Hoovey689

iTrader: (16)

8 more reasons for Detroit to worry

A few weeks ago, I identified eight reasons why Detroit -- despite higher sales and black ink -- should not be getting complacent.
I got a number of reader comments suggesting that my analysis was, at best, flawed, and, at worst, unpatriotic. But encouraging as it is to see U.S. automakers hiring workers and adding shifts, the tide of good news should not prevent the identification of rocks under the surface that could sink the industry's long-term prospects.

The evidence is all around. The BrandZ Top 100 Most Valuable Global Brands study from market research company Millward Brown ranks six automotive brands among the top 100 across all industries. BMW is the auto leader, followed by Toyota and Mercedes. None of the six are American.

Detroit has a tendency to bet on the come. Like the fans of the old Brooklyn Dodgers, its motto is "Wait `til next year" -- the longstanding belief that the arrival of a new model will cure everything. But the next three years are studded with the same kind of issues that drove the domestic automakers to the brink in 2009.


1. Domestics depreciate faster than imports

Retained value is a reliable indicator of vehicle quality and resale value, and it helps determine monthly lease payments. An analysis by Edmunds.com of models that hold their values best identifies 38 from Japan but only 21 from Detroit. That means owners of Japanese cars can expect to get more for their trade-ins, and Japanese manufacturers can offer lower lease rates.


2. Old ways aren't the best ways

The U.S. vehicles that hold their value best are in segments traditionally dominated by domestics -- sporty coupes like the Chevrolet Camaro and light and heavy-duty pickups like Ford's F-series. But American cars don't do well overseas. When the domestics go head-to-head in segments where the Japanese compete -- small coupes, sedans, minivans -- they finish out of the money in the Edmunds.com analysis.


3. Detroit lags in fast-growing segments

Crossover SUVs, a segment pioneered by the Japanese, will represent 61 of the 176 new models launched over the next three years, according to Bank of America Merrill Lynch's "Car Wars" report. GM is making a heroic effort to catch up, introducing eight new or redesigned crossovers during the period, but crossovers will still account for only 22% of GM's new model sales volume by 2015 -- well below the industry's 30% benchmark.


4. Big ticket customers go elsewhere

Over the next three years, 45 new models in the luxury and sporty car category are due to hit the market -- 12% of the total, as measured by sales volume. But despite Ford's rebuild of its Lincoln brand, luxury and sporty cars represent only 9% of its total new model launches. Chrysler looks worse, with just 2%.


5. Detroit still has too many dealers

Dealership consolidation was a major goal of the industry restructuring that took place in 2009, but it fell short. Selling more cars per dealer means larger, more profitable stores, less price competition among dealers with similar brands, and lower distribution costs for manufacturers. Yet the latest tally of sales per dealer by Automotive News is led by nine import brands, topped by Toyota. Ford, the highest ranked domestic, finished tenth.


6. Detroit dealers stock too many cars

Carrying new car inventory means floor plan expenses for both dealers and manufacturers and disappointment for customers as cars rot on the lot. The average domestic dealer was carrying 68 days supply on May 1. While you would expect import dealers to carry more inventory because of longer supply lines, they get by with far less. European and Japanese makers each clocked in with 49 days supply on the ground, as measured by Automotive News.


7. Good enough isn't good enough

The "Car Wars" report shows Ford and GM ratcheting up their rate of new model replacement to the highest speed in the industry, besting their Asian rivals. Each will turn over its model lineup by greater than 100% over the next three years. But according to the forecast, even that heroic effort will only allow them to stabilize their market share at historically low levels


8. What price parity?

By 2015, if events follow the "Car Wars" outlook, the Detroit Three will be hanging on to just 45.8% of the U.S. market, while the Asian Four -- Toyota, Nissan, Honda, and Hyundai/Kia -- control a 41% share. In the past, when big, successful companies like Kodak, Sears, and A&P lost their market dominance, they quickly slid from mediocrity into irrelevance. What will be Detroit's fate?


http://money.cnn.com//galleries/2012...fortune/9.html

bitkahuna

iTrader: (20)

sobering article... i do think ford, gm, and chrysler all get that they're in the fight for their lives. on one point about too many domestic brand dealers, the dealers themselves are a powerful political and legal force, and gm and chrysler had to go bankrupt to get rid of dealers... there's a lot of stupidity to go around. but if you're a dealer that ekes out a living having too much inventory, competing with too many of the same brand dealers, it's hard to step forward and say "ok, i'll close for the good of the others". somehow the mfrs need to help some consolidation.

Akito san

Gm keeps playing catch up making recycled réplicas of other imported companies like BMW Honda to Toyota, Chevrolet has many recalls and lose 1/4 of their value the day their car is driven of the lot, but some people get sucked into Detroit new cars for 10k and later in two years realize all the trouble they got into, try to trade it in for dimes or sell it on Craigslist for 5k its like buying a pair of knock off Nike's its just not the same.

spwolf

looking at all the hater comments towards cnn on cnn and autoblog, i think people need to face the reality - and reality is that gm and ford are steadily using market share they gained by government intervention as well as tsunami and floods.

why exactly is what this article tries to find out... i remember 2 years ago when recall fiasco hit the web, everyone thought japanese were out of the game... not to mention how all these new "best in class" models were supposed to beat japanese since they started coming out 4-6 years ago.

I8ABMR

nothing surprising here.

Fizzboy7

The Big Three are doing better right now than they have done in a long time, so they must be getting it. I don't fully agree with the article.

Habious

I don't really agree with this statement.

How is it a "fight for their lives" when they're considered "too big to fail"?

It's easy to gamble when there's no risk involved.

If they do well...great...they make a profit.

If they fall to pieces (again)...they will get bailed out, government-backed loans, "assisted restructuring", whatever euphemism you wish you use.

caddyowner

Just a reminder, Ford did not seek nor receive a government bailout. Ford mortgaged everything they had, including rights to their HQ & blue oval logo, to build up their war chest to weather the storm and upgrade their products. They just recently earned those items back and are paying down their debt. However, because they didn't go through managed BK, their labor & benefit costs are higher than GM & Chrysler.

spwolf

I consider head of NTHSA going in front of congress and claiming Toyota cars are unsafe to drive, govt intervention.

Now that effects of that are gone, and that tsunami and flood effects are gone, both Ford and GM are seing their market share slip.

Stormwind

That 8 reasons is just a tip of the ice berg when it comes to GM's problems, something disasterious is coming and it's gonna be big. Like bankrupt big.

bitkahuna

iTrader: (20)

gm and ford's problems continue to be VAST union obligations to people who no longer work there and to people who aren't retired, but don't work, and who gm and ford STILL have to pay (to do nothing). it's insane. but the uaw doesn't care. it will not concede any ground as its leadership enjoys a lifestyle as or more lavish than the execs at gm and ford they hate.

and the bailout by obama was the most obscene union and voter pay off in history.

hopefully it will not be forgotten.

and how unfair is it to ford that because they planned for a (very) rainy day and survived without govt bailout, that they should have to compete with a resurrected company (gm) that was able to jettison a vast amount of debt and other dead weight with no consequences?

FNFZ4

if there was no rental car companie and US government buy any car then there would not be a detroit anymore

bitkahuna

iTrader: (20)

of course that makes no sense at all, as gm sells a TON of cars outside the u.s., including highly successful volume in china.

spwolf

if GM didnt buy Daewoo, they probably wouldnt be around anymore then :P.

bitkahuna

iTrader: (20)

i honestly don't know, but are the ton of buicks that gm sells in china made by daewoo?