By on May 13, 2011

The combined market share of GM and Ford will reach 40% of the US market by the end of 2015. Yes, you just read that correctly. That’s a full five percent more share than what they have today, or a gain of just one percent a year. Call me crazy… but recall that Farago and I called the GM bankruptcy way before most industry observers (and certainly before the BoD of Old GM) could see it coming. Long time TTAC readers will also remember my call to buy Ford’s stock in April 2009 when it was trading in the three buck range. So calm those gut-reactions for a few minutes and let’s walk through this.

We should begin by reviewing a few facts (while forgetting the fact that GM once owned 50% of the market among its six brands a long time ago): GM and Ford today are selling into approximately 35% of the market. In a normalized market (and that’s probably just two years away), the average SAAR will likely run in the 15+ million unit range. Each one percent of market share represents 150,000 units. Doing simple math, for GM and Ford to grow market share by five percent means that these two Detroit companies will need to gain additional sales of 750,000 units beyond what comes to them from market growth alone. Holy cow…that’s a gigantic increase – basically three full production plants worth of sales.

Will it be difficult to do? I don’t think so…other than the fact both companies are starting to run out of production capacity. GM North America production – in Q1/2011 – was running at 99% capacity on a two-shift basis. But GM does have some idled plants – like Spring Hill, TN – that it can restart. Ford is getting squeezed too but Ford hasn’t disclosed its capacity utilization and is actually closing some plants while retooling others. But let’s just believe for now that both companies will solve their capacity problems. (And why no comment from GM and Ford about new capacity for now? It’s being held as a bargaining chip with the UAW – more jobs in the USA means more UAW members but only if the UAW plays ball this summer during contract negotiations. Otherwise, bienvenidos a Mexico!)

So what is it going to take? It’s not the product any more (with a few exceptions). Rather, all GM and Ford need is greater consideration from consumers and increased penetration in the fleet market.

Fleet is the easiest to understand as it comprises daily rent cars, commercial accounts, and governments. For GM and Ford, fleet sales represent approximately 30% of their sales and in the overall industry fleet sales represent nearly one in five new vehicles sold.

For a fact check here, total new fleet registrations in CY2007 according to R.L.Polk were 3.0 million units but dropped to 1.8 million units by CY2009. While 2010 data is not yet available, fleet sales in 2010 likely rebounded from 2009 but were hardly at the level of 2007 or in years prior. Clearly, there’s room for growth in fleet sales ahead – and it’s doubtful GM and Ford will walk away from their 55% share of the fleet business. And we know now that the Japanese are going to have plenty of problems this year and maybe next year too building vehicles so it’s an opportunity to take business. (And the Koreans can only supply so much…)

So for arguments sake, let’s assume that the fleet business is going to reach a normalized level of 2.8 million units annually (19% of total sales of 15MM units). GM and Ford, without any share increase, would sell 1.5 million units to fleets. But allocating another five percent share increase to these two Detroit companies with their improved passenger car line-ups and with the problems facing the Japanese, there’s an additional 140,000 vehicles to be sold from share gains to fleet buyers.

So to meet my forecast of an increase of 750,000 units for GM and Ford in share growth, and with 140,000 units coming from fleet sales share increases, it means that 610,000 units will come from the retail side. Of course, all of the gains are business taken from competitors. And here’s the heart of the argument – Toyota and Honda are going to get clobbered in the marketplace. It’s all about product and reputation – and for as long as I can remember, neither GM nor Ford had competitive small or mid-size cars (or luxury cars too) worth a damn. Plus Detroit’s reputation for build quality, reliability, or even design wasn’t setting consumers’ hearts aglow. The Japanese captured these consumers, particularly along the coasts, and took share from Detroit.

But the tide is going out on the Japanese. Like Detroit pre-bankruptcy, the two Japanese stalwart manufacturers have gotten complacent. Long model cycle times, boring design, and replacement products (when they get here) that look like warmed over versions of the previous generation vehicles. (Nissan is somewhat of an exception to this.) The luxury brands for Toyota and Honda also appear stalled for the same reasons as their mass market siblings. Plus, the Japanese no longer offer superior fuel economy to the latest offerings from Detroit.

Detroit now just needs to convince those American consumers that won’t consider a Detroit product that it’s time to take another look. You can’t sell a Detroit product to a buyer that doesn’t put a domestic product on the shopping list. And here’s my idea of how Ford and GM can accomplish that – put a human face from within their respective companies (like a vehicle designer, an engineer, a factory worker, and a believable senior executive) to come out and ask for consideration in a series of TV spots. No pitchmen, no fancy graphics, just the speaker, the product, and the brand logo. Focus on some attribute of the product that makes it worthy of consideration. Then add the spokesperson’s contribution to making it a great product. No need to dismiss the competition. All that is being asked for is to take a look.

To add five full percentage points to market share in a short time period is a herculean task – but the only thing that prevents GM and Ford from doing so is no longer due to the products but this lack of consideration. Ask your friends, colleagues, family members, or anyone else who now drives a foreign brand product if they’d consider a domestic product for their next car purchase. I’d bet most would say something along the lines that “been there, tried that, had a horrible experience – won’t go back.” And that’s the biggest obstacle for GM and Ford today.

I believe that with the new product onslaught from GM and Ford, some focused advertising that asks for consideration and with growing positive word of mouth from satisfied customers, the sales needle will move in short order. The world is their oyster – as long as they stay focused on product at the RenCen and in Dearborn.

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83 Comments on “Changing Tides: Can Ford And GM Control 40% Of The US Market By 2015?...”


  • avatar
    Philosophil

    I forced my wife to come test drive the new Focus with me a while back, and she was so impressed (she had test driven the Focus back in 2004 and that was enough of that), that when I suggested I should test drive the Fiesta, she readily agreed. Prior to having actually sat in the thing, she would automatically dismiss Ford as crap (as she did with Hyundai as well, until I forced her to sit in the new Elantra).

    If Ford and GM are to have the kind of revival you forecast, then I think they need to get ‘bums in seats’ (as my local administrator would say). First hand impressions can make a big difference.

    • 0 avatar
      highdesertcat

      Yep, I remember when Elias and Farago predicted that GM would go tits up, and there were others as well who were able to read the mud that was the tea leaves at the bottom of the GM-teacup by subtracting operating expenses from sales-income to come up with negative Billions each year, (for decades).

      I hope this increase in market share for Ford and GM turns out to be true because that means that we, the people may be getting back some of that money we threw at these losers. The US auto industry is in turmoil right now and the great shake out still has 2-3 years to go. But if I were to hedge my bets I would say that by 2015 Toyota, Honda and Nissan would still be standing, and that Hyundai/Kia would give the Japs a serious run for their money. By then I expect Chrysler/Dodge/Jeep to be fully integrated into Fiat, Inc and rebadged with foreign-sounding names everywhere except in the US. Maybe by then GM will also have divested itself of GMC, or sold it off to China.

      One thing for sure, the US auto industry will be totally different by 2015 with more assembly done outside of the US, like in Mexico. Makes sense to me. Better assembly, higher quality, and lower expenses equals greater value for the buyers and greater profits for the shareholders. Based on that alone an increase in market share is entirely possible.

  • avatar

    I don’t think it’s impossible considering the product shortage some of the Japanese companies will have coming out of the Tsunami recovery. It’s possible the lack of products will force some people to consider domestic. This isn’t a completely crazy argument.

  • avatar
    Bytor

    Fords products are compelling to me. A Focus Hatch with MT is top of my list for my next car,and if I wanted a class smaller, a Fiesta would be up there.

    GM has nothing that interests me.

    I agree with Japans big two getting more stagnant, but Korea is coming on like gangbusters. I wouldn’t count on capacity holding them back. They are considering more US factories to meet demand:
    http://www.autoblog.com/2011/01/17/hyundai-reportedly-considering-second-u-s-plant-to-meet-rising/

    Will the big two hit 40%. I really don’t know or care. I do care that Ford is making great cars and will likely grow share. As are the Koreans…

    • 0 avatar
      gogogodzilla

      It’s smart for Hyundai (and by default – as it’s owned by them, Kia) to build more US plants. Korean unions (and so, by default, their auto unions) make our own US auto unions look like bastions of free-trade conservativism. They strike on a annual basis. So much so that there is a term for it in the Korean language, “Pa-op Chul”.

  • avatar
    M. Ellis

    Interesting thoughts.

    My family grew up buying GMs. Including an early 80s Olds Diesel Wagon that ended its life rotting in a Teterboro, NJ parking lot, and good riddance to it. My biggest car buying regret was siding with my father in buying my mother a Corsica instead of a Camry. We did have a ’73 Corona that I learned to drive on (twelve years later, as it was busy rusting to death, but it taught me how to drive stick, and I loved that car), but it was very much the exception until the late 90s.

    I bought a Ford Probe GT in ’92 instead of the Mazda or the Acura. In retrospect, I wish I’d bought the Acura. My wife inherited two Mercury Sables from her family. One died underneath her before we started dating. The other, a ’97, survived until last year. It ran, but it was crap (and looked it), and its replacement for her parents is an Avalon.

    Neither of us was ever going to buy another Domestic. Our current car’s a Prius. I’d planned for my next car to be a Subaru Wagon of some sort, since my mother’s owned two since the Corsica, and they’ve been fantastic for her.

    What changed? The Ford Fusion. We rented an ’09 down in Texas for a weekend, and it was great. And, frankly, other than the Subaru Wagons and the Prius, there’s nothing the Japanese make that I particularly want, and I’m not going to blow out the budget on something like a BMW. So we’re left with the following:

    Midsize Sedan: Fusion is at least as good as anything else in the bracket. Looking forward to the next redesign and an updated MyFordTouch. (We’re both geeks; a complex system isn’t a problem, so long as it works well.)

    Compact/Midsize Wagon: Subaru. I grew up in Colorado, I’ve driven one in whiteout conditions on backroads in the mountains, and I trust them.

    Compact/Midsize Hybrid: Fusion or Prius. If the Fusion came in a wagon format, I’d say the Fusion, hands down. My wife hates wagons, but she likes the Prius well enough, so when the time comes to replace the Prius, it’ll either be another Prius (or Prius Alpha), or it’ll be a Fusion.

    CUV: I actually like the Flex design, but my wife doesn’t, so, alas, no. Maybe a GM but, while I don’t have any issues with buying from ‘Government Motors’, I do have very bad memories of GMs from the mid-90s and before, so it would take some doing.

    If we still lived in California, I guess I’d have a look at the Volt. Particularly when they come out with a 2nd generation. And if I’m ever in the market for a sports coupe, I’ll have a close look at the FT-86 or its Subie equivalent, but for now, it’s sedans and wagons, and the Domestics are competitive with the Japanese, something I never would’ve thought even five years ago. There’s a definite shift for people I talk to, where people who would never have reconsidered a domestic vehicle are reconsidering, and I hope the trend continues.

    • 0 avatar
      Ubermensch

      Subaru doesn’t really make a “wagon” anymore. The Impreza is really a hatch and the Outback has swelled to CUV status. The only realiable wagon for sale in the US right now is the Acura TSX Sport Wagon. If the nearest Acura dealer wasn’t over 100 miles away from me, I would probably be getting one. However, if I decide I can live with less room in the back, I would strongly consider a new Focus hatch.

  • avatar
    getacargetacheck

    A 15m market in a couple of years? You are underestimating the severity of the housing bubble and its long-lasting effects. There hasn’t been any real income growth in 10 years. The meme floating around now is that the “new” economy has high unemployment baked in as “normal.” But people can’t buy new cars without an income, and there is no longer a housing or stock market bubble to allow buyers to feel rich through debt. We are tracking Japan’s experience with deflation quite nicely. After 20 years, Japan’s economy is nothing like it was in 1987. You are also underestimating Toyota, Honda, Nissan, Hyundai/Kia. If anything, with gas creeping higher and unemployment strong, GM and Ford’s pickup truck sales will be under fire.

    • 0 avatar
      SVX pearlie

      Excellent post. It goes without saying that Housing is a slow market with a long cycle time. It takes years to go down, and years to go up. And by years, I mean more like decades. Cali last bottomed in 1996-1997, and didn’t peak again until 2006-2007. It’s only 2011, so we’ll be like this for another year or two, probably longer, but I like to think the worst is over. On the plus side, mortgage rates are pretty good if you’ve got money…

      “US Like Japan” is scary, but not so possible. One odd factor is that the Chinese Yuan is fairly tightly-coupled to the US Dollar, unlike the Jap Yen. With China growing, the economics are different.

      I’m not seeing a huge resurgence out of Japan. The 1970s boom was an outgrowth of the US rebuilding and propping up Japan after WW2. That won’t happen again, as the US is too busy taking care of things domestically to focus externally. Plus, Japan has 3/11 to deal with before they can ramp things up.

      I do see pickups shrinking big time, especially big trucks. No more giant F-150s for grocery-getting. I see small trucks and Elkies coming back for cost and light-duty, respectively.

      • 0 avatar

        US was industrial superpower and won the WWII because of having most effective manufacturing system in the word. Japan and Germany simply could not compete. But after the war Germany and Japan being exempt of military spending took over US as soon as recovered. US power is crippled by unaffordable military spending, waging numerous never ending wars and police operations around the world and even defending super powers like Japan, Korea and Europe who could easily took care of their own defense.

      • 0 avatar
        HerrKaLeun

        Inside Looking Out: I don’t think US WWII production was more efficient… it was more the size of the country and the access to vast amounts of resources (out of the reach of axis bombers).

        I know it is not a good part of German history, but during all the bombing raids by allied forces, without access to much raw material, Germany increased production as far as to 1944. Again, this is not something to be proud of due to the circumstances and the pain Germany caused by being so “efficient”.

        And what do you mean being exempt from military spending? Germany (both East and West) had to pay for their own army. Actually both sides were forced by their victors (US for West, Soviet union) to build up army against the “other” side of Germany. Much of the remaining East German industry was moved to the soviet union as reimbursement. Similar is true for Japan after WWII.

        again, not defending what Japan and Germany did… but all the cruelties both countries committed were committed with the highest efficiency and accuracy. 1933 Germany had a population of 66 million (including old folks and children). within 12 years Germany killed over 50 million people all over Europe…. you can’t do that with an inefficient system (the Italians never killed so many because of their lack of efficiency… they sure would have)

      • 0 avatar

        The numbers are from http://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures

        United States $687,105,000,000 4.7% of GDP
        Japan $51,420,000,000 1.0%
        Germany $46,848,000,000 1.4%

        It is like 4-5 times more. It is a huge difference. And we are talking about period after Cold War and Vietnam ended. I cannot imagine how much money America waisted in Vietnam and on Cold war while Germany and Japan managed to attack US economically and win the the export war. They lost one war in 1940s and won another in 70s. Japan and Germany are grown-up countries by now, no kids anymore. They can take care of themselves against any enemy. Germany was always formidable military power and Germans and Japanese never had the fear of engaging into fight. How they suddenly become lame and unable to go to war and fight for own freedom? Why US had to keep military bases in these countries to protect them giving them opportunity to focus on perfecting economy and increasing exports?

        During the WWII US had the best mass production system in the world and can replenish military quickly with weapons, ships and planes. Germany occupied most of Europe and used slave labor for production. Slave labor never was effective.

      • 0 avatar
        HerrKaLeun

        Inside Looking Out:
        I don’t dispute the US is spending more money on military. Actually more than all other nations combined (thanks to the rest of the world lending money to the US).

        But neither Japan nor Germany forced the US to have an empire. You know it is not about liberating the rest of the world, it is about influence and access to resources and markets that requires an army that big.

        And all the money the US spent to train and equip the Taliban in the 1980′s … do you really want to count that towards liberating the world?

      • 0 avatar
        charly

        The EU spends more than the rest of the world* combined so why should they spend more as they can’t beat one and overwhelm every other

        rest of the world is every country except EU and US

      • 0 avatar
        Philosophil

        @ Inside Looking Out. Wasn’t there an issue recently where Japan tried to have U.S. military bases removed from Japanese soil, and the U.S. pushed back (economically) suggesting that wasn’t a good idea? My suspicion would be that the U.S. maintains the vast majority of its bases around the world for their own interests primarily, and would not want to give up such strategic geo-political spaces.

        Also, while it is no doubt true that WWII would probably not have been won without the U.S., to say that the U.S. won the war (and would have won it without the Allies) may be a bit of a stretch, don’t you think?

      • 0 avatar

        American government should learn lesson. All empires sooner or later crash and it happens because they cannot sustain it anymore. Obligations push America into bankruptcy. In the past America had much higher taxes to support cold and hot wars. You cannot have low taxes and wage wars at same time.

        Regarding Japan – if something happen – they will run back to daddy to send troops back. Do you believe they would agree to spend 5% of GP on defense? Real world power like Russia and China spend almost as much if not more than US on defense. Japan and Germany are economic superpowers but not really world powers. US represent both Japan and EU on world stage and it is 70 years after WWII! Destiny of world is decided between US, China and Russia. Look which countries had aspiration to launch man to space and you will know who real players are.

    • 0 avatar
      John Horner

      The flip side of the housing bubble bursting is that the people who do have jobs are able to spend much, much less on their mortgage payment than they would have had to pay three or four years ago. House prices are coming down fast and mortgage interest rates remain at near all time lows.

      The haves in this economy are actually in pretty good shape, and they still outnumber the have nots by a large margin.

      • 0 avatar
        getacargetacheck

        Yes, except that rising interest rates (whenever that starts to happen) will put even more downward pressure on the value of the “have’s” homes. Many of these people, though they have jobs, will need to short sale their home or come to closing with cash when they do go to sell. Plus, there are as many homes that are underwater or whose owners have stopped paying their mortgages as there are homes for sale where there is not a problem. More downward pressure. Unemployment/underemployment still stands at 16% nationwide (not counting the people who simply have stopped looking for work and are no longer receiving benefits) while 44M Americans are on food stamps. Where has the job growth been coming from over the last 10 years? What jobs have been the growth engine of our economy during the Bush/Obama years? Waiters, bartenders, food service and home healthcare. Not exactly the stuff of a red hot economy. So while the “haves” outnumber the “have nots” this all adds up to bad news for the auto industry, especially the marginal players.

    • 0 avatar
      John Horner

      Chrysler is conspicuously not mentioned anywhere in this piece. Chrysler certainly pursues the US fleet business aggressively, seems to be getting some traction in the cop-car market and remains a rental lot stalwart. Whatever share Chrysler earns is likely from a group of buyers who already have GM and Ford on their consideration list as well.

      Finally, a pet peeve: No company “owns” or “controls” any market share. Market share, especially for a market dominated by single unit sales, is earned hour to hour and day to day. Nobody owns or controls any market share. Semantics, but important in my view.

      • 0 avatar
        DearS

        With all the inflation and global competition I don’t see the U.S. Economy going back to “normal” levels ever or atleast another 40 years. Americans can save money on smaller cars, and homes and still food, energy, and gas prices will go up. Jobs are not returning fast imo, again inflation and competition. A lot of things have been taken for granted, most especially jobs. No good jobs, no expensive cars, imo. This is not China, we don’t have 1.2b people. I may be wrong.

        Oh and taxes may go up.

      • 0 avatar
        Xeranar

        Seriously 40 years? I’m glad DearS isn’t an economist. The problem for our generation is we’ve never experienced a decade long recession and in our ever shrinking attention span due to 24-hour news cycles we’re perceiving time in a very skewed way. The recession wasn’t that bad, the unemployment will fall if we ever restructure our laws to make outsourcing less profitable or China/India come close to 2nd world economies on a serious level (they’re on the verge now, which is why China is paranoid of the inevitable collapse that will happen without major restructuring).

        For the US Auto market to sell 15 million units roughly 20% of US households would have to buy a new car. 1 car every 5 years is actually pretty standard in our society. In most cases the recovering people who went back to renting after giving up their house will be able to purchase a car before a home and will generate better credit reports with that as well. In essence the auto market is inevitably going to bounce back.

      • 0 avatar
        MikeAR

        The recession was and is that bad. In fact it was the Great Depression with a much better pr team. Real unemployment (U6) is now and has been at Depression levels, the labor force participation rate is declining and wages are stagnant. There are fewer jobs now than there were 5 years ago, despite more people of working age.

        The only thing that has masked the seriousness of the problem is goverment aid. Food Stamp useage is at an all-time high (44-45 million people), various welfare and SS programs and extended unemployment benefits are helping people survive and keeping them out of sight out of mind to those of us who are working.

        It is widely held among those who follow them that all government economic stats are at best wrong and at worst lies. The sole sign of economic health is the stock market and it is being articficially supported by the Fed’s pumping money into the economy with the QE programs. Unfortunately that is causing inflation for those of us who aren’t receiving the QE money so we are worse off.

        So no, the economy isn’t better and won’t be for a long time.

  • avatar
    SVX pearlie

    If they don’t screw it up, I think GM has a good shot at gaining 5% – they’re on a roll right now, and their market share level is rather low. I also think the vast bulk of those gains will come at Chrysler’s expense, as Chrysler implodes.

    I think Ford will similarly enjoy the benefits that come from feasting on Chrysler’s entrails.

    Within the Domestics, it’s basically Chrysler losing 5% to GM & Ford, with no net gain or loss.

    I think Koreans will continue to eat Chrysler & Mitsubishi’s lunch, so they’ll gain a little bit of share.

    But 5 years from now is a very long time away, and I foresee a couple really big disruptions:

    1. China arrives with some pretty decent cars, following Japan & Korea. But learning smarter based on what came before. I’m not quite sure how this will be done, probably via the acquisition of a lower-end dealer network (I’m thinking Mitsubishi or Suzuki). GM does OK here, based on SAIC experience. The Chinese join the Koreans eating Chrysler’s lunch at the low end.

    2. EV / hybrid becomes the predominant drivetrain in response to ever-ratcheting CARB mandates. GM is OK here based on Volt, and Ford has their hybrids in place. Having no tech or R&D, this is the final nail in Chrysler’s coffin.

    • 0 avatar
      MikeAR

      Maybe it’s just wishful thinking but I think Chrysler has a pretty good future. It’s GM who willl have problems, their management team in as weak as its ever been now and not all the dirt from the bailout has been exposed yet. Assuming the elections in 2012 go right there will be a posse of DOJ and special prosecutors running around Wall Street and Detroit from 2013 on. Chrysler will be a part of this but the focus will be on GM. By then Chrysler will be Italian anyway. They are by fat the weakest now but some of their vehicles are good and maybe by then with Fiats they will be competitive in most segments.

      Don’t underestimate the resentment against GM through most of the country. Not everyone one detests them, but those who do are a big part of the potential domestic buyers. They can’t really afford to have anyone write them off out of hand. Yet there is a sizeable minority who does.

      • 0 avatar
        mike978

        Mike – you have your opinion, great but don`t assume most people share it. I don`t think you can say most of the country has a burning resentment against GM.
        Second it is widely viewed that Chrysler has a weaker product line than GM – how is Chrysler/Dodge doing in the strong compact marker (that’s right the wonderful Caliber which is soldering on for a few more years.) How is Chrysler doing in the sub compact market? Which Ford has shown can give >100000 sales a year? You at least admit in the last paragraph that it is a minority that dismiss them.

        Even if the GOP did win the 2012 election would they really want to investigate and bring down a company that has paid off most if not all their public debt, employee hundred’s of thousands of American in manufacturing. Especially when most politicians say we need more manufacturing not less. Not even the GOP is that stupid. Just because you think it should be investigated further (remember it has already had some investigations and legal rulings) doesn`t mean it will. A lot of liberal Democrats wanted Cheney and Bush investigated – didn`t happen. Let sleeping dogs lie.

      • 0 avatar
        Luke42

        @mike978: I think MikeAR is right about this one.

        Chrysler will draw from Fiat’s product line; they’ll have good small cars to sell, which will put them and Ford in a great position as gas prices continue to increase. I wonder if the merger will make it easier to sell Caravans and Rams around the world?

        (Ford is importing cars from Ford Europe, which seems like a great idea to me; the Fiesta and World Focus seem to be selling well, and the Transit Connect is exceeding all expectations; the and C-Max looks like something that would belong in my driveway if it were on the market.)

        GM’s coming around on the small car business, and the Cruze looks like a real competitor to the Civic, but they’re getting in to the small ca business the hard way.

      • 0 avatar
        mike978

        Luke – I agree with Fiat’s help Chrysler will have class competitive sub compact and compact cars in due course. But in the mean time the Cruze (and Focus) will do well and establish their nameplates (already done in large part for Focus). Chevy get a new sub-compact which should do better than the Aveo (maybe not that hard!). So it isn`t like GM is being idle. Also you make the point about Ford and Chrysler using European products to help them. The same can be true for GM with the Corsa and Astra – both are class competitive in Europe and very good sellers.

  • avatar
    CJinSD

    GM is in the news today bragging that they’re spending 109 million dollars to preserve 96 jobs in Michigan. Sentient taxpayers aren’t impressed. I’d love to have a look at the data suggesting that we’ll have a ‘normal’ level of economic activity in two years, but there is some improbable optimism involved in this scenario. Early victims of this round of propaganda already getting burned by their new American cars won’t help either.

    • 0 avatar
      golden2husky

      That last sentence is the biggest hurdle that Detroit has to face. Mr. CJ represents the segment of the market that will never buy American, no matter what the reviews say, and even when the toaster testers at CR slather on the red dots, it just isn’t ever going to be good enough. So Detroit should forget the truly narrow, closed minded folks; for valid reasons or not they ain’t looking back. But for those who X cars are but a dim memory an opportunity exists. Most people below 38 or so missed the Malaise-era disaster. These people have often bought Japanese out of habit because they liked what they were exposed to by their parents. These are the folks that will likely give Detroit a chance. Right now, when they go to buy they are likely to face shortages due to the Japanese disaster. Dealers, being the good capitalist opportunistic snakes that they are, likely will jack up ADMs wherever they can on cars in short supply. Faced with that, open minded buyers will be ripe to look elsewhere. Even those who reflexively jump to CR will find good justification for buying say, a Fusion. So while I think 5% may be on the high side, a renaissance for Detroit is certainly possible. And this time around they won’t be “burned” by their choice. I guess everything has a bright side. The horrible disaster in Japan has opened up an opportunity for Detroit, just like the second gas crisis in ’79 gave Japan a second crack at the American market, helping buyers forget/forgive the horrible rustbuckets of the early ’70s…

      • 0 avatar
        Luke42

        It took decades to destroy the GM brands; it will take decades to rebuild them. Remember that us normal folk can only judge a car manufacturer by the performance of their used products. So, while the Cruze looks pretty good, it won’t really join the ranks of the Civic and the Corolla unless most-all of them deliver several years of exceptional reliability. And, if CJinSD is right, it won’t ever happen.

      • 0 avatar
        golden2husky

        While we can’t say for sure, the data right now is promising. And I have to add as the owner of multiple older cars, my experience begs to differ. He can pull up CR, sure, but go to any website that tracks high mileage vehicles, CR’s included, and they are loaded with high mileage domestics, as well as imports. Actually, CJ and his ilk is a lost cause for Detroit. No matter how good the product may be, it will never be good enough. Personal bias is a powerful thing.

        You are correct that changing perception takes time, and folks who were burned by a major failure are likely to be bitter, like I was with the intake gasket on our extended family’s only GM car. But continually improving the product will eventually change most people’s minds.

  • avatar

    Maybe (GM & Ford will have 40%). But my own feeling is that Hyundai will be a stronger contender than the two domestics.

  • avatar
    Tstag

    Give it 5 years and I suspect the likes of MG will be growing into the next Kia. But give Kia another 5 years and I suspect they will be giving Ford and GM an even bigger fight…. never mind a more US focused VW.

  • avatar
    Dynamic88

    I’d love it if this happened. I think it’s very optimistic, and I have my doubts but I’d love it.
    First, I’d just like to see an economy where 15 million cars are sold. 2nd, I’d like American made cars (and other products) to get a bigger market share – better for the US economy. Which raises the unpleasant but inevitable question – what’s an American car? The Japanese and Koreans could do a commercial spot of their own – the emphasis would be on the people who work at the plants, right here in the USofA who have jobs because of the Japanese or the Koreans. It’s time they stopped allowing themselves to be called “Foreign” when they have invested more in America than the D3 in the past few decades. This would be especially effective if they choose to solve some of their capacity problems by building new plants here. Finally, unless Toyhonda prices itself right out of the market (due to shortages) there just isn’t much reason for people to give the D3 a look. Sure, D3 offerings might be competitive, but why bother giving them a look when you’re perfectly happy with your CamCord?

    • 0 avatar
      geozinger

      “It’s time they stopped allowing themselves to be called “Foreign” when they have invested more in America than the D3 in the past few decades.”

      Do you realize how many of those “investments” are freebies from the (Southern) states that courted the “foreign” automakers? The state & local governments buy the land, put in the infrastructure and then give them tax abatements for 20 years in order to keep their interest. I think it would be pretty easy to “invest” if I got a lot of stuff for free.

      The domestics have been upgrading their plants, turning them green and zero landfill, new ones (and even old ones) have been turned to “flexible” plants, integrated with their own stamping facilities, etc., but no one notices.

      Toyota used to run commercials in my part of the midwest boasting about their 10 plants in the US. Big deal. GM alone could close 10 plants and still be four times larger than Toyota’s manufacturing presence in the US.

      • 0 avatar
        Truckducken

        Geo, are you sure about the last bit? I mean, Toyota sales in the US are not too far behind GM, are they? (Certainly not ‘four times’, unless perhaps quake-disrupted months are used as benchmarks.) And Toyota builds a pretty big slice of their product line here in the States, while GM certainly has its share of imports. So – if GM can do as you say, then what does that say for the efficiency of GM plants and workers? Something isn’t adding up. Please enlighten us!

      • 0 avatar
        geozinger

        @truckducken: Reread the last sentence of my post. I wasn’t referring to sales at all. The commercials I’m referencing were about Toyota’s manufacturing impact/employment in the States, and they ran in 2008-09, at least in my market (SWMI). I think GM currently has something like 55 facilities in the US alone, but that includes stuff like component/parts plants, which I don’t think that Toyota has or has only one or two in the US.

  • avatar
    DC Bruce

    The first thing that struck me about your post was the omission of Chrysler. The revamped Chrysler products (300, Durango, Grand Cherokee) are getting such enthusiastic reviews that I would definitely take a look at them. The 300 in particular, IMHO does a much better job of being a big domestic sedan than either of the competitive FWD products from Ford or GM. And with Fiat’s stable of small cars to complement Chrysler’s weakness in that area, the combination might be just right.

    Remember that both Chrysler and GM shed huge amounts of cost in their bankruptcies . . . Ford doesn’t have that advantage. GM seems to have some significant management issues that don’t plague Chrysler or Ford.

    So, I agree that the “domestic 3″ (if you want to count Chrysler) may, in aggregate take back some market share, but I’m not sure I agree on the allocation.

    And, I think fleet sales, while they put money in the company coffers, hurt the brand

    • 0 avatar
      DearS

      Gas guzzlers, They don’t seem to have a Focus/Civic fighter or a Camry/Accord fighter. Especially no good Hybrid. Chrysler may not stay profitable for long.

      • 0 avatar
        ciddyguy

        DearS,

        I think you missed the point made above, while they don’t have much to counter their larger vehicles now, but give them a year or two, and they will have more to offer, right now, the Fiat 500 IS on sale, even if in some markets, but it’s ON SALE and slowly expanding as new dealers open (true, a Fiat, but still, it’s associated with Chrysler in ownership), the Caliber I think is slated for one year freshening before it’s totally redesigned and will then be based on a Fiat chassis/drive train, but with an all new body and interior but made here FOR here/N. America.

        It may not be today, but it might be tomorrow is the operative thing here and I have my doubts about GM, not so much their products, but their top management and that could spell doom if they don’t make some changes to fix that, all the while, Chrysler may just beat them at their game.

        That said, I agree that the domestics’ growth will be incremental in the next few years, but the split may not be what what is said in this post.

  • avatar
    SV

    I have no doubt that Ford and GM will do well over the next 5 years. Whether they’ll be able to regain that much share remains to be seen, but you make a good case for it.

    The product is certainly there, and will only get better in the next year or two:

    GM and Ford are both strong on mainstream products; Fiesta, Focus, Fusion, and Escape are all doing well on the Ford side, while the Cruze is a hit and the Malibu and Equinox continue to sell solidly (the Sonic should do well once it’s out too). The only weak links on the car side are the fleet-queen Impala and Lincoln’s continued suck.

    Toyota and Honda are making little that looks compelling right now, but there is a new Camry coming up and Toyota MAY reverse the slide into cheapness with that one, especially since it’s getting a new platform this time and the new platform Camrys tend to be the nicer ones – compare the ’92 to the ’97, or the ’02 to the ’07, and you’ll see what I mean. However there’s also the new Malibu to contend with and the next Fusion, shared with Europe this time, is less than two years away, so I don’t think the new Camry will be able to make much of an impact.

    • 0 avatar

      I have no doubts that new Malibu and Fusion will be better than new Camry. I am saying that because in Europe you can compare Camry with Mondeo and Insignia and there is simply no comparision. I can hardly believe that Toyota is able to make quantum leap this time, it officially is the new Buick – preferred car for AARP members. I remember in 90s same year Accord or Camry felt like tinny boxes in comparison with Opel Vectra (which was not such a good car after all), Ford Mondeo and VW Passat. BTW nobody mentions VW – they may cheapen interior but platform itself is very solid.

      • 0 avatar
        charly

        You can’t compare a Camry with a Mondeo or Insignia in Europe because Toyota doesn’t sell the Camry in Europe.

      • 0 avatar
        DearS

        Camry is a great car. Toyota has only begun to flex it muscles. Insignia is too small, and new Malibu looks like a rework. Ford is going to push the new Mondeo over here soon and hopefully its reliable and well made. One thing about my generation is that I don’t believe they care much about country of origin, and they have the internet to look for opinions. Its an even match imo. Quality products and innovation will account for a lot imo. The new Focus and Sonata come to mind.

      • 0 avatar

        @Charly: That is exactly the point – Toyota was not able to sell Camry in Europe because it is so bad that cannot compete with Opel, Ford or VW. Toyota desperately tried to sell Camry in Europe for years. Avensis is rather compact car and cannot compete either. BTW I trust German comparison tests more because they know something about cars and how to drive.

      • 0 avatar
        charly

        Camry is a car made for America and not for Europe. it is just to big

      • 0 avatar

        It is good way of saying that it sucks. And now some expect miracle will happen and new Camry will beat Malibu and Mondeo. Only in imagination of some Americans. Camry is not big – it is perfectly midsize car – same size as Regal or Mondeo. Taurus is a big car – I agree on that but not Camry. And Taurus is US only. Camry is the world car. For big car Toyota has Avalon. Toyota tried but failed with Camry – there were even Camries with manual sold in Europe. Accord BTW also is not very successful in Europe too.

  • avatar
    Philosophil

    I wouldn’t write Chrysler off either. If they get a decent replacement for the Caliber, and get their promised B-Class Jeep together, they could make a good go of it.

    I think Hyundai and Kia will be big challengers in the next few years, but in the long run a lot will depend on how well their new direct injection and turbo engines hold up.

  • avatar
    Sinistermisterman

    Interesting article. I would love to see Detroit get back into a good position, I really would… but something just keeps telling me that the moment GM and Ford get comfortable again that ‘the old way’ of doing things will creep back into everyday operations. I know I was harping on about it the other day, but the latest problem with the 6 speed MT82 transmission in 2011 Mustangs seems to be a case in point. Ford haven’t even acknowledged that a problem exists and merely seem to be swapping in a new faulty transmission for every one that fails.

  • avatar

    five points of market share increase? hmmmm…

    Return to Greatness.

  • avatar
    RGS920

    If Chrysler/Fiat were to die it would be a certainty.

  • avatar
    Educator(of teachers)Dan

    “Detroit now just needs to convince those American consumers that won’t consider a Detroit product that it’s time to take another look. You can’t sell a Detroit product to a buyer that doesn’t put a domestic product on the shopping list. And here’s my idea of how Ford and GM can accomplish that – put a human face from within their respective companies (like a vehicle designer, an engineer, a factory worker, and a believable senior executive) to come out and ask for consideration in a series of TV spots. No pitchmen, no fancy graphics, just the speaker, the product, and the brand logo. Focus on some attribute of the product that makes it worthy of consideration. Then add the spokesperson’s contribution to making it a great product. No need to dismiss the competition. All that is being asked for is to take a look.”

    That’s the best (non-education) idea I’ve heard in months.

  • avatar
    Robbie

    Right now, Chrysler, GM and Ford do well based on having had serious government help, and they are surely doing fun things with it. Their subsidies allowed them to develop some nice new products, and turn a profit in a good market. However, nothing truly fundamental has changed, and I predict a slow decline after an initial renaissance of the Big 2.5.

    Five extra percentage points is not a Herculean task for Detroit – it just requires producing without profit, which may be the choice that Detroit will once again make.

  • avatar
    SunnyvaleCA

    “Long time TTAC readers will also remember my call to buy Ford’s stock in April 2009 when it was trading in the three buck range.”

    I remember it well. Thank you! Unfortunately, you forgot to mention “and don’t sell when it hits $8… wait for $15.” I’m not complaining about 2.5x gain in 5 months, though! :-)

    As for 15 million cars / year, I’m having a hard time believing the industry could reach and sustain that level. Here are the main items I think will hold total new car sales down:
    * Cars are longer-lasting than ever before, so people can use them longer or they can go through a larger number of owners.
    * Higher fuel costs mean less driving in general, so cars will wear out more slowly.
    * Fewer people are excited about cars. They are appliances in the minds of most. You run an appliance until it wares out, which is a much longer time than running a car until you are merely bored with it.
    * Services like Zip Car mean more people can go without full-time car ownership.
    * As mentioned in others’ posts above, the economy is likely to stay down for years. Conspicuous consumption is out. Giving the appearance of “living within your means” is an upcoming trend.

    GM+Ford may indeed capture 40% of the USA market. I just don’t think that market is as high as 15 MM cars.

  • avatar
    Trend-Shifter

    One thing that is not mentioned here is the impact of legacy beater cars…seriously! (Murilee would smile!)

    It used to be that most second vehicles and beater vehicles were old Merican cars. From that you get all the comments about owning a crap car with everything falling apart. You see them in droves with beat up body work, rust, and dangling mirrors. Yep, Merican cars must suck even though their owners more likely brought on their fate.

    Now we have a new fleet of second cars and beater cars with different name plates. Some of these name plates are more expensive to repair and need more regular maintenance such as timing belts.
    So now we got a whole new crop of growing discontent with previous golden child name plates at this lower end of the spectrum.

    The people in this segment were typically younger and now will be coming into their own and want a new car. The Toyota and Honda price premium and loyality is eroding. I would say the future name plate of this segment is now wide open. That should be good for 5 percentage points.

    perception = reality

  • avatar
    ajla

    So how is the G8 treating you Ken?

  • avatar
    bufguy

    Don’t count the Japanese out. The Accord and Camry are at the end of their cycle. Fusion is relatively new, facelifted Malibu coming soon. The Camry and Accord just may leapfrog the domestics.

    • 0 avatar
      PenguinBoy

      Agreed, the Japanese may leapfrog the competition with the new Camry and Accord – but I don’t think that’s too likely at this point.

      The latest refreshes of the Corolla and Civic seem underwhelming. These are the cars on which Toyota and Honda built their reputations – yet it seems they are no longer class competitive with the Focus, Cruze, or Elantra.

      When the all important C segment cars that are sold worldwide get a lackluster refresh, what would lead us to think that the North America Focused / North America Only Camry / Accord will be any better?

      It seems to me that Tokyo in 2011 is starting to look a lot like Detroit in 1981. Japan Inc. seems to be coasting on it’s reputation at this point.

      But you’re right – a lot can change in a hurry so it wouldn’t be wise to write anyone off yet…

  • avatar
    don1967

    Good short-term call on Ford stock, Ken, but don’t pat yourself on the back too hard. In March 2009 pretty much every stock on the planet was a screaming “buy”.

  • avatar
    jpcavanaugh

    I have some concerns about the GM side of your outlook. Is GM’s management any better than it was in 2007? Like him or not, GM is riding the crest of Bob Lutz’s new product wave. It is my concern that the pipeline is not going to look as good as what we are seeing now.

    Everything I have read coming out of GM is about cost-cutting. Layoffs of engineers, shuffling of product development heads, this tells me that GM is on the verge of repeating some old product mistakes. The bankruptcy bought them some breathing room, but I remain underwhelmed by their current management and direction. My prediction is that GM is going to struggle to stay where it is, particularly vis a vis a stong Ford and a resurgent Chrysler.

    I have said many times here that I like Chrysler’s trajectory better than I like GM’s. Chrysler seems to be a very well managed company right now, that has done a lot with very little. With Fiat’s backing, I think that Chrysler has a fighting chance. But it will need to soldier through this period of high gas prices until some small cars hit the showrooms. If Chrysler can fill out its line in the next 5 years that are as appealing as their current new stuff, GM is going to have some problems on its hands.

    • 0 avatar
      PenguinBoy

      Agreed on the improvements at Chrysler. The trucks, vans, LX cars, and Grand Cherokee / Durango all seem to be class competitive or better now – an impressive improvement in a short time.

      They still need new products in the C and D segment – especially with gas prices rising. This is where the partnership with Fiat is likely to work out a lot better than the Daimler alliance.

      Chrysler’s brands are severely damaged at this point – the reputation for “Extra Care in Engineering” is long gone. The good news is Sergio and Ralph Gilles seem to acknowledge this problem, are taking steps to address it. With good products and customer service the brands can be fixed – look how far Hyundai / Kia have come in just a few short years.

      Chrysler is hardly out of the woods, but it would be premature to write them off. As I’ve posted before, it wasn’t that long ago that many had written Apple off…

  • avatar
    PenguinBoy

    An interesting post, and plenty of insightful comments.

    A couple of Bertel’s posts have indicated that the Japanese don’t consider the Americans to be serious competitors – they are more worried about the Germans and Koreans. This arrogance will help the Americans as the Japanese won’t be seriously defending against a Detroit resurgence.

    North America may well be the most important market for the Japanese – the JDM is small, they are pretty much irrelevant in Europe, and they don’t seem to have as much traction as GM and VW in China – so you would ~think~ they would be watching the domestic competition very carefully, rather than dismissing them out of hand…

    • 0 avatar

      The Japanese would consider the Americans as a threat, along with Korea and Germany, if only so many of the cars produced by the “resurgent” American auto industry weren’t rebadged Korean and European cars…

      As it stands, I’ll bet the Japanese are focusing all their efforts to combat Korea and Germany, while letting the Americans stumble down the path to ruination all by ourselves. That’s proven to be a safe bet in the past, and surely will be again.

      • 0 avatar

        “while letting the Americans stumble down the path to ruination all by ourselves”

        How true it is! We met enemy and it is us and our own government!

      • 0 avatar
        John Horner

        “As it stands, I’ll bet the Japanese are focusing all their efforts to combat Korea and Germany, while letting the Americans stumble down the path to ruination all by ourselves.”

        Perhaps the US should look at adopting some of the education, health care, trade, industrial policy, taxation and military spending policies of Korea and Germany.

  • avatar
    Mike Kelley

    Here is a good article about the US taxpayer bailout of GM: http://www.theatlantic.com/business/archive/2011/05/gms-bailout-has-been-a-huge-net-loss/238795/

    • 0 avatar
      MikeAR

      I’ve posted that before. it’s a good article but it won’t change minds. The pro-GM crowd here verges on religious fanaticism when it comes to defending the bailout. They would launch their own Inquisition against us heretics if they could. It’s a combination of self-interest and politics. The more indefensible their position, the harder they fight to defend it.

      • 0 avatar
        mike978

        The anti GM bailout crowd is equally fanatic. You regularly show your bias against Government, GM, Chrysler (less so for some reason – even though it was helped by an expedited bailout and is now foreign owned – maybe that pleases you).

  • avatar
    mikey

    @ MikeAR….Okay I plead guilty to the fanatic charge. Yeahhhh…the “self-interest” part, okay you got me.

    Politics? not so much.

    • 0 avatar
      MikeAR

      I wouldn’t include you on the politics, I don’t know where you stand politics wise and I like it that way. But you have to admit that politics plays a part for several posters here.

      For what it’s worth, I don’t think you would participate in the Inquisition either.

      • 0 avatar
        mike978

        So you invalidate your own initial comment (below) by now admitting that some like Mikey wouldn`t launch an inquisition. You tarred everyone with the same brush. Incorrectly.

        “The pro-GM crowd here verges on religious fanaticism when it comes to defending the bailout. They would launch their own Inquisition against us heretics if they could”

        Also to talk of inquisitions, it is you who wants in 2013 investigations and legal proceedings against administration officials and GM. Pot calling the kettle black I think.

      • 0 avatar
        MikeAR

        Mike978, you show where you stand by the order in which you named the targets of my criticism. Protecting the government from any criticism or scrutiny is your primary cause I think. Mikey shows some sense of humor and manners when he posts about GM, lots of people here don’t on both sides.

        As far as investigations go, the amount of criminality in the bailouts will have to be looked into at some point so the country can learn and never repeat anything like that again. The auto bailout was only a small portion of the problem but it should be throughly investigated and people punished.

  • avatar
    Mike Kelley

    The US is now officially a toxic place to do business:http://online.wsj.com/article/SB10001424052748703730804576317140858893466.html
    Now our government wants to prevent companies from expanding to states that are friendly to business. This will just speed the exodus overseas of course.

    • 0 avatar
      gogogodzilla

      Ain’t that the truth.

    • 0 avatar

      There might be several possibilities. One is that current White House is anti-business in its essence. But if it was so then how GE prospers and GM and others big to fail get bailed out at expense of Main street?

      Second explanation might be Obama and his team is anti-American and so wants dominance or even monopoly of Airbus. I find it difficult to believe it unless American government is a secret agent of European powers what sounds very unlikely.

      Third possibility is Obama and his advisers decided to force Boeing into bankruptcy and then bail it out and make it government run company just like they did with GM. Government when grows wants to take more and more controls over economy. There is nothing new in this statement – it happened many times in different countries. But then house of cards comes down and companies get privatized or simply liquidated.

      And finally it would be that Democratic party is simply bribing Big Unions so union leaders bribe them back during next elections with large contributions.

      IMO the last one is the most likely reason. But I also suspects that deeply in his heart Obama and his ilk hopes Boeing going into bankruptcy to nationalize it (and the same is true about private health insurance companies). They may believe that European socialism is only way for America to be globally competitive. As we can see Government run companies not burdened with health insurance and pensions like Airbus have an advantage over Boeing and out-competing it. And also Europeans have a guaranteed high quality health care (but not for illegal immigrants!).

      But these tactics may backfire during elections. Unions are for Obama and Democrats without reservation, not matter what they do, I cannot imagine them going and voting for Republicans just because Obama let Boeing to open factory in southern state. But independents may be turned away by repeated government interventions into decision made by private companies.

  • avatar
    wsn

    Ford is on a positive trend now. But a trend can reverse. Just like A.M.’s Boeing.

    Same with GM, realistically, what changed at GM? Is the new management better than before? Product better? How are the new trucks more competitive than previous trucks? How are the cars better? I just don’t see it.

    If anything, the crude oil price will stay high. So much printed greenback is going to have a lasting effect. In that case, the total market share of Detroit will shrink further. Maybe 40% for all three in ten years.

  • avatar
    tekdemon

    You might have been right about Ford stock (unfortunately I didn’t read TTAC back then or maybe I’d be a rich man!) but GM has been missing their retail market-share targets left and right and while Ford has improved their lineup that boost is temporary-now that they have their new products out in 2015 a lot of their lineup won’t be quite as fresh. The problem isn’t so much that they’re not doing a decent job it’s that the market will only get even more competitive by then and with more players in the game everyone’s slice is likely to get smaller.

    • 0 avatar
      John Horner

      “The problem isn’t so much that they’re not doing a decent job it’s that the market will only get even more competitive by then …. ”

      I wonder about that. Toyota and Honda have not exactly been covering themselves in glory with many of their most recent redesigns. In many ways the current generation products from both companies are less desirable than were the preceding designs.

  • avatar

    I’m not sure where the “product onslaught” that you write about relative to GM is coming from. It’s pretty well documented that the next couple of years are pretty dry product-wise from GM.


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