Toyota, Honda Gaining on U.S. Automakers
Nov. 22, 2005 — -- General Motors intends to contract. Its foreign competitors are expanding. It's as simple as that, and it's not a good sign for U.S. automakers.
Monday's announcement that GM plans cut 30,000 jobs came as little surprise to analysts who follow the auto industry and have watched sales slump for the auto giant. Hearing that GM will slash 9 percent of its workforce, the only question from some analysts was, "OK, and what else?"
"Today's announcement was not unexpected," said Rebecca Lindland, auto sales analyst with the economic forecasting firm Global Insight. "It does a good job of addressing part of the problem. But they still need cooperation from the unions and they need to make some positive moves with their products."
American automakers have seen a steady erosion of their market share of U.S. auto sales the past several years as foreign companies, specifically Japanese manufacturers, gained a toehold with American car-buyers. General Motors, the world's largest automaker, sold 4.66 million cars in the United States in 2004, for a 27.6 percent market share. That number is expected to fall sharply this year to 4.4 million and only 26 percent of the market, according to Global Insight.
"Every single percentage point they lose is worth about 160,000 to 170,000 units," said Lindland.
Ford is expected to see a similar drop, from 3.28 million cars sold in 2004 to 3.09 this year. The Ford market share is expected to slip to 18.3 percent from 19.4 percent last year.
At the same time, the prominent Japanese automakers are gaining ground. Toyota's market share is expected to jump from 12.2 to 13.5 percent in 2005, and Honda is forecast to jump from 8.3 to 8.6 percent. Toyota's Camry has been the top-selling car in the U.S. for several years, and Honda's Accord has also been a big seller.
"If the speed the Japanese automakers are gaining repeats itself for the next decade, Japanese cars will outsell American cars in 10 years," said Jesse Toprak, executive director of industry analysis with the automotive Web site Edmunds.com.
Among the U.S. automakers, only DaimlerChrysler is expected to see a slight increase in sales in 2005, from 2.2 million to 2.26 million in 2006. DaimlerChrysler has been more adept than either Ford or GM at gauging the market and rolling out new products that consumers have bought.
GM also intends to cut its production capacity by about 1 million cars by 2008. Meanwhile, Toyota and Honda have experienced huge global expansions in the last decade, opening plants across the globe and producing more cars than ever before. Toyota could pass GM as early as next year as the world's largest car-maker.
The problems facing GM and Ford have been twofold. First, because of longstanding labor union contracts with their workers, American manufacturers pay out hefty healthcare and pension benefits. Industry analysts estimate that for every car sold by a U.S. carmaker, $1,500 is paid out in health benefits to workers and retired workers. That number climbs above $2,000 per car when pensions are factored in.
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