Sunday, January 22, 2012

The Big Three's Dramatic U-Turn

The chart above shows annual market shares for the U.S. vehicle market (Ward's Auto data here).  From a peak of 90.6% in 1965, the market share of the Big Three (GM, Ford and Chrysler) fell in almost every following year, including a 16-year streak of annual declines in every year from 1994 to 2009.  At the end of that 16-year period, the market share of the Big Three went below 50% for the first time in 2008 at 46.9%, before falling in the next year to an all-time low of 43.7% in 2009.

But the Big Three are making a comeback.  The group gained market share in both 2010 and 2011, marking the first time since 1992-1993 of two consecutive annual gains for the Big Three. The 1.71% increase in 2011 to a 46.2% market share from 44.5% in 2010 was the largest single year gain since a 3.2% gain in 1988.  All three companies posted solid sales gains in 2011, led by Chrysler at 26.1% and followed by GM at 13.2% and Ford at 10.8%.

Production, sales, profits and hiring are now improving significantly for the Big Three and the American automakers are back in the fast lane again, as CBS Sunday Morning reported today on a feature titled "The Big Three's Dramatic U-Turn."  

Related: The Detroit Free Press reported this week that Michigan's unemployment fell to 9.3% in December, the lowest state jobless rate since September 2008, and there was positive net job growth in Michigan last year for the first time since 2000.  

25 Comments:

At 1/22/2012 10:29 AM, Blogger Mark Bonica said...

isn't the total number of cars sold dramatically higher, too? is comparing market share in 1960 to market share in 2012 meaningful? isn't this the same sort of fallacy we argue against in terms of the share of the economic pie? would you rather have 90% of the 1960 market, or 40% of the 2012 market?

 
At 1/22/2012 11:44 AM, Blogger VangelV said...

There are two factors being ignored.

First, the Japanese earthquake has been a problem for Nissan, Toyota, and Honda. Given their shortages, plant shutdowns, and some related quality issues the US manufacturers should have gained market share.

The second factor is the age of the American fleet. Because of the recession Americans did not replace their cars as quickly as they would have. I believe that the data I looked at earlier in the year had the American automobile fleet age near a record of 9.4 years. At some point repair costs become prohibitive and new vehicles will have to be purchased.

Mark's point about a greater share of a smaller market is also very valid.

 
At 1/22/2012 12:17 PM, Blogger Methinks said...

Mark Bonica,

What the chart shows is that domestic car manufacturers are beginning to take a larger share of a larger pie.

What I wonder is: are they taking a bigger share because the cars are better or because the alternatives are made more expensive through import tariffs and possible subsidies to consumers of domestic cars (I don't know, hence the question). Also, is this an anomaly resulting from the U.S. government's aggressive anti-Toyota campaign in 2010?

 
At 1/22/2012 12:31 PM, Blogger Dr William J McKibbin said...

You said that "the Big Three are making a comeback." I would say that the Big Three have started a comeback. However, the Big Three are a long way from a true comeback. For example, selling cars is not synonymous with profitiablity. Until margins improve in Detroit, all bets for a recovery are on hold, at least in my portfolio.

 
At 1/22/2012 12:38 PM, Blogger Mark J. Perry said...

Profitability is returning. Ford lost $14.6 billion in 2008, but made $2.7 billion in 2009, $6.5 billion in 2010,and will probably make about $9 billion in 2011.

 
At 1/22/2012 12:46 PM, Blogger Itchy said...

Perception is everything. We went from being USA only family to possibly owing 2 daily driver Japanese cars. The Big 3 have a long was to go. Hitting the bottom is a lot different than getting back on top.

I plan to get buried in my Mustang; however, after the problems we had with our GM products, the wife will never talk me into owning another Chevy.

Toyota took a big hit with the false accelerator claims, but people will get over that quicker than their memories of poor build quality and reliability of US made cars. I can't believe we are considering purchasing one.

 
At 1/22/2012 1:29 PM, Blogger morganovich said...

you could have said this same thing in 1992.

the big three will continue to bleed share because they make unappealing cars. even with the huge cost advantage of having all their debt forgiven, they will not be able to compete in anything other than light trucks. nothing they have done in the last 20 years has ever shown otherwise.

"What the chart shows is that domestic car manufacturers are beginning to take a larger share of a larger pie."

not in the last several years it doesn't. car sales were over 17mm in 2005 and were 12 million in 2011.

this "share surge" has coincided with the biggest drop in us auto sales since ww2.

the "share shift" may have more to do with work vehicles (like pickup trucks) being replaced more readily in a bad car market than passenger cars.

this would up US share, but not durably.

 
At 1/22/2012 1:31 PM, Blogger Tom E. Snyder said...

So I guess the progressives will now say, "See, government bailouts work."

 
At 1/22/2012 1:36 PM, Blogger morganovich said...

mark b-

more cars were sold in the us in 1972 than in 2011.

the shift in market size may not be as great as you suspect.

the peak sales year of 17.8mm in 2000 was only 9% greater than the 16.3mm of 1986 (implying 0.6% annual growth) and has been unable to grow for over a decade even before the collapse in 2008.

market size (in vehicles) has trended up, but the market in cars peaked and has been in decline since the mid 80's. it's light trucks that have been all the growth in the last 25 years, which is the only reason the big 3 have managed to hang on to any share.

 
At 1/22/2012 1:49 PM, Blogger Walt G. said...

This is great news. I'm not sure that a statistic of 50% market share is relevant because a huge share of the problem was the unrealistic expectations that could be sustainable.

Companies have to evolve with the times instead of hoping for the good old days to come back. Profitability with permanently reduced market share will determine the future winners in the next cyclical bottom that is sure to come.

 
At 1/22/2012 3:09 PM, Blogger sethstorm said...

Ford shouldn't count given their evisceration of US identity from their lineup. About everything from them looks like it's from Europe.


the big three will continue to bleed share because they make unappealing cars.

While the imports continue to make golfcarts that are far from American in nature. Perhaps if those manufacturers designed in the Detroit way versus the way of austerity, there might be some appeal.

 
At 1/22/2012 3:11 PM, Blogger sethstorm said...


Companies have to evolve with the times instead of hoping for the good old days to come back. Profitability with permanently reduced market share will determine the future winners in the next cyclical bottom that is sure to come.

So that means blander cars, more poky engines and more customers thrown under the bus, told to go to the luxury tier or gtfo for a V6?

 
At 1/22/2012 4:02 PM, Blogger Jim said...

Every auto dealer I visit wants to just "give" me a new car. Zero down, no interest. Yes, take it home right now.
Where have I seen this story?

 
At 1/22/2012 6:40 PM, Blogger sethstorm said...


Jim said...

Housing.

 
At 1/23/2012 12:54 AM, Blogger Hydra said...

isn't this the same sort of fallacy we argue against in terms of the share of the economic pie? would you rather have 90% of the 1960 market, or 40% of the 2012 market?

=================================

It is the argument that is the fallacy. It assumes infinite growth, and favorable ratios.
Let's see, At that rate in 2060 you have 17% market share, in 2110 you have 7.2%, in 2160 you have 3%.

Do you believe we will have 30 times as many cars then as we have now?

 
At 1/23/2012 1:03 AM, Blogger Hydra said...

While the imports continue to make golfcarts that are far from American in nature.
===============================

Have you driven the 360 HP infiniti Hybrid?, or the 340 HP Lexus?

 
At 1/23/2012 1:10 AM, Blogger Hydra said...

I can't believe we are considering purchasing one.

================================

I have 160k on my Prius and my only repair has been one very expensive light bulb.

Spoke to a lady last week with a mega commute who has 250k on hers, and still has the original battery.

My VW diesel managed nearly as well as that, but it was a dog by comparison.

I once inherited a GM car: between that and every time I rent an American car I just shake my head.

 
At 1/23/2012 1:17 AM, Blogger Hydra said...

So I guess the progressives will now say, "See, government bailouts work."

==============================

The high speed train system in Japan was privately built, failed, bailed out by government and turned over to new owners (less the debt).

Both the high speed rail in Japan and GM are still operating. Eventually they will fail (again), maybe.

Is that the government's fault?

 
At 1/23/2012 1:21 AM, Blogger Hydra said...

At some point repair costs become prohibitive and new vehicles will have to be purchased.

=================================

It might help if they were designed to be repaired rather than replaced.

 
At 1/23/2012 9:17 AM, Blogger Jet Beagle said...

methinks: " are they taking a bigger share because the cars are better or because the alternatives are made more expensive through import tariffs and possible subsidies to consumers of domestic cars"

I believe the tariff on imported cars is only 2.5%. However, the tariff on light trucks (including SUVs) is 25%.


Those tariffs havene't prevented Japanese-headquartered automakers from selling their vehicles. In 2011, most vehicles sold in the U.S. by Japanese firms were made in the U.S.:

Honda - 85%
Toyota - 69%
Nissan - 68%

I derived those percentages from WSJ-Online data. That site did not break down domestic and imported vehicles for Hyundai and Kia.

At the margin, the 2.5% tariff on foreign cars may influence some buying decisions. The 25% tariff on light trucks is likely much more damaging to comnsumers.

 
At 1/23/2012 9:20 AM, Blogger Jet Beagle said...

sethstorm: "While the imports continue to make golfcarts that are far from American in nature."

Not sure who you are referring to. As I showed in the post above, almost all Hondas, and most Toyotas and Nissans, sold in the U.S. are made in the U.S.

Based on your pas comments, I would guess that you refer to anything not made by UAW as "imports".

 
At 1/23/2012 9:21 AM, Blogger Jet Beagle said...

Walt G: "This is great news."

Not to me. After GM and Chrysler were bailed out by the federal government, I've only wanted them to fail.

 
At 1/23/2012 9:21 AM, Blogger Jet Beagle said...

This comment has been removed by the author.

 
At 1/23/2012 11:29 PM, Blogger Ron H. said...

"I have 160k on my Prius and my only repair has been one very expensive light bulb."

And, we're not likely to ever her the last of it.

If you drove a car that many miles and only spent $300 in repairs, you have had a very good experience. But, whiner that you are, you need to complain about it.

"Both the high speed rail in Japan and GM are still operating. Eventually they will fail (again), maybe.

Is that the government's fault?
"

It is government's fault that they will fail *again*.

 
At 1/24/2012 8:26 AM, Blogger VangelV said...

"I have 160k on my Prius and my only repair has been one very expensive light bulb."

And, we're not likely to ever her the last of it.

If you drove a car that many miles and only spent $300 in repairs, you have had a very good experience. But, whiner that you are, you need to complain about it.


Sorry but I don't buy the story. If you look at the reports the Prius tends to have higher repair costs than other cars, particularly those with diesel engines. At best it might be close to the average repari cost of a Camry or Corolla. Our friend may be lucky or may be conveniently forgetting cash he shelled out for repairs.

 

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