Rocky '06 Predicted for Big Three

[joe1280]

From sinking sales to job cuts by the thousands, it’s safe to say that 2005 was a dreadful year for the American automotive business. Will 2006 be any better? Detroit certainly hopes so. But some industry observers say that despite new vehicles and far-reaching restructuring plans, serious challenges remain for America’s big automakers.

And those challenges look much like the ones that dogged Detroit in 2005 — stiff competition from Asia, tough union negotiations over crippling healthcare and pension costs, and a continued erosion of U.S. market share, as consumers continue to gravitate to foreign automakers such as Toyota and Honda, which have been at the vanguard of new consumer demand for cars with more fuel-efficient gas-electric hybrid engines.

“Sometimes you say a new year can bring a clean slate and refreshment, but that’s not the case for 2006,” said Rebecca Lindland, an automotive analyst at consultancy Global Insight. “2005 was a tough year, and 2006 will be another tough year. In the U.S. market, I don’t see a let-up of the pressure on GM and Ford from the Asian car makers.”

Despite the gloom in Detroit, 2005 ended on a fairly high note. Analysts are predicting full-year sales of around 17 million vehicles, a healthy pace that has held steady over the last 6 years. But GM and Ford still face challenges in 2006 when it comes to selling cars.

While Chrysler has brought out a line of attention-grabbing vehicles — including the 300 sedan and the Dodge Magnum, Charger and Challenger — GM and Ford need to bring out their own lines of must-have vehicles, notes Lindland.

“Young people who wouldn’t normally look at a Chrysler car are flocking into Chrysler showrooms,” she said. “That’s the problem that GM and Ford are facing.”

Another difficulty for Detroit is a growing portion of its sales are moving toward foreign automakers. GM, Ford and Chrysler had a combined U.S. market share of 57 percent at the end of November, down from 60 percent two years before. In sales terms, that’s as many as 600,000 vehicles lost to flourishing competitors such as Toyota, Honda and Hyundai.

U.S. automakers hit a home run last summer with discounts that let consumers pay the so-called “employee” price, leading to near-record sales. But as soon as the discounts expired in October, sales plummeted. GM, Ford and Chrysler have vowed to pull back on incentives, which confuse customers, cheapen brand image and hurt resale value. But analysts say that won’t be easy as long as they churn out more vehicles than they can sell.

GM and Ford were hit hard last year as consumer demand shifted away from Detroit’s gas-guzzling SUVs, a longtime cash cow, and toward smaller, more fuel-efficient cars, a segment of the market long dominated by Asian and European automobile manufacturers. Sales of sport utility vehicles have fallen by 2 or 3 percent in each of the last few years, and a jump in gas prices late in 2005 accelerated that trend curbed sales of the biggest SUVs.

GM is hoping to halt that slide with a new lineup of full-size SUVs coming out in 2006. GM says its 2007 Chevrolet Tahoe, Cadillac Escalade and other models get 20 miles to the gallon, making them the most fuel efficient in their class. And Ford hopes its Ford Fusion sedan, introduced last fall, will be stiff competition for the 2007 Toyota Camry.

But for some, changing car tastes and the potential for higher gasoline prices means a new breed of smaller, car-based crossover vehicles, or CUVs — essentially, a term for a smaller-sized SUV that is more like a car than a truck — will grab consumers in 2006.

The market for CUVs is expected to heat up this year, as Ford launches new models like the Ford Edge and Lincoln Aviator. Also, GM has two crossover SUVs in the pipeline.

In all, automakers will introduce 21 new and 38 significantly redesigned vehicles in 2006, according to J.D. Power and Associates. That’s similar to 2004, when 22 new vehicles and 30 redesigns hit the market.

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[AdmiralViscen]

You never know what will happen. This article is a fluff piece.

[JonathanRohr]

Originally Posted by AdmiralViscen

You never know what will happen. This article is a fluff piece.

[AJR]

Although no one can predict the future, I think this prediction is on solid footing.

[AdmiralViscen]

I also love how articles constantly use the phrase "Big Three" in their outrageous headlines about domestic failures, but they always talk about how great Chrysler is doing and how unexpected their turnaround was right in the article. Hello, bias? How about we focus on the actual companies in trouble, instead of slandering one that's doing everything right?

[acurafan]

I thought this topic was about Rocky 6 for a second i got all excited. Anyways, how many times do we have to hear this? Yes we know the big three are having difficulties, why dont we have more articles about the big three's accomplishments. For one, dodge and chrysler have a lot of interesting new models out now and in the future. GM and Ford's new products are good and selling pretty decently.

[01cavalier]

I think many of us are aware that this year will be tough, 07 may be also. Sometimes it just has to get worse before it gets better, and I think GM and Ford are realizing that they cannot stop development of new and better product even if they are not making any money.

[Butz]

2006 hopefully will be better than 2005.

[asim]

Originally Posted by Butz

2006 hopefully will be better than 2005.

I really think so!

[tgagneguam]

Originally Posted by AJR

Although no one can predict the future, I think this prediction is on solid footing.

Yes, I agree, though I'm not so sure it's all fair. Here's why:

I have a lot of faith in the intelligence of one man in particular with whom I work. We got on the topic of customer satisfaction at our organization, and we began to discuss perceptions. I then started to talk about the auto industry as an example of where perceptions aren't necessarily reflective of present conditions. I asked him why people would rate the Toyota Matrix higher than the Pontiac Vibe in quality. "Larry" was quick to respond: "The Toyota is better built, of course." I asked him how a vehicle made at the same factory could be better built. He responded that Toyota's are built better. "Larry, they're built at the same factory by the same people in Fremont, California. How could the Toyota be better built?" He actually looked puzzled, "Perception?"

Regular folks to this site definitely appreciate that I'm no apologist for GM; I'm far from it. But I do believe that one of GM's problems (that it has not done well to address, incidentally) is the precise perception that I mentioned above.

I wonder how it is that you change people's minds when they seem so steadfast in their belief that Detroit sucks. It really isn't true, to my knowledge. But how do you change that? This guy made it clear to me he is a Honda man and will never migrate back to Detroit. "Detroit is through" he claims.

I think larger issues of Union strife and liability costs and the like that Detroit faces will be the issues that continue to dog them in 2006. This will indirectly translate into eroding share and lost cash.

[04Malibu]

Originally Posted by tgagneguam

Yes, I agree, though I'm not so sure it's all fair. Here's why:

I have a lot of faith in the intelligence of one man in particular with whom I work. We got on the topic of customer satisfaction at our organization, and we began to discuss perceptions. I then started to talk about the auto industry as an example of where perceptions aren't necessarily reflective of present conditions. I asked him why people would rate the Toyota Matrix higher than the Pontiac Vibe in quality. "Larry" was quick to respond: "The Toyota is better built, of course." I asked him how a vehicle made at the same factory could be better built. He responded that Toyota's are built better. "Larry, they're built at the same factory by the same people in Fremont, California. How could the Toyota be better built?" He actually looked puzzled, "Perception?"

Regular folks to this site definitely appreciate that I'm no apologist for GM; I'm far from it. But I do believe that one of GM's problems (that it has not done well to address, incidentally) is the precise perception that I mentioned above.

I wonder how it is that you change people's minds when they seem so steadfast in their belief that Detroit sucks. It really isn't true, to my knowledge. But how do you change that? This guy made it clear to me he is a Honda man and will never migrate back to Detroit. "Detroit is through" he claims.

I think larger issues of Union strife and liability costs and the like that Detroit faces will be the issues that continue to dog them in 2006. This will indirectly translate into eroding share and lost cash.

It's not just perception, it's reality. GM and Ford are still behind Honda and Toyota in terms of reliability. This is not just perception, but statistical evidence. JD Power, Consumer Reports, Edmunds, Consumer Guide. I am sure someone will jump on me and claim that those publications are biased. And that may be true for one or two of them, but why do they all agree on quality ratings with remarkable similarity? There must be something more than bias at work.
Detroit IS in for a rocky 2006. It may be a little better than 05', but don't look for a smooth ride. GM and Ford may even make a profit, but don't look for profitability like Toyota or Honda. The UAW is crippling the Americans in more than one way. And as long as UAW is there, GM and Ford will be fighting with both hands tied behind their backs.

[AdmiralViscen]

You can't paint with a broad brush. Not all GM and Ford models are lower quality than their Toyota counterparts.

BTW, the door pull snapped off my dad's Honda yesterday.

[redimpss5]

The way they gave away 05's last year, all car companies will be lucky to sell in 06.

[Cortazzo]

Things are going to be tough for Ford, the Fusion will be a runaway hit, but I don't know if it can make up for the sales of the Explorer and Expedition just imploding. GM has a better shot with new and very awesome 900s, the Lambas that get here with enough time to make an impact, the Aura sedan. The g6 will continue to sell well i feel, the HHR and cobalt will still post solid numbers. The only misstep i feel was the new Impala, while the interior is pretty nice I can't seem to warm up to the exterior.

[04Malibu]

Originally Posted by AdmiralViscen

You can't paint with a broad brush. Not all GM and Ford models are lower quality than their Toyota counterparts.

BTW, the door pull snapped off my dad's Honda yesterday.

I agree with you about generalizing. But the media and the buying public ARE painting with a broad brush. It doesn't matter that the Mustang is higher in initial and three year quality than a Civic, not too many people are looking at it that way. They still remember the Chevy they owned that had multiple problems and assume that ALL Chevys have those same problems.

The other problem is that MOST Toyota and Honda models seem to outpace GM and Ford. At least up to this point. I had a new Fusion for a week until my Fiancee totaled it. I will say that that car felt nicer than a Honda or Toyota. I don't know about the quality though since it is now in the junkyard. Had to be a safe car though, because she survived without a scratch.