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Losses seen for U.S. autos Analysts: Share drops with fewer new models
From the Detroit Free Press:
Losses seen for U.S. autos
Analysts: Share drops with fewer new models
July 30, 2004
BY JAMIE BUTTERS
FREE PRESS BUSINESS WRITER
Two new studies from Wall Street experts point to Detroit automakers losing an even larger share of their home market in the coming years.
The experts, who help investors decide what auto stocks to buy and sell, say that Detroit's traditional brands have relatively fewer new models in the pipeline than their Japanese, European and Korean rivals.
Automakers tend to dispute such forecasts -- especially when they are not positive -- but the idea is pretty straightforward: A steady stream of new models keeps customers coming through the door, which means more sales and a bigger piece of the market.
"Historically, Detroit has replaced its lineup every seven to eight years, and the competition" does it "every four or five years. And we think this goes a long way toward explaining the historical market-share loss," John Casesa of Merrill Lynch said in a conference call with investors Thursday afternoon.
According to his study and one released by another prominent brokerage firm last month, those trends -- relatively fewer new models and falling market share -- aren't going to change anytime soon.
If the trend continues, for example, Toyota Motor Corp. will be selling more cars and trucks than DaimlerChrysler AG's Chrysler Group in just two years, according to an analysis by Michael Bruynesteyn of Prudential Equity Group.
This one of the pressing issues facing the Detroit automakers, their employees and the Michigan economy. As their share of the market falls -- as it did in going from 76 percent in 1980 to 60 percent today -- they close plants and cut jobs.
Automakers don't publicly discuss their plans for future cars and trucks in detail. "This is top-secret stuff," Casesa said.
"It's always in our best interest for our competitors to underestimate us," said Ford Motor Co. spokesman Jim Cain.
Analysts use different methods to anticipate the freshness of an automaker's lineup, which lead to slight deviations in their findings. But the gist is the same: Toyota, Honda Motor Co., Nissan Motor Co. and Hyundai Motor Co. have more robust product pipelines than General Motors Corp., Ford and the Chrysler Group.
"GM will probably fare best among the domestics against the foreign-based competition, but the continued market share decline for the Big 3 in aggregate is likely to continue," Bruynesteyn wrote.
In contrast, Casesa of Merrill Lynch finds that GM and Ford have the fewest new products on the way. But he includes wholly owned foreign brands in his analysis.
For instance, Casesa's analysis of DaimlerChrysler includes Mercedes-Benz, Freightliner heavy trucks and Smart mini cars. Bruynesteyn focuses on the Auburn Hills-based Chrysler Group.
He foresees DaimlerChrysler taking market share from GM and Ford but losing out to Japanese and Korean automakers.
Of the two giant U.S. automakers, Casesa was quizzical: "What I'm wondering from this data is whether these companies just simply need to spend more money to do more product and better product."
While it has become a cliche to say the industry has gotten more competitive, he said the numbers back it up.
Over the next four years, Casesa expects the industry to produce about 54 new or redesigned models, up from an average of 35 from 1987 to 2004.
So automakers can tout huge numbers of new models, but that is just the price of staying in business -- not getting ahead or even holding their ground in the market.
With 16 new models set for the next two years, Chrysler Group spokesman Rick Deneau took issue with the characterization that launches would slow down after this year's Chrysler 300 sedan and Dodge Magnum wagon.
"We've got a barrage of new products that is going to continue for the Chrysler Group over the next two years and beyond," Deneau said.
The difference of opinion could be one of volume. Chrysler is introducing many new cars, but trucks make up about 70 percent of the group's sales.
By Bruynesteyn's calculations, the Chrysler Group is replacing 26 percent of its volume over the next two years, while Toyota replaces 40 percent.
And the following model year, Toyota will open its Texas plant to make thenew, significantly bigger, Tundra pickup.
So Bruynesteyn forecasts Toyota will displace the Chrysler Group -- though not the whole of DaimlerChrysler -- as the No. 3 seller of vehicles in the United States in 2006.
After losing a combined 12 points of market share -- roughly one of every eight vehicles sold -- over the last six years, 2004 was supposed to be the year that Detroit automakers had a chance to regain some ground.
A product onslaught from Chrysler, new high-volume cars from GM and the ongoing momentum of Ford's F-150 pickup made this year a hopeful one for Detroit.
Instead, the traditional domestic brands have lost another 1.6 percent of the market, and Detroit automakers appear in need of strong sales for at least a couple of months to sell excess inventory and avoid plant shutdowns that hurt automakers' incomes -- as well as those of their suppliers and employees.