Auto Industry Faces Intensifying Competition in Mature Markets

Strategic Insights -

Mature markets in North America, Europe, and Japan will experience a decline in auto sales in the coming years, intensifying competition among auto manufacturers. Standard & Poor's Corp. forecasts a softening of overall sales, which will disproportionately affect major players like Ford Motor Co., General Motors Corp., and the Chrysler division of DaimlerChrysler AG. The decline in sales is attributed to consumer preference shifts, gas prices, and declining market share.

Key Takeaways:

  • Sales of new vehicles will decline in North America this year from 2005 levels and again in 2007 from this year's levels.
  • Deliveries in Canada, the United States, and Mexico are on a declining trend from the 17-million-vehicle level hit in 2000.
  • Ford, GM, and Chrysler have lost market share to Asian and European auto makers, prompting production cuts in the first quarter of 2007.
  • Consumer preference shifts, gas prices, and moderating levels of incentives are keeping sales of Ford and GM's most profitable products under pressure in 2006.
  • Near-term liquidity is adequate at Ford due to a recent plan to raise over $20 billion in new debt, but elements of its restructuring plan will take several years to execute.
  • GM has been removed from S&P's credit watch list but still faces significant challenges in North America.
  • The Chrysler group's target of break-even results on an operating basis in 2006 is challenging due to the competitiveness of the North American mass market for light vehicles.
  • European auto makers will continue to struggle with declining prices and the need to restructure and improve efficiency.

Statistics:

  • Sales of new vehicles will decline in North America this year from 2005 levels.
  • Deliveries in Canada, the United States, and Mexico are expected to reach 17 million vehicles this year.
  • Ford, General Motors, and Chrysler will cut production in the first quarter of 2007.
  • Ford plans to raise over $20 billion in new debt to improve liquidity.
  • The Chrysler group's target of break-even results on an operating basis in 2006 is challenging due to market competitiveness.
  • European auto makers have seen five successive years of declining prices.

Sources:

  • Standard & Poor's Corp.
  • "Report Card on the Global Auto Industry"
  • [The Globe and Mail]
  • [Publication Date]

Note: The exact date of the "Report Card on the Global Auto Industry" was not provided in the original text.