The deepening financial troubles of General Motors Corp. and Ford Motor Co. will likely overshadow the shimmering new car and truck models on display at the Detroit auto show next week, one of the industry’s most important annual events.
The North American International Auto Show, beginning Sunday in downtown Motor City, comes as the two U.S. automakers -- facing cutthroat competition, high labor-related costs, shrinking market share and excess capacity -- are preparing to report their fourth-quarter and full-year financial results.
Analysts expect GM, which has lost nearly $4 billion through the first three quarters of 2005, to post its fifth straight quarterly loss later this month. Cross-town rival Ford is expected to eke out a small quarterly profit, but announce major plant closings and blue-collar layoffs.
“The next 12 months will not only determine the very future of the domestic automobile industry as we know it, but Detroit will become the lightning rod for the most pressing issues facing this country -- health care costs, pension reform, global competition and its threat to the industrial foundation of America,” said Peter DeLorenzo, auto analyst and publisher of Autoextremist.com, a closely-watched industry Web site.
The mood will be somber at Ford’s stand with Americas president Mark Fields and other top executives avoiding questions on the details of the automaker’s long-awaited restructuring plan for North America during the show.
Ford Chairman and Chief Executive Bill Ford Jr. has said the turnaround plan, expected to be revealed on Jan. 23, would include “significant plant closings” and job losses.
Industry executives warned on Wednesday that higher interest rates and continuing volatility in energy prices could crimp U.S. auto demand this year.
Toyota racing ahead
GM and Ford each lost U.S. share to foreign rivals led by Japan’s Toyota Motor Corp. in 2005.
Asian brands won a 36.5 percent share of the U.S. market last year, a 1.9 percentage point increase compared with the same period in 2004. U.S. automakers, on the other hand, collectively lost 1.7 points of share at 57 percent, according to industry tracking firm Autodata.
With Asian carmakers ramping up output amid a flat to lower U.S. sales outlook, more share erosion seems inevitable for GM and Ford, analysts said.
KPMG LLP released a survey on Wednesday that showed most auto industry executives believe U.S. automakers’ share of the global market will decline in the next five years.
GM is now looking at the possibility of losing its “world’s largest automaker” crown for the first time in more than 70 years to Toyota, which unseated Ford for the No. 2 spot in 2003. Also, Toyota appears poised to overtake DaimlerChrysler’s Chrysler in the United States this year after gaining 1.1 points of market share in 2005.
Toyota said it plans to make a record 9.06 million cars globally in 2006, just shy of the 9.15 million cars and trucks that some analysts expect GM to build next year. Toyota’s production increase of 10 percent comes at a time when GM is shrinking capacity by slashing 30,000 jobs and closing 12 facilities in North America.
One bright spot for GM is the launch of the GMT-900 series, a new line of redesigned SUVs and trucks.
“With the upcoming introduction of new vehicles based on the GMT 900 platform, GM should regain lost share in the remarkably profitable large truck and large SUV segments,” said Jesse Toprak, executive director of industry analysis for Edmunds.com.
But Argus Research analyst Kevin Tynan was skeptical, given that high gas prices prompted many consumers to turn away from mid-size and large SUVs, and purchase more fuel-efficient cars in 2005.
“’06 is really a year where Ford and GM don’t have the products to satisfy the demand in the market if the shift away from trucks continues,” he said.
The increasingly volatile and difficult environment in Detroit as labor and management tensions come to a head could also grab the media spotlight at this year’s show.
Dissident United Auto Workers’ groups from Delphi Corp., angry with the bankrupt parts maker’s proposal for deep cuts in wages and benefits, are threatening to set up picket lines at the show.