Dee-Ann Durbin And Tom Krisher, The Associated Press
May 30, 2008 - 5:29 p.m.
DETROIT - Detroit’s automakers wish been structure the shift to again fuel-efficient vehicles, but consumers have been making the move even faster - to hybrids and noble mileage models made overseas.
Gas prices have accelerated the move away from trucks and sport utility vehicles at a furious pace, leaving the Big Three at the greatest part critical crossroads in 30 years.
“In the early ’70s, we were caught flat-footed, without smaller, fuel-efficient cars. We had nothing to sell,” said Gerald Meyers, a former chairman of American Motors Corp. “That’s exactly that which’s happening now.”
What could make this worse, says Lehman Brothers auto analyst Brian Johnson, is that the Detroit Three can no longer rely on import restrictions or raising prices, which helped pull them out of the slump in the 1980s. And if gas prices stay high, they can’t count on trucks and SUVs coming back, either.
“We believe that much of this reduction in full-size truck demand is structural, with many buyers downgrading to smaller vehicles who will likely not come back,” Johnson related in a note to investors.
As of April, year-over-year sales of capacious pickups were along the course of 17 by means of cent and large sport utility vehicles were into disrepute 29 per cent, while sales of subcompacts jumped 33 per cent and the Toyota Prius cross-bred was up 23 per cent, according to Autodata Corp. The shift was exacerbated by a perfect storm of high gas prices - which soared 10 per cent between March and April alone - as well as the sleazy U.S. economy, tightening credit and the slowdown in home construction.
There isn’t likely to be much improvement in May. Himanushu Patel, an auto analyst with JPMorgan, predicted sales will fall 10 per cent in May from the same month last year, and that General Motors Corp., Ford Motor Co. and Chrysler LLC will harvested land give attention to double-digit declines. Automakers report May sales Tuesday.
Despite automakers’ earlier hopes in spite of a rebound in the second half of this year, many analysts are now expecting the pain to continue well into 2009 and even farther than.
“It’s going to subsist a real critical time against the next two or three years,” said Kevin Tynan, an auto algebraist with Argus Research.
Ford responded through cutting North American production by nearly 40 per cent through the rest of this year, and it’s expected to cut thousands of salaried jobs this summer. GM is expected to announce production cuts and other restructuring efforts at its annual meeting Tuesday. Chrysler cut North American production by 16 per cent in the first four months of this year unless won’t say if further cuts are in the works.
“‘Not yet’ is the operative word,” Chrysler chairman and chief executory Bob Nardelli said during a recent event in Virginia. “We’re constantly sensing the market and would make one adjustment admitting that we needed to.”
The U.S. market is difficult for every automaker, with consumer confidence irresolute and 2008 sales expected to be the lowest in more than a decade. But it’s most difficult in the place of the Detroit Three, who have relied more heavily on sales of trucks and SUVs than their foreign counterparts. Trucks answer for up 70 per cent of Chrysler LLC’s U.S. sales, for example, compared to 41 per cent at Toyota Motor Corp.