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post #1 of 1 (permalink) Old 07-05-2004, 02:51 PM Thread Starter
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Detroit share lags despite new models

From the Detroit Free Press:

Carmakers fail to gain in market
Detroit share lags despite new models
July 3, 2004

BY JEFFREY MCCRACKEN
FREE PRESS BUSINESS WRITER

New cars and trucks would abound. The economy would improve. And some foreign rivals would seriously struggle.

At the start of the year, Detroit automakers hoped this trio of trends would give them a real chance at increasing their collective share of the U.S. car and truck market. If it happened, it would be the first time since 1994.
Alas, after the first six months of 2004, Detroit's three automakers are unable to increase their share of the U.S. market. New products are coming out, but DaimlerChrysler's are the only ones creating a real buzz in the market. The forecasts for struggles by foreign rivals have been true, but mostly at Volkswagen and Mitsubishi, not bigger rival Toyota. The economy is recovering, but much more slowly than expected.

Detroit automakers' collective share of the market for new cars and trucks is down to 61.8 percent, compared with 63.4 percent for the first six months of 2003. These numbers include the foreign brands tied to the former Big Three, like Saab, Volvo and Mercedes-Benz.

DaimlerChrysler has done the best, holding steady at 14.7 percent of the U.S. market, exactly where it was for the first six months of 2003.
The Chrysler Group, the old Chrysler Corp. before its acquisition by Daimler-Benz, has been aided by a number of brand-new cars that have been popular with consumers, such as the Chrysler 300 and 300C. Chrysler also has remodeled its all-important SUV, the Dodge Durango.

General Motors Corp. and Ford Motor Co., however, are both down from a year ago.

"We, as a group, are trying to get this turned around, but it doesn't happen overnight. We are dealing with 30 years of history here," said George Pipas, Ford sales analysis manager. "The erosion of Big Three market share in cars goes back to the oil crisis of the early 1970s when the foreign automakers got a toehold into small cars. But, this could still be a turnaround year. Don't write it off yet."

Ford is off the most among Detroit's automakers, with its market share falling to 20.1 percent, compared with 21.2 percent a year ago. Pipas said Ford expected its share would be off early in the year because most of Ford's new products or redesigns are coming in the second half of the year.
Ford also says it isn't as concerned about market share as it used to be, so it is selling fewer vehicles to rental companies -- a line of the business that is not as profitable as selling to consumers.

General Motors, which many analysts thought had the best chance to improve share, is down to 27 percent this year, compared with 27.5 percent a year ago.

"Our sales have been a bit softer than expected. We were hoping for a bit more so far this year," said Paul Ballew, GM's executive director of industry and market analysis. "The car market is eroding faster than we thought. The whole midsized sedan market is declining much more rapidly than we expected."

In the first six months of 2004, Detroit automakers' sales slipped 0.5 percent while the rest of the industry was up 7 percent.

Back in January, amid the hoopla and optimism of the North American International Auto Show, many Detroit auto executives and auto analysts were bullish on the possibility that one or more of Detroit's automakers could increase share. All three would have a slew of new products like the Dodge Magnum, major redesigns of classics like the Ford Mustang or Chevrolet Corvette, or full years of recently redesigned products like the Ford F-150 and Chevy Malibu.

"Let me put it this way, if we don't gain market share this year, I will feel personally hurt," Bob Lutz, GM vice chairman, said at the show in an optimistic tone that was echoed in other quarters.

Analysts say a number of factors have slowed the combined sales of Detroit's automakers. To begin with, many of the new products are slated for the second half of the year.

Ford will have the Five Hundred sedan and its twin, the Mercury Montego. The fall will bring a completely redesigned Mustang.

GM is awaiting its Chevy Cobalt, which replaces the Cavalier in the GM lineup. Also coming is the Pontiac G6, taking over for the Pontiac Grand Am.
The question is whether any of those new offerings will entice consumers. New products like the Malibu and Ford Freestar minivan have not hit anywhere near as well as those automakers had hoped.

"I think, for the Big Three, the second half will be a lot like the first half with no dramatic improvements," said Jessie Toprak, director of pricing and market analysis for Edmunds.com, a vehicle-pricing Web site.

Another problem: They are trying to get away from the profit-eating incentives they have used since 9/11 to lure customers back into dealerships.

"I know GM, Ford and Chrysler want consumers to buy the product because they want the product not because they like the incentive, but the consumer now expects to get an incentive when they buy one of their cars or trucks," said Bob Schnorbus, chief economist at J.D. Power & Associates.
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