Competitive Connection

A look at the competition . . .
Ford explores work rule changes
Ford has been negotiating with the UAW to implement local-plant agreements aimed at reducing costs by changing work rules. Ford said Sept. 15 that such accords were reached at about 30 plants, which would generate about $600 million in annual savings.

Such agreements are “important for us to become competitive,'' said Anne Marie Gattari, a spokeswoman for Dearborn, Michigan-based Ford. “It's part of our strategy to
turn around our North American operations.'' --Source: Bloomberg, February 13

A look at the competition . . .
Chrysler restructuring plan
DaimlerChrysler announced a three-year Recovery and Transformation Plan that seeks a return to profitability by 2008 while also taking steps to change its business model for the long run. The plan will result in an employee reduction of 13,000 people from 2007 to 2009.

Overall, the Recovery and Transformation Plan is aimed at a return to profitability with a primary focus on cost. It is structured to over-achieve in order to offset potential unforeseen market headwinds, resulting in a target of $4.5 billion of financial improvements - or a return on sales of 2.5 percent - by 2009.

Chrysler plans to reduce total production capacity by 400,000 units per year. In 2007, it will eliminate a shift at both the Newark, Delaware Assembly Plant and the Warren, Michigan Truck Plant. In 2008, it will eliminate a shift at the St. Louis, Missouri South Assembly Plant.  The Newark Plant will be idled in 2009. The Cleveland, Ohio Parts Distribution Center will be idled in December of this year.

Key parts of the Transformation will be a greater global footprint and a shift in the product mix to smaller, more fuel-efficient vehicles. Currently, North America represents some 90 percent of the Chrysler Group's business, and its product line-up has historically been heavily weighted toward minivans, trucks and sport utility vehicles.  –Automotive News & DCX Press Release, February 14, 2007

A look at the competition . . .
Toyota’s growth continues in US and abroad
For the full fiscal year that will end March 31, Toyota expects net income to increase 13 percent to 1.5 trillion yen, or $13 billion. Global vehicle sales are expected to reach 8.47 million units, up 6.2 percent from the previous year. Toyota's operating profits for North America took a hit in the third quarter due to the start-up of a truck plant in Texas that cost $1.28 billion – $400 million more than projected.

In addition to its growth in North America, Toyota is doing well in emerging markets, such as China and India. The major challenge for Toyota is maintaining its reputation for quality even as it expands worldwide, said Bill Mann, who tracks Toyota as a senior analyst at the Motley Fool.

In May, Toyota was embarrassed by a recall of almost 1 million vehicles worldwide. Earlier this year in the United States, Toyota settled a case that involved potential oil sludge damage in millions of vehicles sold in the late 1990s and early 2000s, including the Camry.

"You buy a Toyota, in some ways, because you want a car you can put gas in and put oil in and rotate the tires and that's all you have to worry about," Mann said. "Any level of fault in a Toyota and any degradation in quality and reliability are going to hit them hard." –Source: Detroit Free Press, February 7, 2007

 

Then and Now
According to an estimate by the Automotive News Data Center, the pool of Detroit 3 vehicles (GM, Ford and Chrysler) on the road that are 3 years old or less totaled 28.5 million units in 2006. That's 13 percent lower than the pool of such vehicles in 1997.

Ford suffered the sharpest shrinkage, with a decline of 23 percent. GM's pool of vehicles declined 9 percent, and the Chrysler group's total declined 4 percent.

 

What others are saying . . .
A new breed of dealers
One of the toughest problems facing the ailing U.S. car industry stems from Detroit's century-old business model. Rather than build cars to suit customer tastes, U.S. automakers churn out what makes sense for their plants, and then use incentives and rebates to lure buyers. The thirst for revenue to pay for mounting health-care and pension costs has further encouraged companies to keep plants running regardless of demand.

Last year, AutoNation, the largest U.S. chain of auto dealers under the leadership of Michael J. Jackson, began sifting through its trove of data to identify the best-selling configurations of every vehicle on the market. He wants GM, Ford and Chrysler to join the effort and use the information to produce vehicles customers actually want.

Until the 1980s, auto retailing was dominated by entrepreneurs who relied mainly on selling one Detroit brand for their livelihoods. A new breed of dealer has emerged. These new auto retailers, some of which are publicly traded, own multiple stores in multiple cities and sell an array of models.

The Big Three are trying to be more market-driven, but it isn't easy. Because they have big and rising costs for union health care and pensions, they need to maintain revenue, which means they often keep plants open and build more cars than the market demands. Source: The Wall Street Journal, February 9, 2007