After two years of cost-cutting, profits are beginning to recover for General Motors and Ford but a soft economy is sharpening competition in the critical truck segment.
As they head into their annual summer gathering this week in northern Michigan, American carmakers are no longer king of the road: for the first time, foreign rivals rule over their home turf.
The market share for new-vehicle sales among US brands dropped to 48.2 percent in July, the first time it has fallen below 50 percent, according to data released ahead of the annual management briefing seminar in Traverse City, Michigan.
Meanwhile, Asian carmakers grabbed 44.6 percent and European competitors took 7.3 percent of the US market.
Overall sales in the United States dipped to their lowest level in more than nine years in July, according to industry tracker Autodata.
And sales are not expected to increase much in August, said Paul Ballew, general director of market analysis at General Motors (GM) Corp.
Ellen Hughes-Cromwick, corporate economist at Ford Motor Co., pointed to softening in the economy in recent months.
“Home prices are still falling across the country,” she said. “(The) new-vehicle sales environment clearly remains challenging.”
The monthly sales decline came just as GM and Ford were beginning to show signs of recovering from the terrible beating they took over the past two years, when they suffered a combined loss of more than 25 billion dollars.
On Tuesday, GM reported an 891-million-dollar quarterly profit, while Ford posted profit of 750 million.
Chrysler, the third leg of Detroit's Big Three automakers and the just-divested US arm of DaimlerChrysler, is not due to publish its second-quarter earnings until late August, but last year posted an operating loss of 1.5 billion dollars.
Since the end of 2005, GM and Ford have cut their payrolls by more than one third, or by more than 60,000 jobs, as part of their restructurings.
Chrysler has eliminated 6,000 jobs this year in its North American operations as part of its recovery plan.
Harley Shaiken, a labor expert at the University of California-Berkeley, said that GM and Ford's sales and profits numbers underscored the dilemma facing American manufacturers as they try to negotiate additional concessions from the United Auto Workers union in contract talks that began in late July.
“The numbers cut both ways,” he said. “The profit numbers complicate the negotiations. The workers see the numbers and know the sacrifices they've already made.”
They must be wondering about demands for more concessions, he added.
“But the sales numbers underline the financial realities remain pretty severe,” Shaiken said. “There is no question the improvements in productivity and job cuts aren't going to do the trick without the right products. Detroit's real weakness is in the product,” Shaiken said.
The decline in market share came as American carmakers slashed sales of vehicles to fleets maintained by daily rental companies as part of efforts to restructure and boost the value of their vehicles in the eyes of finicky, fashion-conscious buyers.
Although American carmakers' long resistance to more stringent fuel-economy standards has begun to weaken, they still depend on sales of pickup trucks and sport utility vehicles (SUVs) designed for the relatively inexpensive gasoline prices that prevailed prior to the 2003 US invasion of Iraq.
However, American manufacturers' grip on this critical segment weakened last month, with Japanese leader Toyota reporting record sales. Bob Carter, Toyota Motor Sales vice president, said Toyota's pickup truck sales were particularly strong in the center of the country.
“We're hitting our targets,” said Carter, who noted Toyota sold more than 21,000 new full-size pickups in July.
Tom Libbey, an analyst with J.D. Power & Associates, said Toyota has clearly been using incentives of more than 3,500 dollars to help sell the new trucks.
“The truck has only been out four months and they still outsold the (Chrysler) Dodge Ram last month,” he said.
