Sign in Subscribe
Transportation equipment industry

US Auto Industry Faces Mounting Losses Amid Shift to Greener Cars

Strategic Insights

— 1 min read

The US auto industry is reeling under the impact of soaring fuel prices and intense competition from Asian carmakers supplying smaller, more fuel-efficient vehicles. Chrysler, America's third-largest carmaker, is launching a severe cost-cutting program and shifting focus towards more fuel-efficient models to halt its losses, which reached euros 1.16bn (pounds 780m) in the third quarter. DaimlerChrysler's operating earnings plummeted to euros 892m in the same period, a stark contrast to euros 1.84bn a year ago.

Key Takeaways:

  • Chrysler's losses were prompted by a 26% drop in sales and a price war, resulting in a significant drag on its parent group DaimlerChrysler's operating earnings.
  • DaimlerChrysler's delays in Airbus's A380 superjumbo production are expected to shave off euros 200m from its earnings this year, despite reaffirming its forecast of euros 5bn for the full year.
  • Chrysler has launched eight fuel-efficient models this year and is planning further cuts in output to reduce stocks at dealerships by the end of the year.
  • Tom LaSorda, Chrysler's Chief Executive, has admitted that more closures or capacity cuts could be on the horizon.
  • Mercedes, Daimler's premier brand, increased its operating profits by 127% to euros 991m, despite Smart small car division losses.
  • General Motors (GM) reported a net loss of $115m for the third quarter, a $1.6bn improvement on the same period in 2005, and intends to shed 35,000 jobs.
  • GM has refused a three-way alliance with Renault-Nissan, opting to restore its premium brands, including Jaguar.
  • Bodo Uebber, DaimlerChrysler's Chief Financial Officer, has not ruled out a partnership for Chrysler or an outright sale.

Statistics:

  • Chrysler's losses: euros 1.16bn (pounds 780m) in the third quarter.
  • DaimlerChrysler's operating earnings: euros 892m (a decrease from euros 1.84bn a year ago).
  • Delayed earnings from Airbus's A380 superjumbo production: euros 200m.
  • DaimlerChrysler's forecast for the full year: euros 5bn.
  • Mercedes' operating profits increase: 127% to euros 991m.
  • General Motors' net loss for the third quarter: $115m (a $1.6bn improvement on the same period in 2005).
  • General Motors' jobs cut: 35,000.

Sources:

  • [1] guardian.co.uk/cars
  • [2] DaimlerChrysler's press release
  • [3] General Motors' press release
  • [4] Reuters report on Chrysler's losses
  • [5] Bloomberg report on DaimlerChrysler's earnings

Read more