Toyota, New Papa Bear?

Once upon a time the North American auto industry was totally dominated by three auto makers. There was General Motors, the No.1 car maker in the world, followed by Ford and, finally, the wee one of the three, Chrysler. Collectively, they became known as the Big Three amid the also-ran American car makers and upstart foreign-owned companies that scrambled for traction in the market. Today, the upstarts

Once upon a time the North American auto industry was totally dominated by three auto makers.

There was General Motors, the No.1 car maker in the world, followed by Ford and, finally, the wee one of the three, Chrysler.

Collectively, they became known as the Big Three amid the also-ran American car makers and upstart foreign-owned companies that scrambled for traction in the market.

Today, the upstarts are bona fide contenders. Collectively, they have captured a sizable share of the pie.

It has taken time, but each of the Big Three has recognized the need to right-size accordingly.

Chrysler was first. Five years ago, Dieter Zetsche was parachuted in from parent DaimlerChrysler in Germany to lead a turnaround of the ailing U.S. division.

He oversaw an aggressive cost-cutting campaign that eliminated 26,000 hourly jobs, thousands more white-collar positions, and worked with suppliers to reduce material costs by 15%.

Three painful years later, Chrysler arguably is just right.

Remaining plants are operating at full capacity, new products are selling well and earnings are back in the black.

Dealers gave Zetsche a standing ovation at a farewell sendoff in Las Vegas as the man who won the hearts of many prepares to take over as chairman of DaimlerChrysler.

GM appeased critics by announcing it will close six vehicle assembly plants, two powertrain facilities and two stamping plants by 2008, slashing hourly employment by 30,000 workers and reducing annual North American capacity to 4.2 million cars and trucks.

There has been much clamor for drastic action in the face of falling earnings and stock prices, and waning sales even with deep and costly discounts.

GM's turnaround also will be painful, but Chairman Rick Wagoner expects the auto maker to be close to operating at 100% of capacity by the end of 2007.

He says the restructuring should not affect future product programs, or be taken as a sign GM is conceding market share in North America.

GM should emerge with a footprint that's not too big, a portfolio that's not too small, and a balance sheet that's just right.

And then there's Ford, which has started down the path to revitalization with a new management team to execute the next plan.

Some of the details have become public, such as the intention to eliminate the equivalent of 4,000 salaried jobs.

Plant closings and hourly layoffs will be outlined as part of the “Way Forward” plan to be detailed in January. The consensus is Ford has four more plants than it needs.

The auto maker launched a revitalization plan in 2002 that included a pair of plant closings and shift reductions, among cost-cutting measures.

But there is every reason to believe Ford again is prepared to take the drastic steps necessary to operate profitably and retain its prominence in the industry.

There likely is no stopping Toyota from becoming the new papa bear of the auto industry, but all the Goldilocks on Wall Street should appreciate the healthier proportions of the Big Three.

Alisa Priddle is editor of Ward's Automotive Reports.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish