Competitive Connection

March 10, 2008

A look at the competition
Changes at Ford; Growth at Tata
The global auto industry will get a major new player, and Ford will lose a major distraction when Indian conglomerate Tata buys Jaguar and Land Rover from Ford.

The acquisition of two high-profile luxury brands will transform Tata, which prides itself on building affordable vehicles that are fuel efficient and easy to service.  It also will free Ford to devote its resources to repairing its North American operations.

"Now Ford can concentrate on fixing the big problems at the Ford brand," said Joe Phillippi, principal of AutoTrends Consulting in Short Hills, N.J. Ford decided to sell Jaguar and Land Rover last year to focus its money and resources on repairing its North American operations.

Tata Motors is part of the Tata Group, which had worldwide revenues of $28.8 billion in its last fiscal year and accounts for 3.2% of India's gross domestic product. Tata is already a major global force in steelmaking, information technology services and engineering services. Tata does business in 80 countries and has 289,500 employees worldwide.—Source: Detroit Free Press, March 5, 2008
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What others are saying . . .
UAW & GM working on VEBA
 A federal judge granted preliminary approval to a settlement between General Motors Corp. and the United Auto Workers that would set up a trust to fund the automaker's retiree health care. GM and the UAW agreed to form the trust as part of contract negotiations last fall, but they need court approval for it to take effect.

U.S. District Judge Robert Cleland praised GM and the UAW for their cooperation and said the deal appears to be reasonable and fair.

"It is an extraordinary feat, it seems to me, what has been accomplished,” Cleland told lawyers for GM and the UAW after a brief hearing. "It's a very impressive body of work."

William Payne, the attorney representing UAW workers in the case, told Cleland that the settlement protects workers' benefits regardless of GM's financial position. GM would contribute between $33 billion and $36.5 billion to the trust, depending on the value of shares it is contributing and other factors. GM has said the new contract will save it $3 billion per year, with a big chunk coming from reduced retiree health care costs.–Source: The Associated Press, March 4, 2008
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What others are saying . . .
GM has too many brands
After three years of restructuring, GM is still racking up billion-dollar losses and isn't ready to say when it will return to profitability. There is an age-old predicament that continues to undermine the Detroit automaker's efforts: The eight brands in its portfolio often compete with each other – both for customers and a slice of GM's marketing budget.

For example, GM has four mass-market midsize sedans. The Chevy Malibu is backed by a ubiquitous ad campaign and is a top-seller. Meanwhile, the Buick Lacrosse, Pontiac G6 and Saturn Aura have struggled to build the awareness and recognition needed to compete. Toyota has one model to compete with those offerings – the Camry – and last year it alone outsold GM's four models, 473,308 to 386,024.

Even when GM does spend on its smaller brands, it often sees little return. In past years, television ads have promoted Saab's sports cars as "born from jets," but in 2007 Saab dealers sold just 32,711 vehicles – not much more than a single month of sales for the Camry or Honda's Accord.

Mark LaNeve, GM's head of marketing and sales in North America, acknowledged the company puts substantial effort into promoting its two core nameplates, Chevy and Cadillac. The others, he said, can get more marketing dollars if they show they're gaining momentum in the market. It's an uphill climb. Of the six, only Pontiac and GMC have more than 2 percent market share in the U.S.—Source: The Wall Street Journal, March 4, 2008
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What others are saying . . .
Turnaround difficult in current economy
GM is prospering overseas, though not enough to make up for losses at home. And what guarantee does GM have that the same economic difficulties now gripping the U.S. won't spread to the fast-growing automotive markets of Brazil, Russia, India and China?

GM is running out of options in its race against time. The company's financial cushion from its glory days is almost gone. It won major concessions from the United Auto Workers union last fall. But the impact of lower labor costs probably won't reach GM's bottom line for two more years. The Chevrolet Malibu, Cadillac CTS and Buick Enclave have won critical acclaim and could bolster market share in the U.S., though that won't be easy in a market where demand is falling.–Source: Bloomberg, February 28, 2008
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Then and Now
Cars lasting a lot longer
As if automakers needed one, there's another obstacle to sales in the U.S., which have declined more than 7 percent this decade: Vehicles last longer than they used to.

The median age for trucks jumped to 7.3 years, the highest since 1998, research firm R.L. Polk & Co., while the median age of cars on U.S. roads remained at a record high of 9.2 years in 2007 for the second year in a row. That's up from 8.3 years for cars and 6.9 years for trucks (including commercial vehicles) in 2000.

Forty-one percent of cars are at least 11 years old.—Source: Chicago Tribute, February 22, 2008
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To read previous editions of the Competitive Connection or to access other information about manufacturing and labor at GM, visit http://www.gmmanufacturing.info