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GM vs Boeing manufacturing

kanabco

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This is a question about manufacturing and cost.

I'll begin with a very general overview of how a capitalist manufacturer like General Motors approaches the introduction of a new car model.
GM has to spend a lot of money up front for design and testing and then must invest in tooling and factory floor space to build the new car model.
They then must go into production and sell say one million of these over say three years so that there is monetary Return on investment (ROI) that hopefully covers expenditures over a given time so that a profit can be managed.

Boeing on the other hand does not work the same way for military aircraft.
They too have to spend a lot of money up front for design and testing and then must invest in tooling and factory floor space to build the new fighter jet.
They also must go into production and sell enough (?) of these over some time so that there is monetary Return on investment (ROI) that hopefully covers expenditures over a given time so that a profit can be managed.

The main difference is the banks will loan GM the money they need to make the new model but the banks will not fund a full blown new fighter program. Therefore the only source of funds for the new jet fighter is the Pentagon who happens to be the only buyer too (initially).

I think most people can understand how GM and the banks work together for hopeful success of a new product simply (very simply) by adding up all the costs over time and dividing that by the number of cars built times the margin. ROI is a simple concept.

However when a new jet fighter is being built the public does not see it the same way and the whole thing gets very political very quick and we get 100 different "proofs" that the fighter is (or is not) worth the dollars spent. The entire process of explaining monetary things just right (or just wrong) to be on the right side (or wrong side) has not changed during my life in the business simply because we are not banks... we are taxpayers.
 
This is a question about manufacturing and cost.

I'll begin with a very general overview of how a capitalist manufacturer like General Motors approaches the introduction of a new car model.
GM has to spend a lot of money up front for design and testing and then must invest in tooling and factory floor space to build the new car model.
They then must go into production and sell say one million of these over say three years so that there is monetary Return on investment (ROI) that hopefully covers expenditures over a given time so that a profit can be managed.

Boeing on the other hand does not work the same way for military aircraft.
They too have to spend a lot of money up front for design and testing and then must invest in tooling and factory floor space to build the new fighter jet.
They also must go into production and sell enough (?) of these over some time so that there is monetary Return on investment (ROI) that hopefully covers expenditures over a given time so that a profit can be managed.

The main difference is the banks will loan GM the money they need to make the new model but the banks will not fund a full blown new fighter program. Therefore the only source of funds for the new jet fighter is the Pentagon who happens to be the only buyer too (initially).

I think most people can understand how GM and the banks work together for hopeful success of a new product simply (very simply) by adding up all the costs over time and dividing that by the number of cars built times the margin. ROI is a simple concept.

However when a new jet fighter is being built the public does not see it the same way and the whole thing gets very political very quick and we get 100 different "proofs" that the fighter is (or is not) worth the dollars spent. The entire process of explaining monetary things just right (or just wrong) to be on the right side (or wrong side) has not changed during my life in the business simply because we are not banks... we are taxpayers.

That is why it is important that the military products can be sold to foreign countries.
 
This is a question about manufacturing and cost.

I'll begin with a very general overview of how a capitalist manufacturer like General Motors approaches the introduction of a new car model.
GM has to spend a lot of money up front for design and testing and then must invest in tooling and factory floor space to build the new car model.
They then must go into production and sell say one million of these over say three years so that there is monetary Return on investment (ROI) that hopefully covers expenditures over a given time so that a profit can be managed.

Boeing on the other hand does not work the same way for military aircraft.
They too have to spend a lot of money up front for design and testing and then must invest in tooling and factory floor space to build the new fighter jet.
They also must go into production and sell enough (?) of these over some time so that there is monetary Return on investment (ROI) that hopefully covers expenditures over a given time so that a profit can be managed.

The main difference is the banks will loan GM the money they need to make the new model but the banks will not fund a full blown new fighter program. Therefore the only source of funds for the new jet fighter is the Pentagon who happens to be the only buyer too (initially).

I think most people can understand how GM and the banks work together for hopeful success of a new product simply (very simply) by adding up all the costs over time and dividing that by the number of cars built times the margin. ROI is a simple concept.

However when a new jet fighter is being built the public does not see it the same way and the whole thing gets very political very quick and we get 100 different "proofs" that the fighter is (or is not) worth the dollars spent. The entire process of explaining monetary things just right (or just wrong) to be on the right side (or wrong side) has not changed during my life in the business simply because we are not banks... we are taxpayers.

Cant compare.. Boeing gets massive subsidies from the federal government, something that GM does not.
 
That is why it is important that the military products can be sold to foreign countries.

Bigger profits even. We sell Apache's for a premium to Israel and others so I suppose they have done or will do the same with the F35. However we give tax money to foreign governments to buy our weapons so... sounds sort of Keynesian, doesn't it?
 
Cant compare.. Boeing gets massive subsidies from the federal government, something that GM does not.

Nothing relevant in your reply that I can see so that must mean I did not do a good job explaining the differences. Try substituting Lockheed for Boeing and Toyota for GM. The same thing applies: banks finance normal manufacturing programs but Military equipment manufactures would not even exist today without the gov to fund weapons costs up front.
 
Bigger profits even. We sell Apache's for a premium to Israel and others so I suppose they have done or will do the same with the F35. However we give tax money to foreign governments to buy our weapons so... sounds sort of Keynesian, doesn't it?

With a little security mixed in.
 
Nothing relevant in your reply that I can see so that must mean I did not do a good job explaining the differences. Try substituting Lockheed for Boeing and Toyota for GM. The same thing applies: banks finance normal manufacturing programs but Military equipment manufactures would not even exist today without the gov to fund weapons costs up front.

You don't need to subsidise military research, development and production up front. As soon as the purchase contract is signed the company can borrow money easily and at near the treasury level if there is a keep well attached.
 
You don't need to subsidise military research, development and production up front. As soon as the purchase contract is signed the company can borrow money easily and at near the treasury level if there is a keep well attached.
:2no4:
 
Cant compare.. Boeing gets massive subsidies from the federal government, something that GM does not.

Actually they don't get subsidies. They are remunerated for r&d and difficult production.
 
Why wouldn't a company be able to borrow money on the basis of prospective profits from a government contract on the same kind of basis as they'd borrow money on the basis of profits from direct commercial sales? If anything, I'd expect a government contract to be a more secure bet.
 
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