Analysts: Big 3 will fall further
By 2009, foreign automakers will lead U.S. market share; experts say better products needed to survive.
Sharon Terlep / The Detroit News
DEARBORN -- Fewer than half of all vehicles sold in the United States will be made by Detroit's Big Three by 2009, when foreign carmakers will outpace American companies in market share, a top industry analyst said Wednesday at a conference focused on carmakers' restructuring.
Not only will the Big Three's market share erode, but by 2011 foreign automakers will build more cars in the United States than American manufacturers, said Sean McAlinden, chief economist and vice president of research for the Ann Arbor-based Center for Automotive Research.
"They won't be the Big Three anymore, they'll be the Detroit Three," McAlinden said of General Motors Corp., Ford Motor Co. and DailmerChrysler AG. "You've got to shrink to survive and shrink to be profitable in Detroit today."
The three companies have posted more than $60 billion in losses since 2000 and can no longer maintain a huge market share in an increasingly crowded marketplace, he said.
The Big Three have seen their market share continually erode. Currently the three combined have about 54 percent of the U.S. market in 2006, down from nearly 58 percent during the same period in 2005, according to Autodata. In 2000, the Big Three commanded 65.6 percent of the U.S. market.
U.S. automakers have been in denial about the need to overhaul their product lines and production capacity, said Thomas Stallkamp, a former Chrysler vice chairman and partner of Ripplewood Holdings equity firm.
"Detroit has an uncanny ability to shrug off losses, as well as an ability to generate losses" he said, drawing a parallel to city's sports teams. "But the sports analogy doesn't work" in the auto industry.
McAlinden predicted U.S. carmakers in 2011 will produce about 45 percent of vehicles sold in the United States, with foreign companies making 55 percent. U.S. companies' share will drop below their foreign counterparts in 2009, he said.
The downsizing will mean 132,300 fewer United Auto Workers will be employed by the Big Three in 2007 than in 2003. GM and parts supplier Delphi Corp. together will have cut their hourly ranks by 377,000 -- to 80,000 from 457,000 -- between 1985 and 2009.
The contraction, while drastic, more accurately reflects the demand for domestic vehicles. Companies are making too many and, as a result, are being forced to sell with deep rebates and incentives, he said.
"Stop selling to people who don't really want your car or truck," he said. "Rebates go to people who really don't want cars. There really are 4 million people in the nation who like GM, but not 5 million."
Downsizing was the theme of the day at the Supplier Challenges and Investor Opportunities conference, which drew dozens of investors and industry insiders to hear experts discuss the effect downsizing will have on the industry and suppliers.
Analyst John Casesa said automakers have erred by producing too few new models to woo customers.
He was critical of restructuring plans that call for factory closures and buyout offers, but lack significant plans for new products.
Japanese and Korean carmakers replace their products more frequently than the industry average, while American and European carmakers fall below that average, Casesa said. He then showed corresponding industry figures showing better profit margins from those companies that replace models more frequently.
"Domestic companies will continue to lose share for the foreseeable future," Casesa said. "Looking at what is in the pipeline for the next three or four years, I don't think that's going to change."
As bleak as the picture may seem, he said, bankruptcy is not an option for the domestic automakers.
"We just need to get down to our fighting weight," he said.
You can reach Sharon Terlep at (313)223-4686 or sterlep@detnews.com.
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By 2009, foreign automakers will lead U.S. market share; experts say better products needed to survive.
Sharon Terlep / The Detroit News
DEARBORN -- Fewer than half of all vehicles sold in the United States will be made by Detroit's Big Three by 2009, when foreign carmakers will outpace American companies in market share, a top industry analyst said Wednesday at a conference focused on carmakers' restructuring.
Not only will the Big Three's market share erode, but by 2011 foreign automakers will build more cars in the United States than American manufacturers, said Sean McAlinden, chief economist and vice president of research for the Ann Arbor-based Center for Automotive Research.
"They won't be the Big Three anymore, they'll be the Detroit Three," McAlinden said of General Motors Corp., Ford Motor Co. and DailmerChrysler AG. "You've got to shrink to survive and shrink to be profitable in Detroit today."
The three companies have posted more than $60 billion in losses since 2000 and can no longer maintain a huge market share in an increasingly crowded marketplace, he said.
The Big Three have seen their market share continually erode. Currently the three combined have about 54 percent of the U.S. market in 2006, down from nearly 58 percent during the same period in 2005, according to Autodata. In 2000, the Big Three commanded 65.6 percent of the U.S. market.
U.S. automakers have been in denial about the need to overhaul their product lines and production capacity, said Thomas Stallkamp, a former Chrysler vice chairman and partner of Ripplewood Holdings equity firm.
"Detroit has an uncanny ability to shrug off losses, as well as an ability to generate losses" he said, drawing a parallel to city's sports teams. "But the sports analogy doesn't work" in the auto industry.
McAlinden predicted U.S. carmakers in 2011 will produce about 45 percent of vehicles sold in the United States, with foreign companies making 55 percent. U.S. companies' share will drop below their foreign counterparts in 2009, he said.
The downsizing will mean 132,300 fewer United Auto Workers will be employed by the Big Three in 2007 than in 2003. GM and parts supplier Delphi Corp. together will have cut their hourly ranks by 377,000 -- to 80,000 from 457,000 -- between 1985 and 2009.
The contraction, while drastic, more accurately reflects the demand for domestic vehicles. Companies are making too many and, as a result, are being forced to sell with deep rebates and incentives, he said.
"Stop selling to people who don't really want your car or truck," he said. "Rebates go to people who really don't want cars. There really are 4 million people in the nation who like GM, but not 5 million."
Downsizing was the theme of the day at the Supplier Challenges and Investor Opportunities conference, which drew dozens of investors and industry insiders to hear experts discuss the effect downsizing will have on the industry and suppliers.
Analyst John Casesa said automakers have erred by producing too few new models to woo customers.
He was critical of restructuring plans that call for factory closures and buyout offers, but lack significant plans for new products.
Japanese and Korean carmakers replace their products more frequently than the industry average, while American and European carmakers fall below that average, Casesa said. He then showed corresponding industry figures showing better profit margins from those companies that replace models more frequently.
"Domestic companies will continue to lose share for the foreseeable future," Casesa said. "Looking at what is in the pipeline for the next three or four years, I don't think that's going to change."
As bleak as the picture may seem, he said, bankruptcy is not an option for the domestic automakers.
"We just need to get down to our fighting weight," he said.
You can reach Sharon Terlep at (313)223-4686 or sterlep@detnews.com.
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