U.S. turn to play odd one out ?

Charles Brown CharlesB at SPAMCNCL.ci.detroit.mi.us
Thu Jan 11 09:24:01 MST 2001


Only U.S. carmakers cut output
Foreign rivals see better days, spelling bad news for Detroit

By Daniel Howes and Bill Vlasic / The Detroit News


"More ominous are Chrysler's clear hints of financial distress, permanent plant
closings and job cuts. "


    DETROIT -- Every automaker at this year's North American International Auto Show
agrees that the hot U.S. vehicle market is slowing, a victim of higher interest rates,
more expensive fuel and declining consumer confidence.
   And virtually every car maker predicts it will grab a bigger share of the estimated
16 million to 16.5 million cars and light trucks that Americans are likely to buy this
year, down from the record 17.4 million in 2000.
   Some automakers will turn out to be terribly wrong in their expectations because
not everyone can gain ground in a declining market. The disconnect between
expectations and reality are especially important to Detroit's automakers.
   General Motors Corp., Ford Motor Co. and, especially, DaimlerChrysler AG's Chrysler
Group are responding to the unmistakable slowdown by ordering production cuts and
predicting softer profits in the first half of 2001. More ominous are Chrysler's clear
hints of financial distress, permanent plant closings and job cuts.
   So far, foreign rivals aren't reacting the same way. Toyota Motor Corp. expects to
increase first-quarter North American production by 2.6 percent.
   Daewoo Motors Corp. estimates a doubling of U.S. sales this year. Mitsubishi Motors
Corp., now a partner with DaimlerChrysler, will boost production to match an expected
rise in sales.
   "We will be a little bit above last year," said Yoshimi Inaba, president of Toyota
Motor Sales USA, in an interview this week.
   "We're looking for a small volume increase. I think we will keep our production and
incentives very constant. You won't see any change."
   The Europeans are no less bullish. BMW AG and Mercedes-Benz, which now outsell all
Detroit luxury brands in the United States, predict sales will continue their upward
surge. And Volkswagen AG says sales in North America should grow as much as 10 percent
from the 567,728 cars and light trucks it sold last year.
   Home market shrinks
   The seemingly divided assessment of prospects for the North American market
portends tougher times ahead for Detroit's automakers, who began this year with the
lowest collective share of their home market than any time in history. Should their
foreign rivals deliver on their promises, Detroit's slide will continue.
   This year is shaping up to be a year of change for Detroit's automakers, especially
GM and the ailing Chrysler. A key question is whether the products Detroit is touting
at this year's auto show really will be as hot as promised.
   Ford is cutting first-quarter production 17 percent, but vows to grow its market
share and profits thanks to steady cost-cutting as others struggle. The Dearborn-based
automaker argues its products are holding up better than its cross-town rivals and
that its financial position is far more stable.
   GM, which is undergoing a major restructuring, is trimming production 21 percent,
scrapping its Oldsmobile line and will cut 10 percent of its salaried workforce.
   The most serious surgery is likely to come at Chrysler, not too long ago considered
the industry's most profitable automaker. Chrysler President Dieter Zetsche, who
already slashed production 26 percent, is set to announce a sweeping restructuring
that likely will shrink America's No. 3 automaker in a quest to return to
profitability.
   Zetsche signalled to analysts Wednesday that Chrysler was considering using more
components from Mercedes-Benz and partner Mitsubishi Motor Corp. to lower Chrysler's
costs. And he said Chrysler may shift more small-car production to Mitsubishi.
   'We're not panicking'
   Detroit's automakers "are losing market share and the foreign competitors are
gaining market share," said Wolfgang Bernhard, Chrysler's chief operating officer.
"We're not panicking -- we're preparing our strike back."
   GM executives, striking a perennially optimistic chord, predict a market surge for
2001, powered by the first of 40 new vehicles that will be launched between now and
2003. This year, GM will launch three new mid-sized sport-utilities, a Saturn compact
SUV and a Chevrolet sport-utility pickup. The automaker is ramping up two new
heavy-duty pickups, too.
   "There is downward momentum in the market, no doubt about it," said Ronald
Zarrella, president of GM North America. "We're very well positioned in trucks. In
every segment, we're in the position to dominate."
   Yet it was in small cars, where profit margins are razor-thin, that accounted for
the largest slide in GM's share slide. "The Koreans picked up share on the low end,"
Zarrella said. "Most of us can't afford to chase them down there -- and won't."
   Nasser remains upbeat
   To be sure, optimism varies among Detroit's auto bosses -- as do the challenges
facing their individual companies. Ford President Jacques A. Nasser said the No. 2
automaker can weather almost any downturn because of its growing selection of brands,
new products in growing segments and a strong balance sheet.
   "The market dropped very quickly and I think the suddenness of the change is more
significant that the change itself," Nasser said. "We are going through a transition
adjusting to the sudden drop in economic activity."
   Assessments of the strength -- or weakness -- of the U.S. economy are changing
weekly, sometimes daily. With that, come reappraisals by auto executives, whether they
sit in Detroit, Tokyo or Munich.
   "If we keep talking into the early selling season about crisis, we may create a
crisis," said Helmut Panke, BMW's chief financial officer. "It's all about psychology.
The U.S. economy is basically sound. We're seeing a normalization here and we should
live with it."






More information about the Marxism mailing list