Detroit's Silver Lining
Things are bad for Chrysler, Ford and GM. The Big 2.8 are burning precious cash, shedding valuable market share, choking on unwanted trucks, attempting to nurture (or excise) damaged brands and outmoded models, and struggling to bring relevant products to market. Bankruptcy looms large. And yet, there’s a silver lining to the recent, calamitous downturn in the U.S. new car market. But before we reveal the sliver of hope, let’s check in with the main engines of their destruction: Honda, Nissan and Toyota…
For Toyota, whose annual profits are more than twice GM’s entire market capitalization, the American consumer’s switch from light trucks to lighter cars is extremely annoying.
After investing some $2b in a brand new pickup truck plant in Texas, ToMoCo had to slash prices to the bone to move the metal. Now that their sales target is a cruel joke, they’ve backed off on discounting. Sales are sinking fast. Although Toyota’s still selling over 100k Tundras per year (at current rates), the plant was designed to build more than twice that amount.
As ToMoCo shuffles and “right sizes” production, the prescient addition of Camry production in Subaru’s space is paying off in spades. The “extra” capacity has allowed an increase in U.S. rental sales. Even so, the increase in total sales means the fleet percentage is well under 20 percent for the Camry/Corolla, which bodes well for maintaining the vehicles’ re-sale value (historically what kills fleet-queens).
In this not-so-brave new market, Toyota’s biggest obstacle to further growth is structural; they can’t build popular models fast enough. The vehicle that best exemplifies gas-sipping, the Toyota Prius, can’t be constructed in anything other than a purpose-built (or highly modified) assembly plant. Equally important, battery suppliers must expand to meet the demand. Back when Toyota announced a target of over 200k Priora per year, there was talk of them being too ambitious. Turns out, they weren’t ambitious enough.
If the pickup truck debacle dented Toyota, it gutted Nissan. Even matching mad pricing only moved 80k Titans last year. With the ’08 numbers plunging off a cliff, Nissan is looking to get out of big-truck building (sourcing the Ram, if Chrysler’s still around). Meanwhile, the company’s juggling output to keep their factories busy. This is the first major market downturn since Nissan merger with Renault; it’s time to find out if they can thrive in adversity.
The biggest issue Nissan faces in the U.S.: a lack of “first choice” vehicles. The Quest is off most minivan buyers’ radar. As good as they are, the Altima/Versa are on the tip of no one’s tongue. The Murano, one of Nissan’s only “stand out” vehicles, is slumping badly. The model’s thirst, extra size (without a compensatory third row) and cannibalistic smaller sib (the Rogue) have done it in.
So, while a truck-liberated Nissan will have the production space to grow, there’s not much hope for growth in the near future.
Right now, Honda is the only major manufacturer increasing U.S. sales over last year– by about five percent. Offering a small-car heavy line-up has helped their bottom line. But so did limiting large vehicle production.
Last year, Honda changed over one line from making Pilot/sized vehicles to Civics. That left them with a natural cap of around 200k Pilots, Ridgelines and MDXs, and a similar limit on Odysseys. If the Odyssey outsells the Dodge Caravan this year, it will be a result of the Caravan falling (which it has been), not increases on Honda’s side.
All this shuffling freed production space to increase the sales of Civics, Fits and CRVs. The Accord is selling well enough, but there is a natural “cap” of about 450K. Given strong TL and Inspire (JDM US-style Accord) sales, they may not reach that. The limit on Civic sales are much higher; half a million would not be a shock.
Even better, Honda is getting ready to open a new assembly plant in Indiana. While it has been listed to build Civics, it may directly or indirectly allow higher Fit sales. Even with a new plant online, Honda’s U.S. sales cannot get much above two million units per year without even more investment and time.
The good thing about this market-share-loss is that it’s mostly relative. Chrysler, Ford and GM have too many factories for what they sell, but they are also the only companies that could fill the gap if/when one of them shuts down.
And there’s your silver lining. Assuming Chrysler's the first to go, assuming the American market doesn’t contract even more violently than at present, Ford and GM will be uniquely positioned to increase production to take-up the sales slack; which could be measured in hundreds of thousands. No one else has the necessary plant capacity. Last man standing. Dead cat bounce. Silver lining. Take your pick.
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- Oberkanone Installing immobilizer is the answer. It's not hard. It's not expensive.
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- Dukeisduke I saw a well-preserved Mark VII LSC on the road not too long ago, and I had to do a double-take. They still have a presence. Back when these were new, a cousin of mine owned an LSC with the BMW turbo diesel.
- Dukeisduke I imagine that stud was added during the design process for something, and someone further along the process forgot to delete it after it became unnecessary.
Anybody looked at any of the decaying Detroit picture websites? Sort of parallels the American auto industry. Wonder if a person could tie the poor choices of the industry and the fickle nature of the American consumer to the decline of Detroit. America is too temporary... They'll take old Detroit and tear it down and someday replace it with more sprawl - fast food joints, malls, strip malls, and big box retailers surrounded by suburbs after suburbs and all that history will be lost. Shame we can't be more creative to save it and put it to use. If the American auto industry fails too or simply moves out of the USA entirely there will be many, many more buildings like this. I want a domestic vehicle but few classes of vehicles that interest me are made by the big three. Last time I wanted a small wagon and went to Honda b/c Detroit had quit them. This time I want a small wagon or hatchback and I can't get any closer than Volvo or the Astra to Detroit's bank accounts.
Yes I have, busbodger. It makes me sad. Remember dodge main? They cast crankshafts and stamped body panels there! Had their own phone system too. Alot of history is down the memory hole.