[amitoj]

Originally Posted by Jomz

Really?? I don't think 401k is the major reason for cost cutting on outsourcing.
I see that the contractors make quite a bit , and they don't want to let go of the pie. 20% of the salary billed straight goes to the contractor?? What for??

Why doesn't the employee deserve that 20%??

I guess someone needs to pay the contractor for his services of providing labour?

Originally Posted by Jomz

Anyway, I don't know much about the economy and sewage and stuff. I believe american money should stay with America to revitalize the economy , rather than used for investments outside US.

Even if an average Joe is buying a new car/ Making payments on his credit card/ making mortgage payments- it goes back to American economy. What should be removed is ganging up on the average Joe by corporations.

What ganging up are we talking about here? If you spend more than you earn, you will end up in the red eventually. Its not rocket science.

And these investments do end up back in the US in terms of profits and dividends to shareholders as well as the workforce.

Originally Posted by Jomz

I still don't see how outsourcing is beneficial to Chrysler, which was where we started the topic. If Ford & GM can get out of their mess without Outsourcing much ( they do take people on H1's but very limited), why can't Chrysler do it by leveraging local American talent??

Wait. Ford and GM dont outsource much?? You do know about their manufacturing plants outside of US, e.g. Mexico and Canada. Ford's Fusion, Fiesta and Lincoln MKZ are built in Mexico while Edge, Flex and few other Lincoln models are built in Canada.

Originally Posted by Jomz

but once that employee has gone back, gone are the lessons learned in the project.

That can be expected from small companies that dont have any idea about how outsourcing works. But with larger companies, they have processes in place to make the whole operation person independent. There is a reason why at least in IT, many companies are CMM Level 5 certified.

Originally Posted by Jomz

No way. I don't know how the cheap effective labor would help American economy, they might show larger profits for corporations. That is it. Any the money given to the cheap labor just leaves the country- it is not used to build houses, put in an investment fund in the US, or so..

These corporations that we are discussing are not owned by a family or a private small group. These are publicly listed companies, answerable to millions of stock holders who are mostly the average/common man (either directly or through pension funds) If these companies make money from outsourcing, the entire economy benefits from that because it infuses more funds into the US economy, including Chrysler even though it is owned by an Italian company now.

[Jomz]

Originally Posted by amitoj

I guess someone needs to pay the contractor for his services of providing labour?

why should there be a contractor at all??

Originally Posted by amitoj

And these investments do end up back in the US in terms of profits and dividends to shareholders as well as the workforce.

Misconception. For example I sent $45k last year to India. If an American engineer was employed in place of me, he would have used that money to build a house or so- which would have in turn supported the local construction business.


Tell me how does the $45k I sent home last year get back to the US economy?? & I'm pretty sure almost every H1 guy send at least 30% of his salary back home.

India has restrictions on exporting Foreign/ Indian currency ( for NRI's), why is that?? I think that is to keep Indian money in India itself.

Originally Posted by amitoj

Wait. Ford and GM dont outsource much?? You do know about their manufacturing plants outside of US, e.g. Mexico and Canada. Ford's Fusion, Fiesta and Lincoln MKZ are built in Mexico while Edge, Flex and few other Lincoln models are built in Canada.

I was talking about American jobs, not new production facilities. I work in the research and development section and I don't have a real good idea about production strategies , anyway all the above models were designed and developed at Detroit only. Those R & D jobs were not outsourced by GM and Ford. At Chrysler they are.

Originally Posted by amitoj

These corporations that we are discussing are not owned by a family or a private small group. These are publicly listed companies, answerable to millions of stock holders who are mostly the average/common man (either directly or through pension funds) If these companies make money from outsourcing, the entire economy benefits from that because it infuses more funds into the US economy, including Chrysler even though it is owned by an Italian company now.

The cost benefit which trickles back to the economy is a fraction of the money what leaves the Country. In cases where the H1 salary is same as a American citizen salary- I don't see a benefit at all to the company ( Unless somebody proves to me that an Indian engineer is much better than an American engineer). That money is completely lost to the US economy. Refer my example above.

That is the reason why they are hard on H1/L1 approval during a recession. If cheap and high quality offshore engineers could revitalize the US economy, won't that cause them to be lenient on H1/L1?? I don't know.

I'm full support for making the H1/L1 guys permanent residents here. That would change the mindset of Investing in this country- because they (H1/L1 crowd) are supposed to live here. But now the wait is what ..15 years?? Immigration policy needs to be revised.

& I don't blame the H1/L1 guys for taking the money out - even I Do that- After all everybody is in this to make money and live a good life.

[amitoj]

Originally Posted by Jomz

I work in the research and development section and I don't have a real good idea about production strategies , anyway all the above models were designed and developed at Detroit only. Those R & D jobs were not outsourced by GM and Ford. At Chrysler they are.

Help me understand Chrysler's outsourcing model. Traditionally, outsourcing means the whole job function moves to another country/company. If that is the case here, then there is no way Chrysler is paying equivalent amount for the outsourced work. If, by outsourcing, you mean Chrysler has replaced its workforce in US with temporary workers while no work function has moved out, then that is not outsourcing. Although the biggest advantage of such a structure is that it gives the company a lot of flexibility in managing its workforce size.

And i think you are grossly underestimating the cost benefit of outsourcing that comes back to the home country. If that were the case, then outsourcing would not have flourished so well. 45K per annum going out from a handful of workers is not even peanuts compared to the money that comes back into the economy via profits. Shares are not the only means through which a company is connected to rest of the population. These companies also issue bonds which people buy as a source of steady income. These are quite popular among pension accounts. Companies have to keep churning out profits in order to continue that revenue stream for the millions of people who rely on their interest income to buy their groceries. I am not talking about Chrysler in particular because i dont think its even publicly listed. But Chrysler was probably the sickest puppy of the big 3 when recession hit and they needed to be bailed out. It would be harsh on the company to expect it to fair equally well if not better than the other two.

Its easy to claim that Chrysler took the taxpayer's money that was given as part of bailout and used that to pay salaries outside of US. But its easily forgotten/ignored that that bailout money was a loan from the government and Chrysler paid double digit interest on that. And compared to GM, Chrysler's bailout deal got wrapped up when Fiat bought the government's stake. GM on the other hand still owes 24bn to the government.

[vineethvazhayil]

Originally Posted by amitoj

I am not talking about Chrysler in particular because i dont think its even publicly listed. But Chrysler was probably the sickest puppy of the big 3 when recession hit and they needed to be bailed out. It would be harsh on the company to expect it to fair equally well if not better than the other two.

As this discussion was on fire here, Sergio Marchionne has signalled his intention to take Chrysler LLC public again. I think they will do well. They have a product range that is in Demand. The Jeep GC, the RAM truck (with the underwhelming GM trucks that are to be launched in 2014, RAM and Ford have a lot of prospective buyers who only buy American), the Chrysler 300 etc. are getting favorable sales numbers. I think the market will appreciate this fact when the list Chrysler again.

[Jomz]

Originally Posted by amitoj

Help me understand Chrysler's outsourcing model. Traditionally, outsourcing means the whole job function moves to another country/company. If that is the case here, then there is no way Chrysler is paying equivalent amount for the outsourced work. If, by outsourcing, you mean Chrysler has replaced its workforce in US with temporary workers while no work function has moved out, then that is not outsourcing. Although the biggest advantage of such a structure is that it gives the company a lot of flexibility in managing its workforce size.

.

I believe the terms are

1, outsourcing - Using labour from an external source
2, offshoring - Using facilities outside the parent company country , But still under control of the parent company

As far as i know- what chrysler did is Outsourced the labour @ detroit.

Originally Posted by amitoj

. GM on the other hand still owes 24bn to the government.

Wrong info

From
http://en.wikipedia.org/wiki/General...reorganization

"Although the Obama administration had initially provided the automaker five years to repay the money in full, in March 2010 GM made more than $2 billion in payments to the U.S. and Canadian governments and promised to pay the full balance of the loan portion by June. The company beat that self-imposed deadline when on April 21, 2010, GM CEO Ed Whitacre, Jr. announced that the company had paid back the entire amount of the U.S. and Canadian government loans, with interest, a total of $8.1 billion"

[amitoj]

Originally Posted by Jomz

I believe the terms are

1, outsourcing - Using labour from an external source
2, offshoring - Using facilities outside the parent company country , But still under control of the parent company

As far as i know- what chrysler did is Outsourced the labour @ detroit.

Well yeah when you outsource work to a company thats not in the same country, you are offshoring. But the parent company still has equal say in both the cases.

Anyway, it seems Chrysler just wants to have a more flexible workforce size. Its always a lot easier to scale up or down when you are dealing with outsourced workforce, specially in volatile times (of growth as well as recession)

Vineeth, thats great news. It will also help in determining the company's true valuation. The company has been doing quite well recently.

• Best February sales since 2008
• 35th-consecutive month of year-over-year sales gains
• Dodge, Ram Truck, and FIAT brands each post sales increases in February compared with same month a year ago
• Dodge brand sales increase 30 percent; best February sales since 2007 and largest year-over-year percentage increase of any Chrysler Group brand

Above is just a few from this article:
http://www.media.chrysler.com/newsre...id=13931&mid=2

[Jomz]

Originally Posted by vineethvazhayil

The Jeep GC, the RAM truck (with the underwhelming GM trucks that are to be launched in 2014, RAM and Ford have a lot of prospective buyers who only buy American), the Chrysler 300 etc. are getting favorable sales numbers. I think the market will appreciate this fact when the list Chrysler again.

Hmm, Can speak for Sure for the RAM.

The RAM does well because of the Cummins engine reputation, which is a good example of how things can be outsourced to a company within US and still make good profits. In diesel trucks - the RAM was always unbeatable.

But for gasoline powered trucks, It was always the F150 v/s Silverado. I lived in a rural area before and the guys there used to say , either you are a Ford Truck guy or a GMC guy. I personally asked the guy about Dodge and he said nobody cares much about RAM's in the rural areas - unless it is a diesel.

Check the sales report for FEb 2013

http://online.wsj.com/mdc/public/pag...autosales.html

Ram sales incresed by 3%, while F series and Silverado showed increase in double digits. Heck Silverado sales was up by 28.9%.

[vineethvazhayil]

Originally Posted by Jomz

Ram sales incresed by 3%, while F series and Silverado showed increase in double digits. Heck Silverado sales was up by 28.9%.

In 2015, when Ford has the new F150 in the market (rumoured to be lighter by 500- 700 lbs), Chevy and GMC would be a little behind in terms of powertrain tech. I think that is the chance RAM should really pounce on. In terms of sales numbers, RAM has never sold as much as Ford/Chevy/GMC. But they certainly have the potential with their latest model. They are also going to put in the Fiat 3.0 V6 diesel in the RAM with an 8 speed transmission - unproven in a heavy truck situation as yet, but could yet prove to be quite successful.

[vivekiny2k]

Originally Posted by Jomz

why should there be a contractor at all??

This is a micro-economics question. Without a contractor, in all likelihood you will either end up paying too much or get a bad deal on competency. The "middleman" is responsible for keeping the machinery running at optimum profit. Yes, there can be too much of a middleman, but no middleman is not right either.

Apart from that, if the company directly employed these people, they will get paid less because company's internal costs would be most likely be much higher than a contractor's (payroll, HR, training, recruitment, grievances, legal, facilities, health/life insurance, unemployment benefit etc). Contractor is also a form of outsourcing for better efficiency.

[NinadJoshi]

Originally Posted by Jomz

Hmm, Can speak for Sure for the RAM.

The RAM does well because of the Cummins engine reputation, which is a good example of how things can be outsourced to a company within US and still make good profits. In diesel trucks - the RAM was always unbeatable.

But for gasoline powered trucks, It was always the F150 v/s Silverado. I lived in a rural area before and the guys there used to say , either you are a Ford Truck guy or a GMC guy. I personally asked the guy about Dodge and he said nobody cares much about RAM's in the rural areas - unless it is a diesel.

Check the sales report for FEb 2013

http://online.wsj.com/mdc/public/pag...autosales.html

Ram sales incresed by 3%, while F series and Silverado showed increase in double digits. Heck Silverado sales was up by 28.9%.

Since you mention Cummins, Cummins is actually one of the MOST outsourced companies around. In fact they sort of pioneered the outsourcing-in-manufacturing as long back as in the early 80's. One of the first things they outsourced was pistons (read Venkatesan's analysis of why they chose not to manufacture their own pistons - basically because they realized it isn't their core competency). There isn't a single business side of Cummins that isn't involved with some outsourcing. Marketing, procurement, production, r&d, you name it. They have had a product research center in Pune for almost a decade now.

Question is, is their reputation as a solid diesel engine maker any worse due to outsourcing? Probably not. Outsourcing is a strategic imperative that gets used not solely to reduce costs, as is the general impression, but also to provide better engineered, better quality stuff, as Cummins aptly demonstrates.

I quote Tim Solso, the ex CEO of Cummins from when he was running the show: ""An employee in India is just as important as an employee in New York, as an employee in China, as an employee in Brazil," says Cummins Chairman and Chief Executive Tim Solso. "That's a maturation for this company. If you believe that if you don't take these actions you won't survive, then you take them. But you take them with as much dignity and respect as possible for the workforce and communities where you operate."

Cummins has always sought, in competing with Cat, John Deere and other big presences in its field, economical suppliers for engine components. It has purchase offices in China, Austria, Czech, India, all over, that scout for suppliers and procure all sorts of components from fasteners to oil coolers. Without doubt it saves them money so they do it, even if it comes at the cost of abandoning its its local partners and suppliers (try Golden Casting Corp, an American foundry to whom Cummins outsourced cylinders until 97, then deserted in favor of Mexican stuff).

[Jomz]

Originally Posted by vineethvazhayil

They are also going to put in the Fiat 3.0 V6 diesel in the RAM with an 8 speed transmission - unproven in a heavy truck situation as yet, but could yet prove to be quite successful.

A 3.0l V6 turbo (I assume) instead of the Venerable 6.7l inline 6 turbo?? I'm pretty sure people in rural areas would want atleast half the displacement. A fiat 3.0l diesel is gonna be sure disaster for RAM, It is real hard to change peoples' mindset- and till the 3.0l proves itself, the market is going to be sweeping ground for F150 and Silverado.

I would still like to see a link about this rumor.

The 6.7l is rugged, It is rumored that they outlast the RAM trucks in which they put that in. The same 6.7l or the older 5.7l is used in India by Tata for the 40 tonner semis. And in those semi's they last 1 million kilometers. pulling 40 tons or more.

Originally Posted by NinadJoshi

Since you mention Cummins, Cummins is actually one of the MOST outsourced companies around.

I think we are confusing terms here. Cummins offshores works to its own facility in India. there are no body shops or Contractors Involved. Cummins takes care that any offshore work they do, does not affect local community. I respect that comapny for that.
You don't see a Flint, MI situation in Columbus, IN. All the RAM engines are made in the US. All the research for US products are done in the US.

As you quoted Tim Solso, any employee is important for Cummins. Cummins takes care of them. The employees also feel good about giving back to Cummins. I don't know whether the case would be same if the employee did not work for Cummins but an outside body shop.

"There isn't a single business side of Cummins that isn't involved with some outsourcing. Marketing, procurement, production, r&d, you name it. They have had a product research center in Pune for almost a decade now."

very far from the truth. Cummins makes their own filtration systems ( In WI), they make their own fuel injection systems (in IN), they have their own aftertreatment systems ( In IN), they make their own Turbochargers ( In UK), I believe they make all parts except pistons. :-). It is not outsourcing, it is just part of being a global company. I think you could call that offshoring - but all those companies are still Cummins.

" American foundry to whom Cummins outsourced cylinders until 97"

I don't know about a seperate component called Cylinders in the engine. You meant the Cylinder block?? Anyway, It is normal to change suppliers for any component.

My point is such a outsourcing/offshoring model should be used for Chrysler, rather than today seen - tomorrow not seen- bodyshop labourers.

PS:- This view is completely my personal view and not anyway representative of Cummins. Can we leave Cummins alone?? If any more questions on Cummins, feel free to take it by PM.

[vineethvazhayil]

Originally Posted by Jomz

A 3.0l V6 turbo (I assume) instead of the Venerable 6.7l inline 6 turbo??

I would still like to see a link about this rumor.

I don' think the intention is to replace the 6.7l cummins. That would still be the heavy duty motor. The 3.0l is for the people who buy trucks to use as a truck once in a year. You should go to the cities in Texas and New Mexico etc. People drive full size pick up trucks to work in IT jobs. The 3.0 VM diesel can easily tow 7000 lbs and should suffice for people just wanting to pull a boat or a motorhome. Checkout the link below.
RAM 1500 to get 3.0 l diesel
What do you get with the diesel if you go for it? Well, for starters, 30 mpg highway when you are going to office in a full size truck, how does that sound?

[Jomz]

Originally Posted by vineethvazhayil

I don' think the intention is to replace the 6.7l cummins. That would still be the heavy duty motor. The 3.0l is for the people who buy trucks to use as a truck once in a year. You should go to the cities in Texas and New Mexico etc. People drive full size pick up trucks to work in IT jobs. The 3.0 VM diesel can easily tow 7000 lbs and should suffice for people just wanting to pull a boat or a motorhome. Checkout the link below.
RAM 1500 to get 3.0 l diesel
What do you get with the diesel if you go for it? Well, for starters, 30 mpg highway when you are going to office in a full size truck, how does that sound?

My feeling is that, the people who buy fullsize trucks to commute are really particular about the truck engine displacement and power. They don't care much about fuel consumption.

If they did care- they have the Dodge Dakota's, which could still pull a RV or a boat.

They above said market would want their bragging rights (5.7l Hemi or 6.7l Cummins) and I don't know whether they would be real welcome towards a 3.0l Diesel.

Imagine this An IT guy, walks into an office with his new truck.
Guys around him ask - "RAM eh?? Hemi??"
IT guy :- "Nahh 3.0l VM"
GUys around :- Stunned silence
.............

Later at vending machine :- "IT guy is a wimp - He drives that new 30mpg truck, not a real one - It can't pull anything worth it with that wimpy motor"

[Technocrat]

Originally Posted by Jomz

Tell me how does the $45k I sent home last year get back to the US economy?? & I'm pretty sure almost every H1 guy send at least 30% of his salary back home.

The cost benefit which trickles back to the economy is a fraction of the money what leaves the Country.

Sorry wanted to avoid but just couldnt help asking this question - Who enjoys the SSN Tax paid by Temporary Workers?

Anyways we are way OT here, lets not divulge much into the outsourcing jobs & the nitty grittiness of it. Thanks

[amitoj]

Originally Posted by Jomz

They above said market would want their bragging rights (5.7l Hemi or 6.7l Cummins) and I don't know whether they would be real welcome towards a 3.0l Diesel.

The sales figures of V6 Challengers and Chargers are proof that people are not that hung up on displacement any more.