Detroit's Big 3 Restructure while Foreign Automakers Attempt to Muscle in on the US Automakers

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The following is an advisory by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). 2001 was a very turbulent year for the Big 3 U.S. automakers. Economic slowdowns, poor car sales, lackluster earnings, and the attacks on September 11th necessitated some severe readjustments in thinking in several boardrooms.

With DaimlerChrysler announcing its realignment plan early in 2001 and Ford Motor Company announcing huge cutbacks late in 2000, the US automobile industry appears to be in some trouble. Even General Motors (GM), considered by many to be the automaker in the best position, has announced some cutbacks and closings, although on a smaller scale when compared to the other US automakers.

Add to this the numerous recalls that have been announced in the last year, the Firestone tire controversy, and the fact that foreign automakers are building new plants left and right in the US and it looks like, the Big 3 are being forced to take drastic steps to ensure their very viability in the marketplace as consumer confidence seems to be shaken.

January 2002 sales declined by 11.8% for both Ford and GM while DaimlerChrysler reported a 9% decline. In the meantime, Hyundai raised its 2002 sales forecast and vehicle production is on the rise at Honda. Toyota had a record sales increase of 7% in January 2002. The effect of the large rebates offered at the end of 2001 by the Big 3 appear to be wearing off as the sales figures indicate.

DaimlerChrysler has sold its stake in its software unit to Deutsche Teleko, AG, sold part of its US commercial financing portfolio to General Electric, is working on selling some of its parts plants, and recently upped its bond sale to $3 billion all in an effort to raise much needed cash.

Over 60,000 jobs have been cut, or will be cut, by the Big 3 worldwide. GM is cutting 932 jobs at its two (2) Canadian plants near Niagara Falls and has postponed the development of its new $1 billion complex in Delta Township, MI. Ford is closing its truck assembly plant in Oakville, Ontario and cutting 1,500 jobs while DaimlerChrysler will eliminate 3,300 Canadian jobs as well. In the US, Ford will close its Edison, NJ, Saint Louis, MO, and Avon Lake, OH assembly plants plus two (2) parts plants in Ohio and Michigan. GM and Ford's European operations may also require severe restructuring to convert them into moneymaking entities.

The next twenty-four (24) months will be crucial for the Big 3. It will take that long for their respective restructuring plans to take full effect. Times will be tight while these plans work themselves out, but from all indications, the Big 3 are taking the steps necessary to position themselves back on top of the industry.