US Auto Sector In A Shift
The news is out on the U.S. auto industry and there should be no surprise, especially if you have followed my columns. In March, it was reported that the two top U.S. automakers, General Motors Corp. (NYSE/GM) and Ford Motor Co. (NYSE/F) both saw its monthly sales fall.
GM saw its March sales plummet 14.6% year-over-year, its largest decline since October 2005. Ford reported a 4.5% year-over-year decline, which was disappointing given that Ford offered the most consumer rebates in March according to Edmunds.com, an industry tracking firm. The lone bright U.S. automaker was DaimlerChrysler AG (NYSE/DCX), which reported a 2% year- over-year increase in March sales.
As has been the case in the recent months, U.S. automakers are losing sales to Japanese automakers. Toyota Motor Corp. reported a monthly record for U.S. sales, seeing a 7% year-over-year jump in March sales.
The reality is the U.S. auto sector is in a shift. Domestic automakers must correct this or the negative trend will continue going forward and could further devastate the U.S. automakers.
As far as market share, GM is still holding to the top spot, but saw its U.S. market share decline to 22.8% from 26.9% a year ago. Likewise, Ford saw its share fall to 18.4% from 19.4%. Concurrently, Toyota held on to the third spot at 13.8%, just ahead of the 13.7% belonging to Chrysler.
The use of incentive programs by U.S. automakers, while it helps, does not really address the root of the problem. Once incentive programs are finished, consumers may go back to buying foreign autos. The reality is incentive programs make the consumer wait for major discounts before buying as they have been programmed to look for incentives, which is counterproductive.
The numbers continue to tell the story and the worsening trend. I believe there must be a major restructuring in the U.S. auto sector that will make U.S. automakers more competitive. This includes cost control and focusing on higher margin products.
Automakers must also be ready to react to new trends developing in the market place, including making smaller and more fuel efficient cars. If this does not happen, it is not inconceivable to believe that Toyota could eventually become a top two automaker in the U.S.