Outlook gloomy for U.S. automakers
USA Today
Bad news is coming in waves for U.S. automakers, suggesting that the industry's once-a-decade downturn is at hand.
Bloomberg News Service
"It's one of the three most challenging periods I've experienced in the 24 years I've worked at Ford," says George Pipas, the automaker's market analyst. The others: recessions of the early '80s and early '90s.
Ford Explorers move along the assembly line at Ford's Louisville plant. U.S. automakers have seen their market share slip despite offering huge incentives to customers.
"There's an element of survival of the fittest" as car companies jostle to prepare this time, he says.
"The end of the world as we know it? No. Downturn? Yes," says Jim Hall, industry analyst at consultant AutoPacific. He sees at least another year of slipping sales and profits. And he notes the decline is uneven, mainly hitting Detroit.
GM, Ford and the Chrysler Group of DaimlerChrysler have 65.1 percent of the new-vehicle market so far this year — down from 68.2 percent the same period last year.
Detroit's customers tend to be older and have less schooling. They are first to lose jobs or back off spending in a sluggish economy, industry and studies show.
Also, foreign brands successfully invaded the sport-utility, pickup and minivan segments. Detroit brands have 76 percent of the truck market, down from 78.4 percent a year ago.
Ford Motor, an industry champion last year, seems the lightning rod for disaster this year. It just announced it must cut as many as 5,000 white-collar jobs by the end of the year at a cost of $700 million. It warned Wall Street to expect earnings of 70 cents a share this year instead of the forecasted $1.20.
Ford has been hurt by depressed sales and tire recalls involving its Explorer SUV. Ford also plans to restructure at the end of the year, and "nothing is off limits," says CFO Martin Inglis.
Ford was last to cut jobs. DaimlerChrysler said in January it was cutting 18,400 U.S. workers and 7,600 in other countries, most this year. GM said in December it would eliminate 14,000 jobs worldwide.
Other worrisome signs:
• Moody's Investors Service, Standard & Poor's and Fitch all said they might downgrade ratings of debt issued by Ford and Ford Motor Credit. Moody's and S&P say the same about GM. DaimlerChrysler was downgraded earlier.
• Sales, though declining, remain brisk. But that's taken record incentives. July's averaged $2,046 a vehicle, up 18.7 percent from a year ago, says Merrill Lynch auto analyst John Casesa.
Casesa cautions consumers haven't felt the brunt yet of layoffs and economic worry, but when those hit home, they will be "huge headwinds" for Detroit.
