> Can Detroit Stop Its Slide in 2008?
 

BusinessWeek Jan. 3, 2008

For Detroit, 2007 was a bad year, and forecasts indicate 2008 could be even worse. Still, the outlook is not all bleak.

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Brand-new Ford cars and trucks are seen at a Ford dealership Oct. 2, 2007, in Colma, Calif. Justin Sullivan/Getty Images

As expected, Detroit ended 2007 on a miserable note, seeing combined light-vehicle sales for domestic automakers slip 7.1%. And, also just as expected, executives from General Motors (GM), Ford (F), and Chrysler are predicting brighter days ahead for 2008. What makes them think that the new year will be any better than the old?

In fact, there is a distinct possibility that 2008 could be even worse. For instance, Edmunds.com forecasts U.S. light-vehicle sales of about 15.9 million in 2008, down from 16.1 million for 2007, said Jesse Toprak, executive director of industry analysis. That would make 2008 Detroit's worst year in a decade.

A Glimmer of Hope:

So how bad was 2007? GM reported on Jan. 3 that its sales were off 6% from 2006, to 3,822,612, according to Autodata in Woodcliff Lake, N.J. Ford sales fell 8.9% in December, to 210,872. For 2007, its sales fell 11.8%, to 2,558,553. Chrysler sales were down 3.1% for the year, to 2,076,650, even though its December sales were 0.5% ahead of the year-ago month, at 191,423.

Meanwhile, Toyota (TM) passed Ford for the full year for the first time in 2007, to become the No. 2 volume seller in the U.S. market. Toyota Motor, including its Toyota and Lexus divisions, had record U.S. sales of 2,620,825 vehicles in 2007, up 3.1%.

And yet, while much of their optimism deserves to be taken with a grain of salt, based on the results of the last few years, Detroit's Big Three have some plausible reasons for at least a little genuine hope.

For starters, the Detroit automakers were able to off-load billions of dollars in liabilities to independent retiree health-care trusts, as part of new contracts with the United Auto Workers. The hope is that not only will this help the automakers get their financial houses in order but also, more important, be able to apply many of those billions toward designing more competitive cars and trucks in terms of styling and quality, as well as developing alternative fuel technology.

There are plenty of indicators that Detroit is becoming increasingly capable of going mano a mano with the imports in the critical light-vehicle segments. Several new models—most noticeably, the Buick Enclave, Saturn Aura, Cadillac CTS, Chevrolet Malibu, Ford Edge, Lincoln MKX, and Jeep Wrangler Unlimited—have been both critical and commercial successes.
Trimmer Operations

In addition, Detroit is better prepared for weaker demand than they have been in previous downturns, with lower costs due to fewer factories and fewer jobs. They also have lower inventories of unsold vehicles and fewer unprofitable sales to daily rental fleets.

For instance, Ford said in a review of 2007 that it has cut its U.S. hourly workforce by 23,100 positions and salaried workforce by 7,600 jobs, and reduced its manufacturing capacity by nearly 1 million units since the end of 2005. Jim Farley, group vice-president for marketing and communications, said that Ford Motor's yearend inventory was about 533,000 units, down from 570,000 a year ago, or 733,000 two years ago. "Very few companies would have been as courageous as we have been, but we have stuck to our guns," he said.

Mark LaNeve, North America vice-president in charge of vehicle sales, service, and marketing for General Motors, said GM cut its sales to daily rental fleets by 108,000 vehicles in 2007 to about 596,000. He said not counting fleet sales, GM's retail sales gained 1.5% in December.

If there is one hope shared by Detroit executives and shareholders alike, it is that 2008 will be the bottom of the slide. At this point January, 2009, seems a long way off, but maybe by then their optimism will start sounding a little less like wishful thinking.

Jim Henry is a reporter covering the automotive industry and automotive trends in BusinessWeek's New York office.

If you can't compete, litigate.
 

The American car companies stubbornly refuse to take the bold steps necessary to meet consumer concerns, and Goverment regulations, regarding fuel economy.

Instead of building good, reliable, fuel efficient vehicles, they for years have chosen instead to concentrate instead on peddling unreliable, poorly constructed, problem prone, huge gas guzzling SUVs, Pickup trucks and muscle cars.

At the same time lobbying in Congress and suing in Court to fight and resist fuel mileage standards, rather attempting to meet them, while knuckling under to greedy, stubborn autoworker unions that follow a scorched earth policy in contract negotiations.

Now the chickens have come home to roost, and at this point, I say let the chips fall where they may, let Darwin's theory take over.

I daresay I am probably not alone in this thinking, judging from the votes many Americans have made with their pocketbooks on this subject.



Note: Until I bought my Mercedes 12 years ago, I was a die hard American car fan and owned nothing else..

They also have the burden of providing benefits to a legion of retirees. I read somewhere (in a galaxy far, far away) that the Big 3 pay something like 4x what the Japanese carmakers in America pay in retirement benefits PER EMPLOYEE. That's gotta hurt. It has something like $3K to a car (same galaxy).

How is 20 mpg outstanding?
 

I bought my first MB in '91, and will likely always be an MB owner and driver.

How can 20 mpg HIGHWAY, be touted as so outstanding in the Howie Long /Chevrolet pick-up commercials?

I am of the opinion that great fuel mileage starts @ 30 mpg and up, for any vehicle that usually just transports it's occupants.

I LMAO, when Detroit releases HWY mpg of only 30 mpg for these new smallish automobile releases.

Wake-up Detroit......it's 2008!

The buying public, entering an American showroom, has consistently walked right past the Focus to drool all over the F-150 and Explorer. Back when gasoline was 'only' $1.98/gallon, Ford couldn't build them fast enough. Same story, different badges for GM and Chrysler products. Oh, and you could not give away a 4-cylinder engine when people keep asking "Hey, does that have a Hemi in it?"

Face it, the buying public still wants 5,000 pound, earthmoving SUVs, and no such vehicle will ever get 35mpg, no matter who writes the standards!

Congress could add taxes to make the price of gas $10.00/gallon, and use the surplus revenue to fund something else that needs funding. When this happens, you won't need Congress to raise fuel mileage across the country, a lot more people will demand smaller and more fuel-efficient cars. Believe me, with that kind of demand, Detroit will build them smaller, too.

Well, they first and foremost have to run a business. When you're up to your a** in alligators, you may forget that you wanted to drain the swamp.

Although the news is all about the economy being bad now. I'm pretty sure we really don't want an economy where the "Detroit" auto manufacturers have just disappeared.

Americans always vote with their pocketbooks. That's why we have McDonald's, Wendy's, Target, Wal Mart, etc. You take your pick, and take your chances.

There are some who would say that Mercedes is guilty of "...peddling unreliable, poorly constructed, problem prone, huge gas guzzling..." cars.

All of the above is just my opinion, my point of view, and is worth up to $0.02.

Jim H.

LMAO!!!

Come to think of it........where is that Chrysler commercial, with that doofus guy asking; "Does that have a HEMI in it!?":)

China and India have the world's fastest growing economies and are the only two countries each with over a billion people and are stepping up their auto production.

http://i.n.com.com/i/ne/p/2007/Audi-...te-550x389.jpg
http://i.n.com.com/i/ne/p/2007/Audi-...ia-421x595.jpg
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The first Audi A6 cars produced at the company's new production plant in Aurangabad, India, have rolled off the assembly line and been delivered to their new owners, the company announced Thursday.

"It takes five work cycles of 90 minutes each to build the Audi A6 from its roughly 2,500 parts," according to an Audi statement.

Not entirely accurate. The SUV was born out of fuel efficiency requirements under Carter's administration. Trucks had been excluded, so Detroit developed the SUV. People bought it because the SUV was brilliantly marketed.


That's a pretty gross misrepresentation. The UAW gets all that fat because the contracts were negotiated when the Big 3 were on top of the world and gave them whatever - some stuff they didn't even ask for. I know it's shocking to realize that Big 3 management is short sighted (:brows:)
but I can understand why the union resisted handing back over a bunch of gains.

The UAW certainly has a ridiculous deal (or did before renegotiating), but let's not pretend that's Detroit's only problem. Here is Detroit's biggest problem:
Billions of dollars on styling. This must be the $13bil Ford is spending on paint color. Brilliant, because styling is where the imports are killing Detroit :rolleyes:. I'm not sure how quality is going to get better by shutting down plants, nor will quality change be evident for many years. Developing alternative fuels? Welcome to five years ago. Can anyone name an innovation by Detroit in the past decade? The only one I can think of is the Flexfuel, which we didn't get until last year (which has been marketed the polar opposite way of the SUV).

Health benefits are an enormous expense. Before the last round of concessions that the UAW made, it amounted to $1600 per vehicle. I don't know what pensions costs amounted to, but that would probably be equal or greater than the health care costs. Apparently there is something like 3 retired employees/spouses for every present UAW worker.

It is the legacy workers/retirees that are killing the Big 3 when it comes to these costs. The Japanese companies don't have anywhere near that kind of baggage to pay for and their industry is expanding, unlike the contracting US market share.

Fundamentally I agree with Jim H. If they built quality cars that people wanted to buy, then people would buy them. They got complacent for a number of years when they could make huge profits from selling truck-based SUVs at top dollar while using production tooling often 10+ years old. They could've driven some of those profits into R&D but they didn't. The Big 3 have made advances in quality in recent years. Now they just need to advance the product. The new Chevrolet Malibu looks like a step in the right direction in the mid-sized family car segment. We can only hope.

Uhhhhh....
 

Not to pick on you or anything, but your profile indicates a home base of Holland Michigan.

In the interest of full disclosure, do you now or did you ever, have some connection with American Automakers, worked for them, got a pension from them or anything?


It's been noted in passing already, that ADVERTISING and MARKETING was - and to this day IS - being used enormously to shove these gas guzzling dinosaurs down the throats of patriotic and/or gullible American consumers.

Also, it needs to be mentioned, that the American Carmakers, ESPECIALLY GM and Chrysler, virtually ended, by the mid 1990s. the highly successful and perfected full size, BOF, RWD, cast iron V8 family sedan and staation wagon, something they were able to do very well, and instead, concentrated on selling full size and oversize pickup trucks and SUVs.

In their stead we were given underpowered, 4 and 6 cylinder front wheel drive, ugly sedans that sounded like a vacuum cleaner with a leaky cannister when you stomped on the passing gear!

These pickups and SUV's were specifically classsified as trucks, and were EXEMPT from CAFE automobile fuel economy standards.

It is NO coincidence that this was a a convenient way to sidestep the fuel economy/CAFE standards. Just do what you have been doing and call them "Trucks" and you have evaded the fuel economy standards in place.

For 3 large
 

That'd be a 1965 Ford Galaxie 500 XL, wouldn't it?

http://www.hubcapcafe.com/ocs/pages01/ford6502.htm

Yes, I am 'connected' with American automakers.

[EDIT: personal information deleted by user not relevant to this thread]

I am quite proud of the contribution my father, and to some extent I, have made to the auto industry.

Jim,
I would surmise that most Americans are not bright enough to realize what Detroit has done to them, in the way of your post.

They are led to the slaughterhouse of low mpg cars & light-truck vehicles by the Big III. That's just my opinion, folks.

I have not bought a new American car since 1979 nor do I plan on ever buying anything used that is American-made, save perhaps a new Jeep 4X4 someday........maybe.

The writing has been on the wall for 25 years. First the luxury cars fell to the Europeans and Japanese, and now the midsize choices are dominated by imports. I won't even mention economy cars, because the US never had anything competitive. Once in a while one of the Big 3 would have a good year and that would be an excuse to reward their executives in an outrageous fashion. It's no wonder they are where they are now. They squandered a generation of goodwill that will take another generation to rebuild. That's the price of short-sighted American-style management.

Detroit has pushed itself to the brink of oblivion.

Good summation, raymr.........:)

X2


I very much agree!

Fords SOL, they have no car thats decent other than the Mustang.

GM is starting to come out with some nice new cars! The new Malibu is a decent car, they should have renamed it. The old Malibu was a POS, but the new one at least after I sat in it seems as nice as the new Accord and Camry. Its priced well and should compete very well against them.

Since I intend to drive German cars (except VW, gah) until I die I really don't care, I'll never buy one.

Wrong. There is one still left.
 

Not true.

If you are "mature", the tried and true, cast iron V8, rwd, almost 20 year old design, comfortable, roomy, fairly safe and VERY economical Mercury Grand Marquis, simply can't be beat, if you put it to its full use.

A very savvy shopper could get a new one, a GS, with Airbag and ABS and plenty of modern updates, for $18,000.

About 100,000 savvy shoppers did just that, last year. Laugh if you will, but it was Mercury's best selling car, and they did not need to advertise it at all.

A lightly used one year old rental or lease return with the balance of factory warranty could be in your driveway for $15,000 or less. Very possibly a loaded LX with leather and all options.

There is simply no beating that. These are the reliable ones, that the Police and Taxi companies use. They last a LONG time and are dirt cheap to buy, run and maintain.

And thats the reason Ford is sucking wind, because no one under 60 is buying those other then the government.

100,000 is nothing, its not a growth market.

I can't remember who, but I recently heard an automotive industry pundit remark that "the average age today's Lincoln buyer is 'deceased'".

LMAO!!!!!

That's not too far from the truth.

To answer the question in a word, "NO". Perhaps it is better for them to go out of business and let someone come in with a fresh start.

Fusion. It's more than decent.

MBUSA Achieves All-Time Sales Record with Sales of 248,080 for 2006

http://www.theautochannel.com/news/2007/01/03/032870.html

MBUSA is therefore 2.5 times nothing...

YMMV

See post #12 for my info.

Anybody else going to join in?

Who buys the Ford Crown Victoria/Mercury Grand Marquis?
 

Dynalow, Jlomon and Hatteras guy, you guys are FULL of it. That is all a bunch of BS.

I bought my first one when I was right around 40, and owned two of them,
and I had to listen to that crap from everyone around, younger guys like you,
girls, too (wife!) and everybody laughing at me for owning a geezer car.

The 100,000 per year figure for the Grand Marquis/Crown Victoria was for PRIVATE sales, too NOT just goverment, fleet, rental police and taxi.

They sold a LOT of them to savvy private buyers. With age comes wisdom.

I agree the Crown Vic ain't bad, but let's face it. It's not for everybody. The fact that people rode you hard when you bought one at 40 (not exactly young) speaks volumes. To this day, when I see a Crown Vic or similar vehicle, I think it is being driven either by a Cop or a retiree.

Please don't take this post personally, it's just my $.02.

Back ON topic... :rolleyes: do you think that full sized, rear-drive, V8 powered vehicles with bench seats and column-shift automatics are a growth segment? A market on which Ford can build its future?

No way, Jose. I won't argue that these cars are good - for someone who wants a car like a refrigerator. It's an appliance - inexpensive and reliable - but that's it.

Since when do you compare the sales volume of high end niche companies to, companies that mass produce?

IMHO thats to many for MB, they would be better off cutting that in half and raising prices.

Yeah they are OK, I have seen them. But they cost as much as real car like the Accord so why bother. Resale sucks as well.

Glad you liked them, I can think of a lot better cars to get for $18k.

My 80 year old grandfather wants one, thats all I have to say on that topic.:D

Anyway with gas coming up on $4 and soon $5 a gallon, I don't think many people are going to be interested in 30 year old designed RWD full frame sedans.

As far as I know, MBUSA is a "high end, niche company" because that MB's USA marketing strategy. They EPA and DOT certify, and import, mostly the high end of their product line, and keep their prices up by having lower volume. Worldwide, MB has a lot more "bread-and-butter" offerings we don't see here.

Anyhow, can we agree that MBUSA is smaller than Ford's Lincoln-Mercury Division? This could help explain how Ford may have more problems, since they face more competition from "Japanese" brands in a larger market. Of course, MB, selling their cars through MBUSA as a US niche specialty, has to worry about Lexus and Infiniti, but nobody has speculated that MB will be going out of business soon. That might be a topic for another thread.

Perhaps an explanation of the problem is that GM, Chrysler and Ford are really, really big companies that sell most of their product here in the USA! They have been manufacturing and selling in this market longer, so they have a workforce history that goes back generations. They are not in position to turn around over night, and they won't just fold up their tents and disappear.

So, back On Topic.

Can Detroit Stop Its Slide in 2008? I guess we'll have to watch the financial pages to find out for sure, won't we.

Um Hattie, except for that detail about full frame, that describes most of the MB offerings up through the W126 body... :D

Great cars, but kinda' slow in the styling change department. ;)

I think that GM is in the best position of the three. From a financial perspective I have not studied their balance sheet but I do know that at least they are sitting on a tremendous amount of cash.

GM is also making some pretty decent cars right now, and they are really improving their product. If I was in the market for a brand new car, there are several models - particularly from Cadillac and Buick - that I think would bear some very close investigation.

I think that the product offerings from Ford and Chrysler are very weak - particularly Chrysler. I'd like to see who was in charge of the Dodge Caliber or the Dodge Nitro and said "...yeah, you know, that looks great! We should build THAT!"

IMHO GM is building the best cars of the Big Three and I also believe they are building some of the best cars they've built since the very early 1970s.

That is all true. I briefly thought about picking up a new one of them, last spring and summer, and in the end, finally decided not to do it.

Instead I committed to restoring the Mercedes 560SEC to a car in as good a condition as possible, and never looked back.

I'm quite pleased I did. I'll be even more happy when the new Remus exhaust is installed on it. I just paid for it today, scored probably the last US spec W126 one left in the United States.

My W126 is more advanced than a 2008 Ford Crown Vic. It doesn't have a live rear axle or a push rod V8 for starters. Not to mention its built many times better, and anyone who challanges that is full of it.

Other then the fact that the new S550 has a V8 in the front that drivers the rear wheels nothing is similer to a Ford. Also at the $100k price point people are not sensitive to fuel costs.

Chrysler is going to be broken up and sold, Ford is a sad sight thats just waiting for the bullit to end it all. GM will continue to do well, they are getting it, they are starting to sell cars that people will want to buy.

I couldn't care less, they built junk for 20 years they are reaping what the sowed.

I'm just reading this thread from here on out until it ends.

Why?

I just hope I never get that old or senile, that I resort to ever start buying Mercury Marquis' OR Ford Crown Victorias for any transportation need........Let Us Pray.......!

Jim,

I thought the tag line..."DECEASED"...was funny!

Thinking only of the std. Lincoln Town Car, it's my hunch that the age of the average buyer is well north of 60. I can't find info on car buyers ages, so I may well be wrong. Nevertheless, I agree with Hatt that those type of cars, regardless of how durable or reasonably priced new or used are not the wave of future in auto's

I bought my first Ford when I was around 40 too. To be precise, I was 42 when I bought a new '87 Ford T-Bird LX White, red interior. Nice car. Auto everything. Ran great for 10 years. Replacing the cats was about the most expensive repair I experienced. I think they were 400 apiece. Got rid of it after 144,000 mostly trouble free miles to buy my first MB..the late 190E.

Indeed, with age comes wisdom. Also, with age comes larger waist lines, aching joints and lower metabolism. Thus, the appeal of the larger 4 door sedans with a lot of folks, like us, over 60.

Thanks for including me in with younger guys!

Hope you are getting thru the storms slamming the west as I write this.

JimM.

Edit:

I forgot to mention the huge tax advantage Congress gave to vehicles with a GVW over 6,000 lbs. Up to 100% write off in 1st year for business property. Not too bad when Uncle Sam and the states picks up about 40-45 of the cost thru tax savings. The standard size sedan owner gets much smaller annual writeoffs! Congress could fix this tomorrow, yet...

I have been driving an S class since I was 17 so I already have an old farts car.:D Its to late!

Lincoln Town Car, Ford Crown Vic, Mercury Grand Marquis
 

Thank you! I suppose a Townhouse would make a better investment than a Towncar from a financial point of view, but as a mile per dollar proposition little out there beats them for American roads and freeways; their proven design makes them anvil reliable, and the overall cost to run makes them cheaper than ANY Honda Accord, VW bug or any other car you can put up against them.

They are NOT as safe as a Mercedes or even a Volvo, but they are quite good.

Nobody ever accused them of having "soul", and they do NOT put a smile on you face like an old Mercedes diesel, a big W126, or an SL.

Not to mention they corner like a brick going sideways, and have the road feel of a balloon going down a river.:D

Very likely that they are no longer on "the cutting edge" but as a tool of transportation, the R & D and tooling costs have LONG been recouped, and every one sold is PURE profit for FoMoCo.

They tried to make a "Hot Rod") the 300 hp Marauder, but it was a flop, and poorly marketed, but the ones out there in fact ARE in vogue with a narrow market of practical muscle car lovers, and the resale on them is quite high.

The storms were awful here in the foothills of the Sierra, and yesterday we had a "Mini Toronado" and tghe only damage I suffered was that my garbage can out for trash collection day, got whipped away completely and I have NO idea where it went.

For someone who'd never seen a snowflake till 25 years old, it was pretty amazing to see so much snow around.

It was in anticipation of things like this, that was one reason I forewent a Grand Marquis and got this Subaru Outback awd wagon.

At midnight last night I went out in the snow and practiced driving on the snow covered roads around here. Went slow and carefully, and in 2nd and 3rd gear mostly, and discovered WHY the Outback ( a niche car) sells so well around here, it does great in the snow, I was really impressed.

I am probably going to keep it. For dollar for mile cost, it is pretty close to a Grand Marquis, and makes VERY polite noises at the gas pumps.

It's not, when you have one foot in the grave and the other on a banana peel!!!:D

.
Well, I am still in 50s, but I understand what you are saying.

It is stupid, but I guess you can just accept it as what it was, just a nice Christmas present for automakers to boost SUV sales and reward Republican voters.

I knew a guy who bought one, a Lincoln Aviator. He owned a auto paint franchise in Cntral California, and didn't need another vehicle at all.

But when you can get a brand new Lincoln Aviator, and instantly and legally write off over $25,000 on your taxes, as a small business owner, how could you say no?

Didn't hurt the feelings of the Ford Dealer over in Hanford (Kings County) with a purchase like that either.

I drove it once, and it was lots of fun, real luxury, a kick in the azz.

Good way to keep Republicans in the fold too. Clever move by GWB.

Starvation is God's way of punishing those who have no faith in capitalism, anyway, right?;):D

IIRC it started as a tax break for small business owners and morphed into this. Problem is that when congress gets involved, you never know what is coming out. If you value your good life, KEEP CONGRESS OUT of your life. Don't ask them to do anything or you will regret what comes out.

IMO, that was the excuse he used. If you cannot make it work financially, a business owner should NOT do it. All it did was lowered his taxes by a fraction of $25K not take it off altogether by changing the taxable amount, AFAIK. Somebody correct me if I am wrong.

GWB did that? Did he sign the bill congress wrote or did he write it and sign it himself?

Yes.

I was once told by an accountant to buy something for your business if you need it, but don't buy something just for the write off.

that is why I think the guy he mention bought it with the tax break as an excuse if he didn't need it. That or he is a poor businessman who will soon be parted with his money.

I got bored after reading a few posts, didn't hear anything about the Mark VIII with the 4.6 that get's close to 30 on the highway. Also had a Crown Vic with the 5.0 Police engine, dual exhaust really fast for a production vehicle, rode her hard and she kept giving,,,

Don't forget that Chrysler was once bailed out,,, and they had a GREAT "K" car, so reliable they named it reliant,,, 30MPG easy on the highway,,, and that was in the 80's

Meanwhile GM and Ford made and sold what the public wanted, big gas guzzling safe vehicles, believe me, if Ford could make a car that they couldn't keep in their dealers lot, they'd be working overtime pumping them out,,, but the fact of the matter is the US economy is so screwed up that I don't think the Gov't will be able to bail out a car company should one go under,,, to much prinitng money for the war effort :mad:

I'm willing to bet that one of the "Big 3" ( or a division of one) will go under just to get out of paying retiree's medical. Re-organize in a union free shop paying 3rd world wages, and getting away with it because there will be so many people unemployed. They'll get away with this because the gov't will cave in just to keep a few plants open.

Haven't been spending too much time in this forum lately,,, got the gold bug and chatting alot at kitco's gold forum.

RON PAUL for President 2008

So? Sorry that the gravy train ride is over. They squeezed the company when things were good and now they get upset when things are tough and there is no more to give? Besides why should we get the govt involved in the collapse? To screw it up further?

That is genuinely funny! :D:)

Wow the K car! They make my VW look like a good car!

All this talk of American cars reminds me of why I will never own one.:D