The Big 3's Big Drop
It's a statistic that will have Detroit buzzing. In January, the Detroit 3-formerly known as the big 3- sold 50.6% of the cars and trucks in the U.S. A record low.
Think about that stat for a minute.
We are on the verge of seeing Americans buy more foreign brand cars and trucks than domestic nameplates. Don't be surprised if that happens in February or March. The biggest reason for the fall-off in domestic sales is the decision by Fordand GMto cut back on low-margin fleet sales. For years, pedaling several hundred thousand vehicles to corporate and rental car fleets has propped up the Detroit 3's market share, but hurt the company's because they carry small profit margins and lower a model's residual value.
So GM and Ford are taking tough medicine, and their market shares are diving. Ford actually fell to fourth behind Toyotaand Chryslerwith it's share dropping to 14%. General Motors market share dropped 3.3% down to 22.2%. And here's something that is especially stunning to some people. Since 2001 GM's market share lead over Toyota has gone from 18.8% down to 6.1%. That's right, in 6 years, Toyota has cut GM's lead over it by two third's.
So what to make of all this?
More than anything, it's time investors and the buying public realize that the U.S. auto market is becoming more like the European market, where there are several companies battling it out for sales. Unlike here in the U.S. where it's long been a story of the big 3 dominating the market. I actually think this more realistic view of U.S. auto sales is good for Detroit's 3. They are facing the fact they need models that sell, and sell for a decent profit margin. If they can do that, their market share and their bottom lines will not only stabilize, but could improve. And those are the type of numbers Detroit ultimately wants to see.
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