Some folks can't see the forest from the trees

[Scotsman]

Esepcially the automotive media when it comes to Detroit...

Detroit Automakers: The Heat Is On

June 02, 2008

By Bill Visnic

At General Motors Corp.'s annual meeting Tuesday, the stickiest questions may not be about the actual dollars and cents of GM's business. Instead, the major issue may be whether - and how - GM can deal with the shocking plunge in demand for full-size pickups and SUVs, the profit machines that have kept the wandering giant afloat for the better part of two decades.

Punishing fuel prices and increasing environmental awareness have all but crushed the "supersize me" mentality of the American auto customer, and now GM and its Detroit-based rivals Ford Motor Co. and Chrysler LLC, with their manufacturing empires witheringly overweighted to address full-size segments, have little to offer the new age of economy-minded consumers.

Equally troubling, the domestics have scant prospect of reversing the situation any time soon - and the heat may be on Detroit executives to begin explaining yet another instance of their collective inability to identify and adjust to emerging auto-market and macroeconomic trends.


In-your-face investor Kirk Kerkorian, for one, again is agitating Detroit, this time stoking the market regarding Ford - despite the fact Ford is moving to quickly lay off 12 percent of its salaried workforce and CEO Alan Mulally just conceded Ford's compromised position in the market means the company will not achieve its stated goal to return to profitability in 2009.

And stories running in national publications last week suggest the latest market troubles may cause GM investors to begin questioning the results of CEO Rick Wagoner's 7-year reign, one in which GM has continued to cede market share to import automakers. Edmunds.com, the parent of AutoObserver, predicts Big Three combined market share for May, when sales are reported Tuesday, will be 47.9 percent, a near-record low.

It's All About the Structure

Now the buzzword in the Motor City is about the "structural" shifts that appear to have once again left Detroit flat-footed - and again start the questions about whether the Detroit Three can restructure their product portfolios in time to snag already import-centric buyers snapping up the fuel-efficient small cars and crossovers GM, Ford and Chrysler still conspicuously lack in any depth.

"It's not so much the sales-volume decline, it's the havoc it's wreaking on the (manufacturing) structure," Michael Robinet, vice president, global vehicle forecasts for CSM Worldwide, a Detroit-based forecasting firm, told AutoObserver.

Robinet said the "uneven balance of full-frame and unibody" vehicles leaves the Detroit Three, whose manufacturing base remains oriented toward old-style, body-on-frame pickups and SUVs, in the position of not having much of anything that anybody wants to buy. But worse, he said, is that by staying locked on to full-size trucks and SUVs, the Detroit automakers are not well-positioned to change the situation with any haste.

"You'd like to be able to react quickly," he said, "but this is automotive."

Flexibility Reigns

He said the Japanese automakers such as Toyota Motor Corp. and Honda Motor Co. Ltd., which are renowned for the flexibility long designed into their assembly plants, are much better equipped to deal with rapidly changing market conditions. Robinet also said the genuinely global nature of their product ranges means they seldom are heavily reliant on one type of vehicle, such as full-size pickups - regardless of the potential profitability.

Using Honda as an example, Robinet said, "It's been all about sticking to the knitting." He said Honda long resisted the temptation to range into the full-size pickup market with a dedicated body-on-frame architecture, instead offering a midsize pickup - the Ridgeline - that leveraged the company's large unibody underpinnings. Honda also took its knocks in recent years for refusing to design a V8 for possible use vehicles such as the Ridgeline, Pilot crossover or even its Acura premium division.

Honda's steadfast product-development path now appears well-advised - it has none of the liabilities of the truck-depended Detroit automakers and even Toyota, which delved deeply into the American-style product pool with such products as the Tundra body-on-frame pickup and the Sequoia full-size SUV - not to mention built a new plant in San Antonio, TX, dedicated to satisfying Tundra demand it seems probable will never emerge.

For Honda, it's now reaping the benefits "of years of consistency," he said. If there is no global applicability for a product or a powertrain, Honda usually doesn't green-light its manufacture.

The companies with more flexible manufacturing and less reliance on products that worked only in the U.S. "are going to be able to weather the storm a lot better," said Robinet.

Now, with market share in freefall and high drains on cash flow a real possibility, fingers may begin pointing in Detroit as the question once again is asked why the domestic automakers so long rode the pickup and SUV trend with mounting evidence and the well-known cycles of the industry suggesting a diversification to more fuel-efficient endeavors would have been a good "hedge."

In the spring of 2006, GM said it saw no evidence of a structural shift in the market as it bragged about launching its then-new GMT900 full-size pickups, sold as the Chevrolet Silverado and GMC Sierra, several months early. Gasoline was about $2.25 a gallon at the time. In April of that year, the company's Cadillac Escalade saw a 127-percent sales hike and in May, the Hummer brand, propelled by the new H3, posted its 12th consecutive monthly year-over-year sales increase.

Ignoring The Signals?

Nonetheless, gasoline prices had become volatile, and GM and others seem to have discounted some early signals the ride was coming to an end.

Many global analysts were warning about the effects of the rapidly emerging economies of China, India and Russia, and the likely potential impact on worldwide crude-oil demand.

And in an early-2005 J.D. Power and Associates survey of thousands of new-vehicle owners, 43 percent cited fuel-efficiency as the primary reason for not buying a full-size truck.

And by April of last year, GM already had announced a major cutback in full-size pickup and SUVs from its 2008 build schedule. Yet last summer, Paul Ballew, then GM executive director-global market and industry analysis, was predicting a moderation in gasoline prices and a dissipation of the "headwinds" that now have become a clichéd euphemism for unfavorable market conditions for which automakers are unprepared.

Enough Time?

Now, GM is hurriedly cutting more pickup and SUV production, Ford is doing likewise and GM's market share, already approaching record lows, is threatening to dip below 20 percent. It is widely expected this week's annual meeting will see GM announce more cost-cutting restructuring. Even before the current big-truck sales plunge, the company lost some $38 billion in 2007, and with the truck profit-engine silenced, some analysts worry the companies will begin to experience significant cash flow difficulties.

Robinet said it is possible GM, for one, may once again approach the United Auto Workers for help in retrenching. He said the language in the new contract between the two - in which GM made significant future-product promises for many manufacturing facilities - gives GM wiggle room in dealing with volatile market conditions.

In effect, Robinet thinks the domestics have but one course: they will have to move as quickly as possible to diversify from the frame-architecture pickups and SUVs to which they had hitched their profit wagons for so many years. Fuel prices have been escalating since 2006 he says, and now the domestic automakers can no longer ignore the evidence that the "big truck" cycle is over.

"The unibody vehicles are where you're going to have to make your money," he said, saying of the big-volume era of body-on-frame pickups and SUVs, "Those days are finished."

Nevermind the fact that GM has 17 vehicles on offer that get 30mpg on the highway and is actively pursuing a variety of fuel alternative/fuel saving measurse. Much more so than Honda or Toyota, who to me seem to be very slow to act taking all the credit and praise for the Hybrid.

[Mr. Wyndham]

Who wrote this article?.......Bill Visnic?
Hey, Bill!!! What do you drive, can I place a bet that it's not a Domestic?:middlefinger:

When I see an quality article(which this is not), written by an honest Journalist (which you can't be) that isn't so blantantly slanted agains the Big 3 because it's easy to do, an was written simply because it yeilds lots of views from knuckle-headed know-nothings (which this IS) -- I'll read it.
Grrrrr...I've sooo had it with these people!!


...once again, for good measure:

[Scotsman]

Originally Posted by Dragoneye

Who wrote this article?.......Bill Visnic?
Hey, Bill!!! What do you drive, can I place a bet that it's not a Domestic?:middlefinger:

When I see an quality article(which this is not), written by an honest Journalist (which you can't be) that isn't so blantantly slanted agains the Big 3 because it's easy to do, and was written simply because it yeilds lots of views from knuckle-headed know-nothings (which this IS) -- I'll read it.
Grrrrr...I've sooo had it with these people!!


...once again, for good measure::middlefinger: