Big Shift in US Car Industry
A FUNDAMENTAL transformation is taking place in the US car industry as Asian carmakers increase their domestic production and market share while General Motors and Ford continue to shrink.
The shift was kicked off 21 years ago when Toyota opened its first US manufacturing plant, and it was highlighted again on Monday when both Toyota and Hyundai subsidiary Kia announced plans to open new assembly plants.
"There's no doubt the footprint is shifting and the players are shifting," Michael Robinet, a car analyst with CSM Worldwide, said.
The same advantages which fuelled the growth of Asian carmakers in the 1980's are helping them today: a strong focus on fuel-efficient vehicles and lower production costs.
Japanese carmakers Toyota, Nissan, Honda, and Fuji Heavy Industries (the maker of Subaru), and Korea's Hyundai currently build 27 per cent of the vehicles produced in North America and command 34 per cent of the US market.
CSM expects the Asian production share to rise to 35 per cent by 2012 as new facilities come online and GM and Ford complete restructuring plans that include the closure of more than two dozen facilities.
That shift has helped propel the economic decline of Detroit and the state of Michigan. While US carmakers are still headquartered in and around the Motor City, Asian and European manufacturers have built most of their plants in the less union-friendly southern states.
Building vehicles in the market where they are sold has a number of advantages.
"It stabilises the cost base and politically it can't hurt," Robinet said. "If you locate a plant in a new state, that's two more senators flying your flag."
Some of the increased production by Asian carmakers will replace vehicles previously imported, Robinet said. But a large chunk could come from new Asian models aimed at further chipping away the diminishing market share of GM and Ford.
While Kia has not announced what it plans to build at its new US$1.2 billion (US$1 = RM3.71) Georgia facility, many industry insiders expect it will enter the lucrative truck market.
Toyota, meanwhile, will open a truck assembly plant in Texas this spring and is expected to build a hybrid version of its best-selling Camry sedan at its new facility in Indiana.
Both Hyundai and Toyota have launched large ad campaigns touting the fact that their vehicles are made in America, in an attempt to break through to consumers who are still uneasy about buying foreign cars.
"If you look at the demographic breakdown where sales occur, they are much heavier along the east and west coasts," said James Ricci, a car analyst with Harbour Consulting. "The only way Toyota can see sales growth is to appeal to a customer they really haven't had access to: the tried and true American".
This expansion will make things even more difficult for GM and Ford, warned David Cole, chairman of the Centre for Automotive Research in Ann Arbor, Michigan.
The two US giants are in a financial crisis following of a sharp drop in demand for their highly profitable but gas guzzling sport utility vehicles.
They have been forced to shrink their operations to meet the realities of a more competitive marketplace and place a new focus on their long-neglected small cars.
But they are also stymied by heavy 'legacy' costs of providing pensions and health care benefits to the now-retired workers who filled their factories in the years when GM and Ford commanded more than three quarters of the massive US market.
"The new players have a cost structure that is on the average of about US$2,500 less a vehicle," Cole said. "That's a killer number when you're trying to get competitive. It's a lot easier to add costs than to take out costs." - AFP
BusinessTimes
The shift was kicked off 21 years ago when Toyota opened its first US manufacturing plant, and it was highlighted again on Monday when both Toyota and Hyundai subsidiary Kia announced plans to open new assembly plants.
"There's no doubt the footprint is shifting and the players are shifting," Michael Robinet, a car analyst with CSM Worldwide, said.
The same advantages which fuelled the growth of Asian carmakers in the 1980's are helping them today: a strong focus on fuel-efficient vehicles and lower production costs.
Japanese carmakers Toyota, Nissan, Honda, and Fuji Heavy Industries (the maker of Subaru), and Korea's Hyundai currently build 27 per cent of the vehicles produced in North America and command 34 per cent of the US market.
CSM expects the Asian production share to rise to 35 per cent by 2012 as new facilities come online and GM and Ford complete restructuring plans that include the closure of more than two dozen facilities.
That shift has helped propel the economic decline of Detroit and the state of Michigan. While US carmakers are still headquartered in and around the Motor City, Asian and European manufacturers have built most of their plants in the less union-friendly southern states.
Building vehicles in the market where they are sold has a number of advantages.
"It stabilises the cost base and politically it can't hurt," Robinet said. "If you locate a plant in a new state, that's two more senators flying your flag."
Some of the increased production by Asian carmakers will replace vehicles previously imported, Robinet said. But a large chunk could come from new Asian models aimed at further chipping away the diminishing market share of GM and Ford.
While Kia has not announced what it plans to build at its new US$1.2 billion (US$1 = RM3.71) Georgia facility, many industry insiders expect it will enter the lucrative truck market.
Toyota, meanwhile, will open a truck assembly plant in Texas this spring and is expected to build a hybrid version of its best-selling Camry sedan at its new facility in Indiana.
Both Hyundai and Toyota have launched large ad campaigns touting the fact that their vehicles are made in America, in an attempt to break through to consumers who are still uneasy about buying foreign cars.
"If you look at the demographic breakdown where sales occur, they are much heavier along the east and west coasts," said James Ricci, a car analyst with Harbour Consulting. "The only way Toyota can see sales growth is to appeal to a customer they really haven't had access to: the tried and true American".
This expansion will make things even more difficult for GM and Ford, warned David Cole, chairman of the Centre for Automotive Research in Ann Arbor, Michigan.
The two US giants are in a financial crisis following of a sharp drop in demand for their highly profitable but gas guzzling sport utility vehicles.
They have been forced to shrink their operations to meet the realities of a more competitive marketplace and place a new focus on their long-neglected small cars.
But they are also stymied by heavy 'legacy' costs of providing pensions and health care benefits to the now-retired workers who filled their factories in the years when GM and Ford commanded more than three quarters of the massive US market.
"The new players have a cost structure that is on the average of about US$2,500 less a vehicle," Cole said. "That's a killer number when you're trying to get competitive. It's a lot easier to add costs than to take out costs." - AFP
BusinessTimes
posted by Ottawa Gas Prices | 4:28 PM
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