Wednesday, June 04, 2008

Seismic Shift: Asian Rivals Outsell Big Three


FORBES: Hong Kong - U.S. carmakers have relinquished primacy of position on their own home turf to Asian rivals for the first time. In a seismic shift in the automotive industry, consumers are voting with their wallets for the smaller, more fuel-efficient vehicles that Asian manufacturers have excelled at producing.

The combined U.S. market share of Detroit's Big Three--General Motors, Ford Motor and Chrysler--slumped to a record low of 44.4% in May, compared with 47.8% for Asian automakers collectively. Japanese car producers by themselves seized a record share of the U.S. market, 42.5%, according to data for the month of May from Autodata Corp.

MP: The chart above shows cumulative, year-to-date (through May) market shares for the Big 3 vs. all foreign automakers this year, compared to last year.

12 Comments:

At 6/04/2008 2:56 PM, Blogger Celal Birader said...

Seismic shift, indeed! This is one for the history books.

I did my master's thesis on the automotive industry back in 1982.

Those were the early days of the Japanese attack on the U.S. automotive industry which never really made any kind of credible comeback in any of those 25 years.

The Japanese could have flattened Detroit sooner but they are a patient race and are smart enough to avoid the kind of patriotic backlash which would have ensued from more vigorous competition.

Like the proverbial frog in a boiling pot they kept turning up the heat gradually and gradually we are where we are now. You gotta hand it to them.

No longer is anyone saying "What's good for General Motors is good for America" these days, are they ?

 
At 6/04/2008 3:26 PM, Anonymous Fred said...

In sixteen years I owned seven various American cars. In twenty five years I have owned four Nissans, including the Pathfinder I drive now.

The lessons here: Reliablity earns brand loyalty. American car makers screwed me seven times before I quit them.

 
At 6/04/2008 3:56 PM, Blogger Walt G. said...

I've been in the auto industry 35 years, and my dad was an autoworker before me. I’ve seen a lot of ups and downs, but GM’s corporate strategy has never appreciably changed. What a lot of people misunderstand is that GM's goal has never been market share. Their strategic plan was stockholder primacy through the highest possible returns to the stockholder in the short term. Why is everyone so surprised when companies that strategically plan for market share accomplish their goal?

It’s easier to understand if you think of the “Asian Rivals” as a gang, and the Big Three as a homeowner in a neighborhood. When a gang comes into a territory they aggressively want “turf.” On the other hand, the homeowners passively just want to keep what they have, and are content to keep doing what they have always done. Is that a mistake? I guess that depends on a lot of factors. Some are controllable; some are not.

Trucks and SUVs were popular when gas was cheap, and they delivered the planned profits to the stockholders. The stockholders were happy, Wall Street was happy. Everything was good.

Now, gas is $4-per-gallon and companies that make cars are profitable. Truck sales and SUV sales have hit the skids. Should GM have foreseen that possibility and shifted focus. Maybe, but don’t simply assume that Wall Street or the stockholders would have bought a shift to GM’s long-term thinking before now because that is not the American Way.

It is easy “Monday morning quarterback” and be critical now with all the facts. However, GM’s recent focus shift to cars and the UAW’s latest contract show that the Big Three can do what it takes to survive. Additionally, GM’s financial backers appear ready to back off and let them do it. It will be a difficult but exciting challenge ahead. Don’t expect the UAW or GM to give up without a fight.

 
At 6/04/2008 5:33 PM, OpenID sethstorm said...

Time for some well-crafted tariffs, problem solved. Set it to a high enough percentage(>10^12?) to keep them from just valuing them at $1; include imports in disguise like the Camry, Civic, and relabeled "Most Favored Nation" makes. Repeat until they concede to Detroit, the UAW, and The Big Three(GM/Ford/Chrysler). Finish it off by requiring the repeal of Taft-Hartley and its ilk before approving any more trade treaties.

GM fills the void of reliable, well-performing and affordable cars that Japan and elsewhere won't do. The best they do is stuff an underpowered car with a ton of junk electronics to distract from its lack of anything else.

If they want to play the game of "mindlessly bash the Big Three of Detroit", they need to pay the price.

As for a certain anti-US person here, I have an unwavering belief in the following:
"What's good for General Motors is good for America"

 
At 6/04/2008 9:29 PM, Blogger OBloodyHell said...

> Big 3 vs. all foreign automakers

Since when is Chrysler not German?

Really.

It's as big as two rooms, needs a fuel station every kilometer, costs a lot of money, and you had better watch your rearview mirror because you may see the fender falling off.
- The Japanese impression of American cars, according to J.E. Steinhagan, a GM Japan executive, ca. 1985 -


This is a hole they dug for themselves.

> On the other hand, the homeowners passively just want to keep what they have, and are content to keep doing what they have always done. Is that a mistake?

Like DUH. In very short order, the gangs will dictate everything to everyone, all will fear them, and no one will do anything without permission from the ganglord.

That's assuming your analogy of 'gangs' is accurate, mind you. It has substantial problems in how you perceive the 'invaders'

I had a friend who bought Mustangs, year after year. The third lemon in a row, he wised up. He no longer buys Fords.

Sorry, kid, your daddy and his friends screwed you and your friends. The simple fact is, that any reasonable person could look at the manufacturing industry, with the onset of robotics, and see that manufacturing HAD to go the same way as agriculture -- to the point where 2-5% of all Americans would have manufacturing jobs, just as 2-5% of all Americans hold farming jobs.

But they, and their union buddies, tried to "hold the line" -- to "keep what was theirs" -- and opened the door for the international rivals to eat their lunch.

If your daddy&co had instead fought to gain stock options (to replace the lost income when they took initially lower paying jobs outside the auto industry) and to get retraining and relocation assistance (to go to where the newer post-industrial jobs were), then both the US auto industry AND YOU AND YOUR FRIENDS would be better off... You and your friends would have better-paying jobs (no union dues, no "time off" striking) in something other than a declining industry, and you would have the prospect of inheriting the stocks your parents had obtained in a healthy US Auto Industry.

So you see -- the problem was, indeed -- exactly what you said -- people fighting only to retain "what was theirs" rather than to see the inevitable future, and head towards it using simple sense.

One of the perversities of the universe -- The only constant is change.

We don't get to stand where we are and demand the same thing our daddies got. We all have to move on. Either we get there in good shape on our own two feet, or be swept along, helpless, by forces far greater than us.

The former works much better -- because you can control the situation under which you find yourself, rather than getting stuck whereever the larger forces dump us.

This isn't to say that the unions are solely at fault in this... but they certainly contributed their fair share.

And you should remember that when you talk to your friends, to the union reps, and at union meetings. The union people got rich off you and your friends (and your daddy&co) trying to "hold the line" in a battle they knew the unions and the auto industry were destined to lose, when a smart choice of direction could have put everyone in a better place -- the autoworkers, the union, and the auto industry.

 
At 6/04/2008 11:09 PM, Anonymous Fred said...

>Since when is Chrysler not German?

Since they were bought from Daimler by Cerberus Capital Management. Hard to keep up, I know.

 
At 6/05/2008 6:55 AM, Blogger Walt G. said...

Obloodyhell,

I agree with much of what you say. I wasn't trying to defend GM or the union as much as explain a market share slide as inevitable unless market share is a prime objective for everyone concerned.

There's enough blame to go around; however, I don't think that the big institutional investors who demand current dividends and profits over the healthy future of the company are given enough of the blame. GM can’t, or at least in the past, couldn’t, emphasize market share before profits because they are 95% owned by large institutional investors who drive the direction of the company. None of the strategic plans in the past emphasized time frames much past one year--Asian manufacturers are allowed by their investors to think longer term. How can you have long-term gains when all the performance is being measured (including executive pay) in the short term?

It’s a whole lot easier to sell one truck or SUV for $10,000 profit than five cars for $2,000 in profit, and that fits the short-term strategy, too. That’s how the American auto manufacturers lost market share: By design. Will that change? We’ll see.

 
At 6/05/2008 12:31 PM, Blogger Walt G. said...

This blogs like to cite the WSJ. Here are a couple articles it missed the last couple of days:

Jun. 6 "Big Three Productivity Improves"

Jun. 5 "Ford and GM Show Gains in Quality Survey"

 
At 6/06/2008 3:18 AM, Blogger OBloodyHell said...

> Jun. 6 "Big Three Productivity Improves"
> Jun. 5 "Ford and GM Show Gains in Quality Survey"

Walt, it's a tendency of too little, too late. They are still having to play catch-up in general ("improves", and "show gains" do not mean they top the market in either efficiency or quality) -- and then, even if they do that, it takes time for people to notice the improvement and to believe it will be sustained. So the domestic auto industry can still look foreward to a long slide for at least 10 years or more, even if they get serious today, which isn't going to happen.

And I did expressly say:
This isn't to say that the unions are solely at fault in this... but they certainly contributed their fair share.

That doesn't even put the majority of the blame on them, just a large bulk of it.

That attitude of which you spoke "trying to hold the line" -- that's the problem at fault just about everywhere in this. Not just by the UAW, but also the manufacturers themselves.

It doesn't matter how big you are -- playing defense is a losing proposition. Because it relegates you to "Please don't let me f**k up". And sooner or later -- you will.

"L'audace, l'audace, toujours l'audace!" ("Audacity, audacity - always audacity!").

Maintain the offensive. Figure out what the people want, and sell it to them. Figure out what they need, and make them realize it. Sure, you're going to screw up. Everyone gets to make an Edsel. But the goal is to minimize the damage when you do -- and, on offense, you can often fix a busted play.

Stop trying to prop up autoworkers as a profession. Roboticization is the Mechanization of The Industrial Age. It's going to happen. It has to happen. An auto factory increasingly should look like the one in Minority Report. I should be able to go in, pick out the options I want, and drive off the next day with it. And it should cost less this year than it did last year. The cost of a car should be 25% to 50% more than the raw materials cost.

Use the union to make sure that you get a piece of the action, not a job. Then have them help you get another job.

The new job, plus the piece of the action can compare to what you've lost... except it can have much more of a future.

Autoworkers need to carefully watch Other Peoples' Money and take the lessons in it, esp. the DeVito speech at the end, to heart:

You know, at one time there must've been dozens of companies making buggy whips. And I'll bet the last company around was the one that made the best goddamn buggy whip you ever saw. Now how would you have liked to have been a stockholder in that company?

The world doesn't owe you -- or anyone -- a living. After all, it was here first. And after we're all gone -- after we and everything and everyone we know is dust? It'll still be here.

"The graveyards are filled with 'indispensable men'."

;-)

 
At 6/06/2008 6:16 AM, Blogger Walt G. said...

obloodyhell,

I only mentioned those articles because as optimistic as this website is about almost every segment of the economy over the smallest blip of an increase in an economic indicator, any Big 3 good news is never mentioned.

Productivity and quality increases by the Big 3 are great news. Too little? Maybe, but that how almost all improvement is made. Too late? Never. It’s never too late to quit trying to be the best.

The union does have major areas that need improvement, but I don’t have to mention them here because enough is said about that already; an opposing viewpoint adds much more to an intelligent discussion than agreeing with the prevailing view of the posters.

I’ll save my criticism of unions, and the UAW in particular, for an arena where everyone thinks unions are doing what they should be doing for their membership. I have strong views on that subject, which I am not bashful sharing with those in power. Just like a family, though, we stand united despite our personal differences.

 
At 6/06/2008 7:44 AM, Blogger Walt G. said...

Here’s a quotation from today’s (June 6, 2008) Wall Street Journal online edition article “Detroit Levels Productivity Playing Field.”

“Detroit's massive job cuts in the past two years have leveled the playing field for the Big Three auto makers and all but eliminated the substantial labor-cost advantage their Japanese rivals once enjoyed, according to a closely watched scorecard on auto manufacturing.”

 
At 6/09/2008 8:37 PM, Blogger OBloodyHell said...

> Here’s a quotation from today’s (June 6, 2008) Wall Street Journal online edition article “Detroit Levels Productivity Playing Field.”

Yes, but until they level the quality control difference, they won't make headway against the alternative market, and even then, they'll have to do it for a half-decade or more before people really start to trust it.

When Detroit produces an automated factory that will take specific orders today for delivery next week ("I want this interior, that gew-gaw, a built-in GPS, power windows and locks, but no power seats, this color with that trim package..."), at no extra price-point (because there IS no existing inventory) -- and the car lasts for 200k miles if I want to keep it that long, for US$10k -- THAT will be the day when they'll sell cars. The car should be a commodity just like pork and corn. The markups should be tiny and based on volume of units delivered, just like with ag -- and with roboticization of the factory doing the same function as mechanization did for ag. Reducing the workforce to 2-5% of the total populace.

 

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