Face it: the glory days are gone for General Motors, Ford and the Chrysler Division of DaimlerChrysler. Japan will soon surpass Detroit as the world's auto capital. While Japan's top three automakers are likely to report mixed financial results for the latest quarter, they're almost certain to achieve major long-term growth.
The success of Toyota, Nissan and Honda illustrates the movement of auto industry leadership from West to East.
GM is now in the business of assigning blame. The latest target is health care. GM, the largest private health insurer in the nation, says it faces a "crisis" because of ever-increasing health care costs.
General Motors reported its worst quarterly loss in 13 years this week. You can talk about health care but it's also clear that GM's line of trucks and over-sized SUVs is not producing the profits company executives anticipated and sales of its newly designed cars are a major disappointment.
There was a time when half of the cars sold in the U.S. were manufactured by GM. Just a generation or two ago, consumers waited eagerly for dealers to unveil the latest GM models. Those were the good old days.
Today, GM commands a 25 per cent market share, roughly half what it was a generation ago. GM's financial picture has deteriorated significantly from just a year ago, as it swung from a profit of more than $1 billion for the first three months of 2004 to a loss of more than $1 billion for the same period in 2005.
Ford Motor Company, despite strong sales of its new Mustang is not covering Detroit with glory either. Ford reported a 38 percent drop in first-quarter earnings due in part to falling U.S. sales and rising costs.
While Ford's earnings were higher than Wall Street had expected, the company said it would not turn the profit in the second quarter that Wall Street is expecting.
Ford said that for the second quarter, the company expects results to range from a loss of 15 cents a share to break even. That will be well below analyst estimates of a profit of 39 cents a share.
A World Away
Japan is a different story. Life isn't perfect for Japanese automakers, with the top three automakers are expected to report a mixed bag of financial results for the latest quarter.
But unlike Detroit's marques, Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. are almost certain to continue producing major growth. Nissan, Japan's second-biggest carmaker, predicts it will beat its target of selling 3.6 million vehicles globally in the 12 months ending in September 2005.
Besides enjoying a growing market share, Japanese automakers and employees are provided with a health care subsidy by their government -- while in the U.S., Detroit automakers are suffering from declining market share and ever-rising health care costs, which contributed heavily to GM's $1.10 billion net loss in the first quarter.
GM spent $5.2 billion in 2004 to provide health care to about 1.1 million employees, retirees and dependents. The company suggests that the bill might rise 7.7 percent to $5.6 billion this year. That amounts to approximately $1,525 per vehicle before GM even begins to manufacture anything.
Before health care gets all the blame for GM's financial woes, it's important to look, at least briefly, at other factors, chiefly marketing and design.
GM insists its next-generation SUVs and pickup will produce big-ticket profits despite record high gasoline prices. If gas prices hit $3 a gallon, filling up a 26-gallon Cadillac Escalade SUV would cost $78.
GM claims that consumers who buy full-sized SUVs don't care as much about high fuel prices as other buyers, but the slumping sales of the last few months lend little credence to this assertion.
GM promises its next-generation SUVs and pickups will show significant fuel economy improvements with cylinder deactivation and hybrid systems that will mitigate higher fuel prices with improved fuel economy, but so far all it has done is crush -- literally -- the EV1, the popular electric car it developed.
Then there's marketing. GM's major brands -- Chevrolet, Buick, Pontiac, Saturn, Saab -- leave much to be desired. Buick and Pontiac sell poorly and present the stodgiest possible image. Saturn and Saab have their fans but neither is selling well.
The company was certain its newly-designed Chevrolets would sweep the market this year but those hopes have come to little.
For years, General Motors has enjoyed healthy revenue despite shrinking market share. The latest disastrous financial results have proven analysts' repeated warnings that America's largest automaker and one of its industrial icons was whistling in the cemetery.
