September 26, 2003
Shifting Sands in the Motor Vehicle Industry
Have you been keeping track of the auto industry lately? Few businesses in Indiana can afford not to. So many people in our state owe their livelihoods, directly or indirectly, to the health and prosperity of the motor vehicle industry that the first sign of a hiccup or glitch in car sales can show up immediately in their paychecks and order books.
But the relationship we have with cars is evolving into something much more complex in recent years. A sign of how things have changed is buried in the details of an otherwise upbeat report on August car and light truck sales released in early September.
There, in the fine print, a stunning event is reported. For the first time ever, Chrysler has been displaced byToyota as the third best selling vehicle brand in America . At least for one month, that is. The two companies are heading in opposite directions, certainly. Chrysler's slide in vehicle sales, down 6 percent from the same month last year, is particularly disheartening in light of the overall strength shown in August sales. Meanwhile, Toyota continues to gobble up market share, climbing from 11 percent last August to 12.3 percent in 2003.
One is tempted to make noise about the fact that Toyota is not an American manufacturing company. But since its 1998 merger with Daimler-Benz of Germany , Chrysler hasn't been one either. Besides, with so much production capacity of both companies located in this country, including a sizable presence in Indiana, such distinctions seem to matter less and less.
But the big news is simply the ferocity of the battle for market share in theU.S. motor vehicle industry. In a market that has seen generations of dominance by the Big Three, the sands are shifting before our eyes. There is a serious move afoot by Japanese, Korean, and German based car manufacturers to carve out a share of the U.S. market. And it shows every indication of succeeding.
The odds against the old Big Three beating back the invasion are stacked very high. Companies like BMW, Nissan, Mercedes-Benz and Hyundai are effectively building a new Detroit , in states like Alabama , Tennessee andSouth Carolina . Their plants are state-of-the-art efficient. Their workers are younger, and non-union. And they have no retiree pension and health care costs to weigh them down as they do battle in the marketplace.
The seriousness of the challenge is demonstrated in the most recently concluded agreements between the United Autoworkers and the Big Three, in which the union effectively gave its blessing to dozens of plant closures. Times are especially dire for Chrysler, which by many accounts would be bankrupt without the support of its German parent.
It's a challenge for Indiana as well. While manufacturing has not recently been, and probably will never be, a source of significant net job growth for the state economy, the loss of these important jobs in countless communities is a nightmare most leaders hope to never face.
But for the countless companies who play a role in the vast supplier network to the auto industry, the battle for market share presents an opportunity as well as a threat. Those with access to good north-south transportation routes here can stand to gain as the center of gravity of the overall industry moves south fromDetroit . But competing for those new sales won't be easy, either.
About the Author
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