you why.

Because when you sell your product to someone for them to re-sell, it's not good business to compete with them. :


Steve

[Luke Plaizier]

The IT industry has the common issue as well - Direct Selling (Dell) vs Channel Selling (HP, Cisco, Microsoft etc).

Notice that no large IT firms are out there trying to sell Dell product when Dell will simply walk in direct, undercut the reseller's price and shaft them. They can't coexist. Dell are out there on their own, whereas HP, Microsoft and Cisco have 3rd party resellers and support providers everywhere.

That's what Ford were in the midst of trying to do - coexistence - and suffering from channel backlash, forcing them to abandon the project.

If it had been followed to completion, there would have been some major advantages for Ford - including being able to control the quality of after sales service and improving margins. But reducing their prices would be doubtful, because if all of the dealers were owned by Ford they wouldn't be competing against one another for business anymore. They'd also be left with the cost localised marketting if they wanted to continue it - something that the local car dealers pay for now.

My estimates early on regarding the cost of materials and labour on car construction were based on a conversation with someone close to the industry.

Everything in this thread is based on conjecture and guesswork. Anyone bold (or arrogant) enough to say that someone else is wrong is simply wrong themselves.


Lukeyson

[Dave_au]

Originally Posted by 4Vman

For the base model i think you're definitely close.
Im thinking 24-28 ish...

I would say both you and Barraxr8 are very close on the money.

I suggest you all try and work out the employee pricing for the Falcon and then take a further 5% off.

If memory serves me correctly, Holden has employee pricing that gives around a 30-35% discount for Commodore; I still believe they would be selling these to employees just above cost so I would predict that Holden is probably running a margin to RRP of around 40%.
For instance, a $35k build cost for a $58k SSV sounds about right.

Also don't forget that the majority of parts for the vehicle come from external suppliers as well, and as such, don't forget that automotive component suppliers are trying to make a profit as well (albeit usually getting locked into onerous contracts which send them straight to volunatary administration).

[tranquilized]

Originally Posted by Luke Plaizier

The IT industry has the common issue as well - Direct Selling (Dell) vs Channel Selling (HP, Cisco, Microsoft etc).

Notice that no large IT firms are out there trying to sell Dell product when Dell will simply walk in direct, undercut the reseller's price and shaft them. They can't coexist. Dell are out there on their own, whereas HP, Microsoft and Cisco have 3rd party resellers and support providers everywhere.

That's what Ford were in the midst of trying to do - coexistence - and suffering from channel backlash, forcing them to abandon the project.

If it had been followed to completion, there would have been some major advantages for Ford - including being able to control the quality of after sales service and improving margins. But reducing their prices would be doubtful, because if all of the dealers were owned by Ford they wouldn't be competing against one another for business anymore. They'd also be left with the cost localised marketting if they wanted to continue it - something that the local car dealers pay for now.

My estimates early on regarding the cost of materials and labour on car construction were based on a conversation with someone close to the industry.

Everything in this thread is based on conjecture and guesswork. Anyone bold (or arrogant) enough to say that someone else is wrong is simply wrong themselves.


Lukeyson

Spot on. And your figure of $7-$8k build cost, no matter what model spec, sounds completely believable as well, and concurrs with my own conversation with a Toyota employee who said $8k for a camry.

All these people coming up with figures of $20k and up must be including R&D costs etc, in which case it could be an accurate figure, but as I and others have already mentioned; its impossible to calculate total unit cost until the model run has been completed Its not even worth speculating on.

Besides, the original question was how much to build a falcon, not how much it costs to be in business...

[4Vman]

Originally Posted by tranquilized

Spot on. And your figure of $7-$8k build cost, no matter what model spec, sounds completely believable as well, and concurrs with my own conversation with a Toyota employee who said $8k for a camry.

All these people coming up with figures of $20k and up must be including R&D costs etc, in which case it could be an accurate figure, but as I and others have already mentioned; its impossible to calculate total unit cost until the model run has been completed Its not even worth speculating on.

Besides, the original question was how much to build a falcon, not how much it costs to be in business...

But you MUST include all associated costs into your build cost? You cant build the car without having spent that money, what about infrastructure and support/administrative structure? that all costs money, it must be factored into your costs...
there would be 8K in driveline and suspension buy ins alone...