Big US car makers fight the decline

Tag: automotive parts

Many of the big American automotive names are struggling in the current economic landscape, with consumers everywhere turning to smaller, fuel-efficient cars, and are being forced to ever more drastic measures to survive.

The seismic shift by consumers to small cars from large vehicles has blindsided virtually every automaker. Only Honda Motor, where sales rose 1 percent in June, appears to have been prepared. The Japanese automaker’s Fit subcompact nearly doubled its sales during the month, and its Civic sedan set a June record.

By contrast, Toyota executives said they could not meet demand for its Prius hybrid-electric car or its small, fuel-efficient Corolla and Yaris models.

The consumer shift toward smaller vehicles reflects their broad concerns about gas prices and the overall economy, said James Lentz, Toyota’s top sales executive in the United States.

“There are so many things weighing on the consumer’s mind today,” Mr. Lentz said. “It has driven consumer confidence down to a low we haven’t seen since the oil embargo in 1973.”

The decline in housing construction has crippled sales of pickup trucks, too. Sales of Ford’s F-Series pickup plummeted 40 percent in June, and G.M. reported a 24 percent drop for its Chevrolet Silverado model.

Auto executives had little choice but to take a philosophical view of the market. “This too shall pass,” said Steven J. Landry, head of North American sales for Chrysler. “When it does, we want to be prepared.”

The Detroit automakers are temporarily laying off thousands of hourly workers as they idle plants making pickups and S.U.V.’s. Both Ford and G.M. are planning to add shifts to factories making small cars, but their additional production will not be available until the fall.

Japanese manufacturers have more flexible plants that will allow them to increase their output of small cars sooner, Mr. Toprak said.

The critical issue for Detroit is whether the companies have sufficient cash to weather the downturn.

Analysts project that G.M. will consume more than $1 billion in cash reserves each month to keep developing new products in the face of declining revenue.

But the automaker is confident that its reserves will hold out, Mr. Cervone said. “We have about $24 billion in cash and another $7 billion in credit lines we haven’t tapped yet,” he added.

G.M will continue to evaluate ways to cut costs, he said. G.M. recently postponed the redesign of its next generation of pickup trucks, and announced plans to possibly sell its Hummer brand.

Mr. Cole said that G.M. might consider splitting the company into two parts — a North American operation and an international unit — and raise money with a public stock offering for the growing overseas business.

Ford has already borrowed heavily against its assets to raise $29 billion in cash. Even so, the second largest of Detroit’s car companies is in the midst of cutting white-collar jobs and planning more buyouts of factory workers.

Privately held Chrysler, which was bought last year by Cerberus Capital Management, said last week that it was financially healthy and not considering bankruptcy protection.

Chrysler drastically cut its production plans early in the year, but this week was forced to announce the closing of one of its minivan factories and the elimination of a shift of workers at a pickup plant. One of its senior executives said Tuesday that the downsizing has stabilized Chrysler’s financial position.

“We committed to restructuring the company to being a much better but smaller organization,” said James E. Press, a Chrysler vice chairman.