Competitive Connection

January 28, 2008

What Others Are Saying
Detroit Still Vulnerable in 2008

Together, Ford and GM account for just $25.46 billion in market value. If the conditions are right -- and the financial barriers to entry are as low as they are now -- they could be targets for would-be investors canny enough to negotiate the new obstacles.

After more than two years of brutal restructuring -- jobs cuts, plant closings, landmark talks with the United Auto Workers -- GM, Ford and Chrysler had been looking to '08 as the beginning of a new chapter in their recovery, a chance to reap the rewards of their workouts and bolster their balance sheets.

Instead, the market swoon, deepening sub-prime mortgage troubles, high oil prices and sagging consumer confidence (the rate cut notwithstanding) mean this year already is shaping up to be the same old story -- Old Economy companies still gutting through the perfect storm of declining customer demand, excess capacity, strained capital budgets and fierce foreign competition.--Source: Detroit News, Jan. 23, 2008
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Around the Globe
$2,500 Car Proves India's Capability

The West seems thoroughly unimpressed by India's $2,500 car. Sure, the “People's Car'' is cheap and tiny and probably wouldn't thrive in showrooms in Miami or Paris. Commentators in India have called it a feat of "Gandhian engineering,'' meaning unpretentious and stripped down. For many automobile enthusiasts, the two-cylinder, no-frills car will seem a bit too egalitarian.

However, Tata's feat is a reminder that India's economy is far more than just service centers and information-technology companies. India boasts an engineering prowess that may continue to confound naysayers, create well-paid jobs and accelerate the growth of their middle class.—Source: Bloomberg News, Jan. 23, 2008
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A Look at the Competition
Hybrids a Tough Sell for Americans

There is an unprecedented emphasis on green technology at the Washington Auto Show, which comes as automakers prepare to spend tens of billions of dollars to improve the efficiency of their vehicles. Automakers are having a difficult time convincing American consumers to buy hybrids in large numbers, however.

Hybrid sales jumped 38 percent last year to 350,000 vehicles, but still accounted for just 2.2 percent of the 16.1 million vehicles sold.

Ford hasn't made money on the hybrid versions of its Ford Escape and Mercury Mariner, and had some trouble convincing customers to pay more for them. In 2007, Ford sold 25,108 of the hybrid SUVs, up from 22,603 in 2006. One in 8 Ford Escapes or Mercury Mariners sold in 2007 was a hybrid. Since introducing the first American hybrid in 2004, Ford has lost as much as $3,200 per vehicle.

Ford's not alone in losing money in hybrid programs: Nissan said it was losing money on its hybrid Nissan Altima, while Honda stopped selling a hybrid version of its Accord sedan because of poor sales.—Source: Detroit News, Jan. 22, 2008
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A Look at the Competition
Globalization Means More Than Sales Overseas

U.S. automakers and suppliers have long looked overseas for inspiration, investments and occasionally executives. But last week's auto show preview highlighted a new import for Detroit's auto industry: survival.

Engineering, money, technology – much of what Detroit's automakers and suppliers will need to revive their businesses over the next few years will come from outside the United States. A larger share of the cars and trucks bought by U.S. consumers – built inside and outside the country – will be designed internationally, with parts drawn from around the globe.

Globalization isn't just about selling cars overseas, as seen on the floor of the show. A number of future models on display, such as the Ford Verve small car and the Pontiac G8 rear-wheel drive sedan, were designed by engineers in one country for sale around the globe.

Such moves are driven by the need to cut costs, mainly by wringing as many models and sales as possible from a limited number of platforms, or sets of basic vehicle components. It's a strategy that's been used for years by Asian automakers, which have given them a head start on cheaply and quickly customizing models for specific markets.--Source: Detroit Free Press, Jan. 20, 2008
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A Look at the Competition
Recalls Down for GM and Toyota

The U.S. government reported that automaker recalls increased by about 30 percent over 2006. Recalls have become more common as many companies build vehicles that share common platforms and components and respond more quickly to deal with potential safety hazards.

In 2007, Ford had the most recalled vehicles in the U.S. with more than 5.5 million. DaimlerChrysler had the second-most in 2007 with 1.47 million, a decline of about 38 percent compared with nearly 2.4 million recalled vehicles in 2006. Separately, Chrysler LLC had one recall in December involving 576,418 vehicles. Volkswagen had to recall more vehicles in 2007 than in any other year this decade. It conducted six recalls involving 1.46 million cars and trucks.

GM and Toyota both saw a decline in total vehicles recalled. GM recalled 537,992 vehicles in 2007, by far its lowest number during the decade. The automaker has averaged 4.7 million recalled vehicles a year since 2000.

Toyota, which has vowed to crack down on quality problems, has seen its number of recalls drop for the second straight year to about 583,191 after it recalled a company record of 2.3 million in 2005. --Source: Associated Press, Jan. 17, 2008