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NEWS ANALYSIS : U.S. Car War Becomes Brutal : Autos: Makers scramble to adjust. While GM cuts back, Toyota will expand.

TIMES STAFF WRITER

As General Motors prepares to dramatically slash production capacity in North America for financial reasons, Toyota will likely expand its manufacturing and assembly operations in the United States for political reasons.

GM is losing billions of dollars a year because of underused plants, while Toyota--the largest foreign seller of cars in the United States--is under pressure to limit exports and expand U.S. production to provide jobs for American workers.

If the two automotive giants successfully carry out their new American strategies, analysts and economists say, other automobile makers--U.S. and foreign--will be under intense pressure to make adjustments of their own to maintain their competitiveness in the lucrative North American market.

It will be years before it is clear whether GM can succeed in turning itself around. But it is evident, after GM’s announcement Wednesday that it will close 21 U.S. plants and eliminate 74,000 jobs by 1995, that the world’s auto makers will have to move into high gear in the chase for the American car buyer.

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In handicapping the industry, analysts say Chrysler has the ability to adjust to a changing market more quickly than GM or Ford, because Chrysler is smaller and already is planning major product changes. However, with the smallest customer base among the Big Three, Chrysler has the most to lose if GM rebounds strongly. Meanwhile, Ford has been more efficient than either company and can more easily finance future projects.

Among foreign car companies, Toyota clearly is in the driver’s seat, while Honda is making gains and Nissan holds steady, despite a difficult 1991 in North America. Japanese auto makers now have nearly one quarter of the U.S. market, although analysts are divided on whether this share will grow in the years ahead.

European car makers have a smaller, but relatively secure, share of the upscale U.S. market, and that share is not immediately threatened.

GM is the last of the Big Three auto makers to make major changes in the quest for more efficient North American operations. Worker productivity is higher at the plants of the company’s American competitors. And GM lags behind its U.S.-based competition in the profit earned on each vehicle.

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While GM continues to perform well in Europe, it is downsizing its operations on this side of the Atlantic in an effort to staunch vast losses here. GM’s problem: It has been maintaining a production capacity far larger than its market share.

“Until these announced changes, GM has been operating as if this were the 1970s,” said John McElroy, editor of Automotive Industries, a Detroit-based trade journal. “Their (North American) structure has been geared for the days when they had nearly 50% of the market instead of the 35% they’re currently getting.”

Meanwhile, Japanese-based competitors face the prospect of even more political pressure in the wake of GM’s struggles. GM’s North American operations will be about $7 billion in the red in 1991, said Stephen Girsky, an industry analyst at Paine Webber in New York. On the other hand, Girsky said Toyota will realize a 1991 profit from its U.S. exports and its North American operations.

Japanese companies are concerned that the GM retrenchment will raise pressure on President Bush to take a tough line on trade issues when he visits Tokyo next month. Japan’s U.S. exports totaled an estimated 1.8 million in 1991.

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“By 1993, the Japanese will be further limiting their exports to the U.S. as a result of pressure,” said Mike Bowyer, an analyst at Duff & Phelps in Chicago. “To compensate, they’ll build more vehicles in the U.S.”

COMPETITIVE LANDSCAPE

The restructuring of General Motors, the world’s biggest auto maker, calls into question just which manufacturer is the best competitor in the race for the customer. GM, Ford and Chrysler have all been losing market share to their Japanese rivals, particularly GM. At the heart of the problem is productivity; hard-hit GM needs more workers than its rivals to build a car and earns less money per car it builds.

Number of vehicles sold in the U. S. in 1990 GM: 3.3 million Ford: 1.9 million Chrysler: 860,000 Toyota: 780,000 Honda: 850,000

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1990 productivity worldwide (vehicles per employee per year) GM: 12 Ford: 16.5 Chrysler: 15.7

Profitability per vehicle in 1990 GM: -$462 Ford: $53 Chrysler: $210

* Based on automotive production worldwide. Profitability per vehicle based on pretax operating profit or loss divided by total production.

Source: Automotive Industries magazine

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GM’s Shrinking Market Share

1954: GM: 50.7% Ford: 30.8% Chrysler: 12.9% Other Domestic: 5.0% Asian/European: 0.6%

1974: GM: 40.9% Ford: 25.0% Asian/European: 15.7% Chrysler: 13.6% Other Domestic: 3.8%

1991 (through November): Asian/European: 36.0% GM: 35.6% Ford: 19.9% Chrysler: 12.9%

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Source: General Motors Corp.


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