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2007: the Year of the Import

U.S. Consumers Turn Away from Detroit

By Joe Benton
ConsumerAffairs.com

February 8, 2007

• States Want Stronger Used Car Rule • Industry Troubles Cloud LA Car Show • Carmakers Get Neither Love Nor Money From Congress • Taxpayers Headed For Automotive Bailout • Time May Be Running Short for U.S. Carmakers • Feds Move Closer to Carmaker Bailout • New-Vehicle Buyers Turn to the Web in Record Numbers --- • More about Auto Sales ...

2007 may go down as the year that the Big Three automakers fall below 50 percent of sales in the U.S.

As car and truck buyers continue to turn away from Detroit, imports are capturing a bigger share of the market than ever before. Most dramatic are Ford's falling fortunes. Ford sales have fallen behind Chrysler, dropping the stories automaker to fourth place.

Ford is cutting costs drastically but may not be able to do so fast enough.

In the latest round of cuts, more than 8,000 U.S. hourly workers left the struggling automaker in January with buyout offers, according to Ford.

The latest round of buyouts at Ford are part of the effort to restructure in the face of record $12.7 billion losses. Ford executives say the massive restructuring effort is on track and on time with plans to cut costs and improve the Ford vehicle line-up by the end of the decade.

In all Ford will close 16 plants and eliminate up to 45,000 jobs as the automaker’s downsizing continues. Roughly 38,000 union workers have accepted buyout offers and Ford plans to cut thousands of salaried workers.

The downsizing at Ford is emblematic of the U.S. auto industry's plight as GM fights to turn a profit and Chrysler plans thousands of layoffs.

Imports Rule

And here come the imports. Imported auto brands reached a record high of 49.4 percent of U.S. sales in January, according to the latest industry figures.

Import sales could cross the 50 percent mark in U.S. market share as soon as March.

High fuel prices over the last year have helped drive sales of fuel-efficient vehicles from abroad. While fuel prices have declined recently, another spike as the summer driving season approaches will likely provide more demand for fuel-sipping imports.

The traditional Big Three have maintained their edge as the biggest sellers of cars in the U.S. by relying on fleet sales, especially to rental car companies and other corporate buyers. But all three are cutting back on fleet sales because of the thin and sometime non-existent profit margins they offer.

When measuring only retail sales to consumers, the Big Three are already close to losing the fight for U.S. car buyers' hearts and wallets.

The distinction between imports and U.S. brands is more muddled than ever with U.S. automakers' parts produced around the world and even the Big Three assembling many of their cars in Canada, Mexico and South Korea.

At the same time, Asian-based automakers sold nearly 4 million vehicles that came off North American assembly lines in 2006.

While U.S. car buyers look to overseas brands for a majority of their car and truck purchases, Detroit is focused on trying to cut costs and return to profitability. That means dropping money-losing products and reducing market share.

While the U.S. market is important to every automaker in the world, it is most important to the Detroit auto companies. Without the support and loyalty of U.S. consumers, Detroit's market share is certain to continue to decline until the Big Three become the Big Two. Or maybe just the Big One.

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