Sunday, October 9, 2011
Big Three
When it comes to
automakers in the United States, one term that will be consistently brought up
is the term “Big Three”. The “Big Three” consists of the auto
companies Ford, General Motors, and Chrysler. Other than producing the most vehicles in
Northern America, these three automakers have a huge influence on the overall
economy. Because they are huge employers, the economy will grow due to their
high union wages and benefit packages.
The Big Three have been
hurt from perceived poorer quality and reliability compared to their Japanese competitors.
They have also been slow to bring new vehicles to the market, while the
Japanese are considered the leaders in productivity and introduction to more
sustainable cars (1). Falling sales and market share have resulted in the Big
Three's plants operating below capacity, which lead to production cuts, plant
closures and layoffs (1). They have had to rely solely on offering high buyer
incentives and subsidized leases to sell vehicles. These desperate actions
drove down a significant portion of the Michigan economy (1). CBC News explains,
“Promotional strategies, including rebates, employee pricing and 0% financing,
have boosted sales but have also cut into profits.” (1)
In the
1990s, North American automakers made a big commitment to large sport utility
vehicles (1). For a while, that was the segment that was selling. SUV sales
peaked in 1999 and have been declining ever since (2). The gasoline price spiked
hurt sales of SUVs even more, which only continued into April 2008. Sales of
trucks dropped 17 per cent while sales of large SUVs suffered by 29 per cent
(2). The Big Three’s primary product is now being overshadowed by Toyota’s and
other automakers’ econ-friendly small and compact cars that have a much higher
gas mileage. As stated in the CBC News, “New products, more efficient plants,
fewer employees, renegotiated contracts and government loans may help the Big
Three succeed.” (1)
3 comments:
I found interesting, how significantly can the foreign competitors influence the US auto producers. Because Japan is the leader country in innovation and high productivity, the US automakers have to expend much effort to keep up with them. Great point is the econ-friendly cars because since Toyota has been producing these compact cars, a lot of people feel the responsibility to the environment and thus prefer the econ car.
Thought I'd throw in... while chrysler is undoubtedly still relevant, it's not one the the big american automakers.
http://online.wsj.com/article/SB10001424053111903554904576460100757324330.html?KEYWORDS=fiat+chrysler
http://online.wsj.com/article/SB10001424053111903454504576485920161518138.html?KEYWORDS=fiat+chrysler
http://online.wsj.com/article/SB10001424053111904537404576555100887756400.html?KEYWORDS=fiat+chrysler
I don't know if you've seen the new Fiat 500 on US streets, but it's being sold through the Chrysler dealer network.
It will be interesting to see what the "The Big Three" will be farther down the road. Traditionally, we have thought of Ford, Chrysler, and GM and THE car makers both globally and within the United States. Now, the global car market has become so jumbled. Global car manufacturers are rapidly expanding into the U.S. in terms of production facilities and units sold within the U.S. market. Higher brand equity is becoming hard to attain both in the U.S. and overseas, partially due to the different perceptions of brands according to different markets (Buick is not perceived as highly in the United States as it is in China). With all this occurring, "The Big Three" may very soon be a historic term.
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