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Detroit's Big Three 'heavily on the run'
The latest bad news of projected losses and job cuts from Detroit points to an inescapable conclusion: U.S. automakers are going to have to get smaller if they ever hope to regroup and get bigger again.
"They are definitely heavily on the run," says George Peterson, president of AutoPacific, which consults for the industry.

That means closing more plants and slashing the workforce in hopes that costs will be reduced enough to make a profit. Only then will Detroit automakers be able to start thinking about a comeback.

Detroit was rocked by two big blows last week:

•Ford Motor. Ford will slash 10,000 additional white-collar jobs while offering early retirement and buyout packages to all of its 75,000 hourly workers.

The goal: cut the U.S. workforce by 29%, from 130,000 to 92,000 by the end of 2008. It will also close two more plants in addition to 14 previously announced. It still doesn't expect to make a profit in North America through 2008.

"Sometimes, you've got shrink to grow," said Mark Fields, Ford's chief of the Americas.

•DaimlerChrysler. The expected third-quarter loss for the U.S.-based Chrysler Group unit, which has Dodge, Chrysler and Jeep, more than doubled. Instead of $600 million, the loss will likely reach $1.5 billion. The unit anticipates a full-year loss of $1.2 billion.

DaimlerChrysler blamed excess inventory, employee retirement and health care costs, high fuel prices, more intense price competition on light trucks and a shift to smaller vehicles.

As a result, Chrysler plans production cuts through year's end.

While General Motors, the world's largest automaker, has come closer to righting its shaky finances lately, it's taking the same route to get there as Ford — employee buyouts and factory closings rather than earth-shattering sales.

"My feeling is we've been watching a long-term death spiral in the auto industry," says Richard D'Aveni, a Dartmouth business professor and consultant to several Fortune 500 companies. "The fundamental problems are not being solved by simply cutting back."

He compares the Detroit automakers with the Penn Central Railroad, which lingered for years by selling off assets — real estate, rights of way, stations — despite decades of losses.

D'Aveni says Detroit will be able to save itself only through radical action: breaking union contracts, investing in better parts and methods to increase quality, creating fresh new brands and getting more control over its dealer networks.

The Detroit Big Three are shrinking so fast now that they are almost at parity with the other Big Three, the largest Japanese automakers, Toyota, Honda and Nissan, says Kevin Tynan, auto analyst for Argus Research. These Big Six make up 88% of auto sales.

Peterson says U.S. "manufacturers are trying to right-size themselves. ... They are trying to get to the right level where they can make money on the products they sell."

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Detroit's Big Three 'heavily on the run'

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tundraboytundraboy - 9/18/2006 2:23:05 PM
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Hummer, Excursion, Expedition, Durango, Hemi, Tahoe, Suburban, etc. Who says words can never hurt you? These words are killing three companies leading to the loss of hundreds of thousands of high-paying jobs.

Top blame goes to the auto execs for focusing on SUVs and light trucks when EVERYONE was saying that cheap fuel will not last forever.

Next in line are the feds for rewarding the Big 3's shortsightedness by refusing to provide incentives to encourage fuel economy. Worse, they gave perverse incentives like exempting the really big SUVs from mileage standards.

Third in line are the unions for not caring a whit about the decades of bad decision-making by the auto execs as long as they get their generous union contracts.

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scottcampbell10scottcampbell10 - 9/18/2006 6:34:44 PM
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The government is close to passing a bill that gives tax credits to people who buy more fuel efficient cars. Just depends if Republicans will stop internal fighting, and if the Dems will drag their feet or not. I agree that Unions definately need to be separated from these companies, they're sucking the assets out like leeches. And I think with GM and Ford backed up into a corner, they will finally start making better vehicles.

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bigslick83bigslick83 - 9/18/2006 6:37:11 PM
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so far as i know the feds already give you a credit for having a hybrid. and they also hit you with a huge tax for a gas guzzler. so in effect i think that should be good enough as it is already overly controlled by the government.

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Sachsi2Sachsi2 - 9/19/2006 2:51:28 AM
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Among the reasons why Detroit is sinking: http://article.nationalreview.com/?q=NWY5ZmMyNjRhMjEwOWJiMjcyMDE5MTI2MWVhNTg1ODc=

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tundraboytundraboy - 9/19/2006 12:40:51 PM
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Amazing how you guys can pile on the unions and the government but can't get yourselves to mention the biggest culprits here: management.

This all started in the 70's when the big three hung on to obsolete technology (iron blocks, low compression, twin valve pushrod engines, carburettors, live rear axles,etc.) when the imports were moving into high compression multivalve OHC alloy engines, independent rear suspensions, fuel injection, and so on. Management decided that they'd build cars that are just good enough, rather than the best that they can build.

This is not governments' or the unions' fault. This is management assuming that their customers are too stupid to notice the difference in quality and will keep on buying their crappy product. This is the root cause. Even if government and the unions had done everything 'right' the big three will still be in trouble.

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scottcampbell10scottcampbell10 - 9/19/2006 2:45:45 PM
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But management isn't a current problem. We can gloat all about the mistakes they made in the 70s and 80s. But unions and government are a much bigger problem now. GM has Wagoner and Lutz, and much better vehicles, Ford just hired a great CEO, and for Chrysler, the falling popularity of trucks is to blame.

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tundraboytundraboy - 9/19/2006 5:55:24 PM
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I didn't say the management mistakes were made in the 70's and 80's. I said the mistakes started to be made in the 70's and 80's. And continued all the way to today (or the recent past if you will). The latest one was milking this SUV/light truck gravy train with no regard at all for what they will sell when fuel prices rise as everybody and her uncle predicted.

The big three were not losing money the whole period from the 70's to the present. They actually had years when they were making money hand over fist. The latest being the just-ended SUV/light truck buying binge. What did they do with all those profits? Use it to develop products for an era of high fuel costs (that their major competitors were preparing for)? No.

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