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Automobile industry

Detroit's Big Three Auto Makers Face New Challenges in U.S. Market

Strategic Insights

— 2 min read

The U.S. auto market, which has been growing steadily over the past few years, is now showing signs of slowing down, posing a new risk to the turnaround plans of Detroit's beleaguered Big Three auto makers. As the U.S. economy and housing industry slow down, particularly in big markets like California, General Motors Corp., Ford Motor Co., and DaimlerChrysler AG's Chrysler Group are facing a challenging situation. With all three companies losing money in North America at current sales volumes, a downturn in vehicle demand would make it even more difficult for them to regain profitability and clear out bulging inventories of unsold vehicles.

Key Takeaways:

  • U.S. auto sales could fall to their lowest level in nearly a decade in 2007, with IRN forecasting 16.3 million light vehicles sold, a drop of 300,000 from this year's expected 16.6 million vehicles.
  • The decline in U.S. auto sales is attributed to slowing growth in the overall U.S. economy and the slump in the housing industry, particularly in California.
  • General Motors Corp. and Ford Motor Co. are forecasting sales of 16.5 million cars and trucks in 2007, but analysts at Bank of America, Wachovia Corp., and Citigroup are expecting a sharper decline.
  • Toyota Motor Corp. could be hurt by any downturn in California, where it controls a large chunk of the market, and is now building a plant in Texas to assemble a new full-size pickup truck.
  • Auto sales in California plunged 16 per cent in the third quarter and show little sign of bouncing back soon.
  • Wilbur Ross, an investor who has spent hundreds of millions of dollars buying battered auto suppliers, thinks 2007 sales will be about 16.2 million light vehicles.

Statistics:

  • U.S. auto sales could drop to 16.3 million light vehicles in 2007, a 300,000-unit decline from this year's expected 16.6 million vehicles. (IRN)
  • California's auto market plunged 16 per cent in the third quarter. (Source omitted)
  • Toyota Motor Corp. controls a large chunk of the California market. (Source omitted)
  • General Motors Corp. and Ford Motor Co. are forecasting sales of 16.5 million cars and trucks in 2007. (General Motors Corp., Ford Motor Co.)
  • IRN's director of forecasting, Erich Merkle, said there is more downside risk to the 16.3 million unit sales forecast than there is a chance it gets better. (Source omitted)
  • Wilbur Ross thinks 2007 sales will be about 16.2 million light vehicles. (Source omitted)

Sources:

  • "To be honest, there is a lot more downside risk to that than there is a chance it gets better," said Erich Merkle, IRN's director of forecasting. (IRN)
  • "A softer market really stresses the Big Three out," said David Cole, president of the Center for Automotive Research in Ann Arbor, Mich. (Center for Automotive Research)
  • Wilbur Ross thinks 2007 sales will be about 16.2 million light vehicles. (Source omitted)
  • General Motors Corp. and Ford Motor Co. are forecasting sales of 16.5 million cars and trucks in 2007. (General Motors Corp., Ford Motor Co.)
  • Toyota Motor Corp. could be hurt by any downturn in California, where it controls a large chunk of the market. (Source omitted)
  • Auto sales in California plunged 16 per cent in the third quarter. (Source omitted)

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