Forbes - Detroit's Long Road

Discussion in 'OT Driven' started by TriShield, Apr 26, 2010.

  1. TriShield

    TriShield Super Moderator® Staff Member

    Jul 6, 2001
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    The U.S. auto industry isn't dead, but it isn't back, either. Americans still disdain Detroit's cars. They'd rather have a Camry than a Fusion or Malibu.

    Jerry Flint, 04.02.10, 12:30 PM EDT
    Forbes Asia Magazine dated April 12, 2010

    The cover of April's Motor Trend magazine informs us that "Buick Is Back." That followed by a few weeks the front page of Barron's declaring that "GM Is Back." My investment advisor, AllianceBernstein, brags at its annual meeting that it's buying Ford. Toyota's troubles, of course, will send traffic to Ford and General Motors showrooms.

    If only it were that easy for Detroit to recover lost ground. The loss of confidence in Detroit's vehicles among American car buyers is deep and persistent. GM and Ford--and maybe Chrysler--are improving. But they have a long way to go. It's too early to declare "mission accomplished" or even to say they are "back."

    GM had 19.9% of the car and light truck market last year, Ford 16.1% and Chrysler 8.9%. The problem is that most of those sales were pickup trucks and larger sport utilities. Because of the government push on fuel economy, sales of these will decline over the next decade as sales of cars rise.

    But Americans disdain Detroit's cars. GM sold only 945,000 cars last year, or 46% of its car-truck total. Ford sold 637,000, 38% of its total. Chrysler sold 247,000, accounting for 27% of sales.

    Detroit is also heavily dependent on bulk sales to rent-a-car and other commercial buyers. Probably 30% of Detroit's sales go to such fleets. So it's quite possible that GM sold fewer cars to retail customers than Honda did in 2009. Ford retail car sales are getting down into Nissan territory.

    Are there signs that Americans are more likely to buy Detroit? The benefit from the Toyota recall merely interrupts a steady decline in market share at GM that has been going on for decades. Ford has been nudging up in share, with help from the fact that it stayed out of bankruptcy and didn't ask for a government bailout. But Ford's share is still less than the 18.6% it was five years ago.

    Make, if you want, a model-by-model comparison. The pride of the GM car operation is the Chevy Malibu, a family-size sedan. It's a good car, but it's outsold by the comparable Toyota Camry better than 2-to-1 and by the Honda Accord by almost 2-to-1. Ford's comparable model, the Fusion, trails the foreign competition by almost as much as the Malibu. Both Malibu and Fusion are outsold by the Nissan Altima.

    In the next size down, Ford's Focus has just three-fifths the sales enjoyed by the Honda Civic. The GM entry, the Cobalt, gets two-fifths of the Civic's sales. Chrysler's bestselling car, the Dodge Charger, was outsold last year 2-to-1 by the Hyundai Sonata.

    When it comes to pickup trucks, the Detroit three run circles around Nissan and even Toyota. But those cars!

    Yes, the Detroit companies are trying to mend their car reputations. Quality is up at Ford and GM, according to reports from Consumer Reports and J.D. Power and Associates. This year Ford and later GM will have new North American-built small cars, smaller than anything built here now. They should easily outsell imported cars.

    In the next size up, Ford has a sleek Focus coming at year-end and GM has a new Cruze (which gets 40mpg highway) to replace the old Cobalt. Both are likely to close the gap with those Honda Civics and Toyota Corollas but not eliminate it. There are some new Buick cars coming, too, including the LaCrosse sedan and the smaller Regal sedan, which is coming later this year.

    Chrysler is just hanging on until new vehicles built with Fiat arrive--but that's a few years off. Another issue is that the gains GM makes with its improved cars can't be expected to match the losses from shutting Pontiac and Saturn.

    Maybe Detroit will receive a big bonanza from Toyota's safety nightmare. The Japanese giant is bound to lose some sales, but it's difficult to predict how many.

    There's also no denying that the financials are better. Labor costs are down and the financial obligations of GM and Chrysler are shrunken--no bonds to repay, no stock dividends to worry about. Bank accounts are filled with bailout money. That's all to the good, but it doesn't replace the need to sell lots more cars.

    The recent shakeup at GM shows clearly that the new leaders are impatient with sales. At Cadillac executives were pushed out, and the sales leaders at all the lines now report to the president of North American operations.

    The best we can say is that Detroit, at least GM and Ford, is no longer hanging by its fingernails. They aren't back yet.

    The woods are lovely, dark and deep, but these guys still have miles to go before they sleep. Miles to go.

    Jerry Flint, a former Forbes Senior Editor, has covered the automobile industry since 1958.

  2. topcat

    topcat Active Member OT Supporter

    Aug 31, 2003
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    Tampa, FL

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