US carmakers face smaller market share, more foreign inroads
American automakers and automotive component suppliers could be in for some major setbacks over the next decade, if a study by the University of Michigan's Transportation Research Institute proves accurate. One of the most significant forecasts is that the Big 3 United States carmakers will see a decline in their share of the domestic new car market. This presents a troubling picture for US autoworkers, who are likely to see far fewer jobs in the future.
The Delphi study, conducted every three years, asked top US auto executives to predict what changes are likely to take place in the industry by 1990, and by 1995.
In 1985, the report notes, Ford Motor Company was responsible for 18.9 percent of new car sales. By 1990, that figure is expected to decline to 18 percent. By 1995, it will decline further, to 17.4 percent.
Chrysler Corporation, which has seen its market share increase over the last five years, reached 11.3 percent in 1985. But that could dip to 11 percent in 1990, and 10.3 percent in 1995.
The biggest decline is expected at General Motors. In 1985, GM's market share was 42.2 percent. That is expected to drop to 40.5 percent in 1990, and 38.9 percent in 1995. (GM's decline may actually come even faster. According to recent sales reports, the giant automaker's 1987 market share could dip below 40 percent.)
Those declines might be avoided if the automotive market continues to grow the way it has over the past several years: New car sales set a record in 1986. But at best, ``The overall vehicle market in the United States is likely to be flat. There will be low growth for both cars and trucks,'' says David Cole at the University of Michigan.
Recently there have been industry reports forecasting that domestic carmakers are likely to close a number of their assembly plants during the next three to five years. Last November, General Motors announced plans to eliminate 11 assembly and body plants, and officials said other factories may also be added to the list.
That is not just the result of their predicted decline in market share. The Big 3 will have other reasons to trim production capacity. An increasing number of the cars they sell will be so-called ``captive imports.'' These are vehicles manufactured by the domestic carmakers' foreign affiliates; they are imported into the US and sold under domestic nameplates.
In 1985, the three manufacturers sold nearly 250,000 captive imports. By 1995, that is expected to double. Ironically, while domestic carmakers may be looking to build more of their vehicles abroad, the traditional auto importers are developing a much larger production base in the US.
Those ``transplant'' assembly lines will become an increasingly important factor in the overall US new car market, the study predicts, noting that carmakers such as Nissan, Honda, and Toyota have the capacity to produce only about 1 million vehicles a year in this country.
By 1990, that will reach 2 million cars and light trucks. Additionally, over the the next decade, the Big 3 will increasingly rely on the new US assembly lines of their foreign allies. Later this year, Ford, for example, will begin selling as many as 60,000 cars a year built at the new Flat Rock, Mich., assembly line now being completed by its Japanese affiliate, Mazda Motors.
The opposite strategies of US and foreign carmakes don't just apply to fully-assembled vehicles.
``The arrow is pointed outside the United States, and we expect [the Big 3] to import more components,'' Professor Cole says. Today, about 14 percent of the parts, components, and subassemblies bought by US-owned manufacturers come from sources outside the US and Canada. By 1990, that is expected to grow to 21 percent and by 1995 to 25 percent.
As part of their effort to control engineering and manufacturing costs, the Big 3 are reducing their reliance on their own component operations. GM, for example, produces about 70 percent of its own components and sub-assemblies. By 1995, it is expected to be no more than 50 percent.
On the other hand, the Japanese are increasing their reliance on US-made components and sub-assemblies for their American assembly lines.
Today, about 30 percent of the content of the typical US-assembled Japanese vehicle - on a dollar basis - comes from US sources. The rest is imported from Japan, South Korea, or other countries. By 1995, that is expected to reach 40 percent.
The picture is somewhat mixed for American suppliers, however.
Cole warns that not only are Japanese carmakers setting up shop in the US, but so are a number of foreign parts manufacturers, a move that will increase competition even further. By 1990, he says, the number of US parts makers serving the Big 3 should decline substantially.