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back to index backAMERItalk January,  2006

Analysts: Big 3 Market Share Erosion Will Continue

Asian automakers expected to report healthy gains in January sales

DETROIT -- Analysts predict Asian automakers will continue to gain U.S. market share this month despite General Motors Corp.'s decision to drop prices on most vehicles.

It's a familiar pattern. GM, Ford Motor Co. and DaimlerChrysler AG's Chrysler Group have seen their U.S. market share decline steadily over the last 10 years, from 72 percent in 1995 to 57 percent last year. The auto information site predicts the combined U.S. market share for the traditional Big Three will fall to 54 percent in January.

"Imports and transplants have eaten Detroit's lunch and are beginning to nibble at its dinner as well," Burnham Securities analyst David Healy said this week in a note to investors.

Several auto analysts predict sales will be up slightly from January 2005 when automakers report monthly sales results Wednesday.

Usually, January is a weak month because dealers are coming off holiday discounts. But this January could be different, because GM, Ford and Chrysler didn't have a strong December despite a flurry of year-end discounts. Healy says buyers were still suffering "incentive burnout" after a summer of employee discounts.

Grabbing the Big Three's share in January will be Toyota Motor Corp. and Honda Motor Co., which could both see double-digit sales increases for the month, analyst Jesse Toprak said.

Toprak said Detroit's heavy reliance on sport utility vehicles and trucks is a big reason for the decline. Average U.S. gas prices, now $2.32 a gallon, are 27 percent higher than last year, and some analysts predict gas will hit close to $3 a gallon this summer.

"This month, compact cars and compact SUVs are selling particularly well, while sales of trucks, luxury cars and large cars are suffering," Toprak said.

That could be bad news for GM, which is launching a new lineup of SUVs and trucks this year. Ford also introduced the redesigned 2007 Ford Expedition SUV and the even larger Expedition EL on Friday at the Houston Auto Show. Ford said it's anticipating the market for large SUVs like the Expedition will continue to decline through 2010, but is still large enough to be an opportunity.

GM is eager to see how its pricing changes will affect the market. Earlier this month, GM lowered the manufacturer's suggested retail price on three-quarters of its U.S. vehicles, a move meant to wean buyers off costly incentives. Merrill Lynch analyst John Murphy said the strategy could weaken GM's sales in the short term, since consumers are used to shopping for deals. But he said the industry will benefit if GM sticks to the plan.

"Lower MSRPs are exactly what the industry needs, as relentless discounting has eroded the brand value of the domestic automakers," Murphy said in a research note.

John Rogin, who owns GM dealerships in Michigan and Ohio, said he has seen more customers in January because of mild weather and lower prices. Rogin said most dealers he has talked to support the change.

"Clearly large rebates weren't working, so this is obviously the next step," Rogin said. "Will it make it easier for us to compete in the marketplace? Time will tell. It's a refreshing change."

January's results cap a difficult month for the domestic automakers. Earlier this week, GM said it lost $8.6 billion in 2005 while Ford announced a $1.6 billion loss in North America for the year and said it plans to cut 30,000 jobs and close 14 facilities by 2012. DaimlerChrysler also announced it plans to cut 6,000 administrative positions, mostly in Germany.

Source: Detroit News - GAI

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