WSJ: Europeans Raise Pressure on Detroit
01-04-09, 09:41 PM
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WSJ: Europeans Raise Pressure on Detroit
With the 'Big Three' Weakened, VW and BMW Aim to Expand Their Shares of U.S. Auto Market
By KATE LINEBAUGH
Struggling Big Three auto makers, accustomed to intense competition from their Japanese rivals, face a new challenge from European auto makers.
Sensing opportunity in Detroit's weakness, Volkswagen AG and BMW AG of Germany are gearing up to expand market share in the U.S. in the next few years.
VW is investing in its first U.S. factory in two decades and expects to triple U.S. sales to one million vehicles by 2018. BMW is introducing a new small car and expanding its distribution network.
"The U.S. will be the growth engine of the future," Jim O'Donnell, BMW's U.S. chief, said in a recent interview. "This is where we will continue to focus our efforts."
To be sure, the Europeans have gone this route before. VW opened a U.S. car factory in 1978 and closed it 10 years later due to quality problems, high costs and slow sales. Renault SA of France bought a 46% stake in American Motors but withdrew in 1987 after heavy losses.
This time, European car makers insist more diverse product lines, healthy marketing budgets and access to nonunion labor can overcome past stumbles.
VW is developing specifically for the U.S. several new models, including a family sedan. A new American manufacturing operation will free it from the currency swings that have hampered its U.S. sales in the past.
VW Chief Financial Officer Hans Dieter Pötsch acknowledged in an interview last fall that VW faces a tough task trying to match output with companies such as Toyota Motor Corp. that have established brands and extensive manufacturing in the U.S.
But he said VW is confident because of its success battling Toyota and Honda Motor Co. in other markets. "We are the leader in China, not Toyota," he said. "We are already competing successfully against them in other parts of the world. Why not in the U.S.?"
VW is spending $1 billion on a new assembly plant in Chattanooga, Tenn., where the company expects to start production of 250,000 vehicles a year in 2012. The plant will produce a new midsize sedan that will compete with the Toyota Camry and Honda Accord. This fall, VW added a new model in the U.S. -- a minivan, called the Routan, that is made for VW by Chrysler LLC.
While most auto makers are cutting expenses, Audi AG, VW's luxury unit, plans to increase its 2009 U.S. marketing budget by 15%, from about $80 million last year, including advertisements during the Super Bowl.
The company also has been pushing its dealers to upgrade their facilities and has commitments by more than 80 of its 270 dealers to do so.
VW and BMW's investments represent a break from the conventional view that prospects in the world's largest auto market are limited. Auto makers sold about 17 million vehicles a year in the U.S. in the first half of this decade. But the market declined to about 13 million in 2008, and most forecasts have it below 15 million vehicles for the next couple of years.
General Motors Corp., Ford Motor Co. and Chrysler are downsizing their operations to adjust to the smaller market. Asian auto makers also are cautious. Toyota has indefinitely delayed the opening of a new plant in Mississippi, and Honda has cut U.S. production.
In 2007, GM, Ford and Chrysler accounted for just over half of the 16.1 million vehicles sold in the U.S., with all the Asian makers selling more than 40%. Yet in the past decade, the European car companies' market share increased by just a single percentage point, to 7.2%.
BMW expects to gain share after it launches the new One Series small car in the U.S., a type of vehicle it hadn't offered previously. It also hopes to increase sales of its Mini brand, Mr. O'Donnell said.
This year, Mini will add about 10 dealerships in cities around the country such as Raleigh, N.C., and Birmingham, Ala. Chicago, a fertile market for sporty small cars, doesn't have a Mini dealer in its downtown, Mr. O'Donnell said.
"Everyone is trying to grab market everywhere they can," said David Cole, chairman of the Center for Automotive Research. "If you've got capacity you are going to find some place to use that capacity and sell cars there."
—Neal Boudette contributed to this article.
http://online.wsj.com/article/SB1231...googlenews_wsj
By KATE LINEBAUGH
Struggling Big Three auto makers, accustomed to intense competition from their Japanese rivals, face a new challenge from European auto makers.
Sensing opportunity in Detroit's weakness, Volkswagen AG and BMW AG of Germany are gearing up to expand market share in the U.S. in the next few years.
VW is investing in its first U.S. factory in two decades and expects to triple U.S. sales to one million vehicles by 2018. BMW is introducing a new small car and expanding its distribution network.
"The U.S. will be the growth engine of the future," Jim O'Donnell, BMW's U.S. chief, said in a recent interview. "This is where we will continue to focus our efforts."
To be sure, the Europeans have gone this route before. VW opened a U.S. car factory in 1978 and closed it 10 years later due to quality problems, high costs and slow sales. Renault SA of France bought a 46% stake in American Motors but withdrew in 1987 after heavy losses.
This time, European car makers insist more diverse product lines, healthy marketing budgets and access to nonunion labor can overcome past stumbles.
VW is developing specifically for the U.S. several new models, including a family sedan. A new American manufacturing operation will free it from the currency swings that have hampered its U.S. sales in the past.
VW Chief Financial Officer Hans Dieter Pötsch acknowledged in an interview last fall that VW faces a tough task trying to match output with companies such as Toyota Motor Corp. that have established brands and extensive manufacturing in the U.S.
But he said VW is confident because of its success battling Toyota and Honda Motor Co. in other markets. "We are the leader in China, not Toyota," he said. "We are already competing successfully against them in other parts of the world. Why not in the U.S.?"
VW is spending $1 billion on a new assembly plant in Chattanooga, Tenn., where the company expects to start production of 250,000 vehicles a year in 2012. The plant will produce a new midsize sedan that will compete with the Toyota Camry and Honda Accord. This fall, VW added a new model in the U.S. -- a minivan, called the Routan, that is made for VW by Chrysler LLC.
While most auto makers are cutting expenses, Audi AG, VW's luxury unit, plans to increase its 2009 U.S. marketing budget by 15%, from about $80 million last year, including advertisements during the Super Bowl.
The company also has been pushing its dealers to upgrade their facilities and has commitments by more than 80 of its 270 dealers to do so.
VW and BMW's investments represent a break from the conventional view that prospects in the world's largest auto market are limited. Auto makers sold about 17 million vehicles a year in the U.S. in the first half of this decade. But the market declined to about 13 million in 2008, and most forecasts have it below 15 million vehicles for the next couple of years.
General Motors Corp., Ford Motor Co. and Chrysler are downsizing their operations to adjust to the smaller market. Asian auto makers also are cautious. Toyota has indefinitely delayed the opening of a new plant in Mississippi, and Honda has cut U.S. production.
In 2007, GM, Ford and Chrysler accounted for just over half of the 16.1 million vehicles sold in the U.S., with all the Asian makers selling more than 40%. Yet in the past decade, the European car companies' market share increased by just a single percentage point, to 7.2%.
BMW expects to gain share after it launches the new One Series small car in the U.S., a type of vehicle it hadn't offered previously. It also hopes to increase sales of its Mini brand, Mr. O'Donnell said.
This year, Mini will add about 10 dealerships in cities around the country such as Raleigh, N.C., and Birmingham, Ala. Chicago, a fertile market for sporty small cars, doesn't have a Mini dealer in its downtown, Mr. O'Donnell said.
"Everyone is trying to grab market everywhere they can," said David Cole, chairman of the Center for Automotive Research. "If you've got capacity you are going to find some place to use that capacity and sell cars there."
—Neal Boudette contributed to this article.
http://online.wsj.com/article/SB1231...googlenews_wsj
01-04-09, 09:49 PM
#2
Lexus Fanatic
hit them when they are down. Its the best way to do it. Take them down while they are weakened. The evolution of these automakers will continue no matter whats good for detroit. They got lazy and soft .
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