US carmakers seek ways out of global automotive crisis

Business Materials 11 January 2008 22:51 (UTC +04:00)

( dpa )- The world's top carmakers gather next week in the North American city of Detroit for what is traditionally an upbeat event on the US industry's home turf.

The trouble is that this time around " Motor City" no longer stands for the historic heart of the US automotive industry. It has become a symbol of deep-seated malaise for General Motors, Ford and Chrysler instead.

Billion-dollar losses and rapidly-dwindling sales at home have plunged the US car companies into a deep crisis. With their backs-to- the-wall view of foreign competition, they are now seeking their fortunes in the distant, emerging markets of China, India and Eastern Europe.

Ironically, the meltdown coincides with the 100th anniversary of the founding of the world's largest carmaker General Motors (GM). As if stubbornly refusing to acknowledge its predicament, the industry icon kicked off the jubilee year by announcing months of festivities in the run-up to the autumn.

GM certainly has its hands full trying to reinvent itself. "We are entering our second century at a time of fundamental change in the industry," said boss Rick Wagoner.

Over at Ford and Chrysler troubleshooters Alan Mulally and Robert Nardelli face an equally arduous task. Between them, the three car manufacturers have shed around 80,000 jobs and shut down two dozen factories over the past two years. There is no sign of a let-up either. Tens of thousands of industry jobs are due to be axed and Chrysler alone, the smallest of the once mighty "Big Three," is to cut its workforce by up to 25,000.

Germany's Daimler got its divorce from Chrysler just in time last summer and sold 80 per cent of the holding to financial investor Cerberus. The credit squeeze that followed would have made the deal impossible, Daimler boss Dieter Zetsche later revealed.

Above all, rising prices at the petrol stations and the growing financial crisis stymied the US car market in 2007. Sales fell by 2.5 per cent to 16.15 million vehicles - the lowest level seen since the end of the 1990s.

Things are set to get even worse this year. Experts expect to see car sales in North America hovering between 15.5 and 15.9 million cars. At this rate, the world's biggest car market could soon have to hand over the title to Europe with its burgeoning eastern regions. Not even the ruinous rebates being offered by US car dealers can reverse this trend.

North American carmakers bore the brunt of the sales slump in 2007, with Ford being particularly hard-hit. It saw sales plummet by 12 per cent. The news knocked an even higher percentage off the value of Ford and GM shares.

Meanwhile, Toyota moved deftly into first place, relegating Ford to second position as the top-selling marque in the US marketplace. The development is a shock for US traditionalists amid signs that the Japanese archrival could soon topple GM from its pedestal as the world's biggest carmaker. German manufacturers led by Mercedes and BMW made significant headway in the US market last year but in volume terms they are not in the same league.

A few months ago, US auto manufacturers sat down with representatives of the powerful United Auto Workers (UAW) and thrashed out a set of new cost-cutting wage agreements. The US economic magazine Portfolio warned car executives however that in view of the many concessions made to their workers, time was running out for the industry.

"There are no more excuses", it opined.

In what could prove to be a decisive year, the carmakers are scrambling around in 2008 for new concepts to help lift sales rather than just saving money. Instead of gas-guzzling offroaders and pick- ups, which are proving hard to sell, the stands at the 20th North American International Car Show will feature petrol-electric hybrids and cars with electric propulsion.

Only recently at the Consumer Electronics Show in Las Vegas GM sought to climb onto the eco-friendly bandwagon and boost its technology credentials by announcing the prototype of a driverless- car.

Suddenly the US giants renowned for producing "yank tanks" are learning to love even small cars. Low-cost models are currently the fastest-growing segment, says car industry expert Ferdinand Dudenhoeffer in Germany.

Just like the German competition, the Americans are focussing their attention on booming markets in India, China and Russia. According to studies, these regions will account for 80 per cent of future industry growth.

GM was even able to boost its sales in China in 2007 to a total of 1.3 million units, giving it the market leadership. Ford is due to start making a no-frills car in India at some point in the next two years and is pouring billions of dollars into the project.

Proof of the way the industry is changing, and an ironic twist of automotive history at the same time, is the news that Ford is thinking of selling its premium British marque Jaguar to rapidly up- and-coming Indian carmaker Tata .