Japanese car makers keep selling lots of small cars. U.S. automakers? Not so much
In case you're wondering why all of a sudden so many car ads on TV are talking about fuel economy, here's why. Toyota and Honda both had an excellent month for selling cars in May, selling 16-17 percent more vehicles than last May. The Big Three American automakers all sold fewer vehicles. GM was down 12 percent, Chrysler was down 11 and Ford was down 2. The Washington Post article on the change in numbers says that – hey – small, fuel-efficient cars offered by the Japanese firms are what's moving the market. Ford will lower production about 2.5 percent in the third quarter.Here are two sets of numbers that really jumped out at me from this article. First, that each percentage point of market share, "is roughly equivalent to the annual production of a typical U.S. auto plant, or 170,000 vehicles." So, when the Detroit companies lose 4.7 points, that sort of implies that five American auto plants are in possible future jeopardy. Of course, Toyota and Honda make cars in America as well.
The other shocking bit of information is this paragraph, which is the last in the story. I'm copying it here because I don't want to mix up any numbers:
"Detroit still trails Japanese automakers in profit per vehicle, according to the report. Nissan, Toyota and Honda each earned a pretax margin of more than $1,200 on every vehicle sold in North America. Chrysler earned $223, while Ford lost $590 and GM lost $2,496 on each vehicle sold in 2005. The figures reflect differences in health-care and pension costs, and expenses associated with cash rebates and financing incentives."
Does that mean that the fewer cars GM sells, the better the company is doing?
[Source: Washington Post]
Reader Comments (Page 1 of 1)
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Amit 8:51AM (6/05/2006)
Most of GM's loss per vehicle probably reflect fixed costs (such as pension, healthcare, idled workers, etc.) that they would carry even if they sold zero vehicles. Selling more vehicles helps defray those huge expenses, so the continued loss of market share means less revenue to help against these other costs that just aren't going away.
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MikeinNC 9:11AM (6/05/2006)
Unions are strangling the American car manufacturers in the US. Most of their foreign built products are doing just fine. If we are not careful, the self serving interests of the unions will eventually lead to collapse of GM which will put a huge strain on the US government due to pension guarantees. The sad thing is that GM's quality and their product offereing, although certainly not overly impressive, are on the rise. I fear it may be far too late for their products to save them.
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lawtrainee 11:17AM (6/05/2006)
is it me or does this sound like the 1974 and 1978 oil price shocks. Detriot's reaction was the same today as it was then, they built huge gas guzzling giants and the Japanese built small fuel efficient cars. It was until the big three almost went bankrupt before they change their practices. It was large thirsty sedans then and now large thristy SUV's. they made the same aguments then as they today, demand is not going to return when gas stays over 4 bucks a gallon this summer. They, Detroit, could just make a minivan look like a tough SUV to sell it, which is this "cross-over segment". But then again the emission and fuel consumption legality makes it easier to trump regulation with an SUV and save money and make huge profit.
The Japanese import car parts and assembly the cars in the USA to avoid taxes. Sure they can say built in the USA, but in reality it is assembled from parts all the way from Japan. This is why Japanese car makers can save so much money, they do not pay union wages to car assembly guys in the USA or the manufactors in Japan. But the Detriot car makers do this, but to a lesser degree, they build engines and other parts in Mexico and Canada.
This thing about the market and sales, is always trying to suggest one thing and another. If the market increased in size and the big three sold the same amount of units their market share decreased. This thing about the small cars in the article suggests that people are buying them instead of SUV's and pickups, when in fact, aren't those sales the same or increasing, those new Tahoes are doing better than last year and that F-150 is still strong in sales.
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Steve C. 1:06PM (6/05/2006)
I've said it before . . . I'll say it again. The only reason Chrysler is doing better than the others is its near-bankruptcy a number of years ago.
The only thing that will save GM and Ford from being slowly eaten by Toyota and Honda (and Hyundai) is bankruptcy -- which would allow them to shed the ludicrous "employment for life" contracts which guarantee neither will ever make $1,200 per car.
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tony 2:28AM (6/07/2006)
guys its so simple .. GM n FORD are still betting on their large SUVs n TRUCKS for profit.. thus redesign of Tahoe. Escalade, Expedition/EL and Navigator .. instead of selling small cars they insist on not building subcompacts because margin of profit is less than those big Trucks ... and they talk abt selling to the younger generation? GM n FORD are really lost right now .. they really dont know what to do .. by 2010 if they dont do anything with their products we'll see Toyota as number 1 in the world (im sure by 2008 they will be already) Honda as number 2 in US, GM and Ford third n 4th with Nissan n Hyundai not far behind ... wont be a shame if GM n FORD are down to 3rd n 4th making 10-15 % of market share? n TOyota making abt 25% while Honda around 20% .. i was gonna buy FORD stocks before because i believe they have great products the only problem is they are not for Americans to purchase .. good thing i didnt i would have lost alot or even worse my future
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Japanese Car Exporters 4:49PM (8/16/2006)
Innovation has been the main element of success for Japanese cars rather than just the cost. There is always a scope for improvement and innovation - be it design, manufacturing techniques, logistics or marketing. The competition in this field is fierce and only those who keep up with the times will win.
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