State of the Auto Industry Today

DETROIT—For decades, it's been called the "Motor City." Detroit also has been a troubled city. Not that it matters directly to Michigan's automakers, because most of their factories lie in surrounding towns. Still, Detroit's decline is a resounding sign of the distress among domestic automakers.

Detroit 3
Many analysts are calling domestic automakers the "Detroit 3" now, says Paul Taylor, chief economist for the National Automobile Dealers Association (NADA), rather than the "Big 3." Traditionally, that trio has included Ford, General Motors, and Chrysler Corporation (now DaimlerChrysler).


The "Detroit 3" are "obviously on the ropes," said labor expert Harley Shaiken, a professor at the University of California Berkeley. Through the 20th century, the automobile was an "icon of industrial growth." Today, its fate is far shakier. The domestic industry has seen "serious failure in terms of product and strategic direction in Detroit," Shaiken said, "and management made those decisions."


Cost-cutting, especially via staff reductions and employee buyouts, has become an epidemic. General Motors is on the verge of cutting $2,000 in costs per vehicle, said Sean McAlinden, Ph.D., chief economist and vice-president of research for the Center for Automotive Research (CAR). That company is approaching the break-even point, but needs to cut $2,000 more.

Buckle Down
Ford is following the same path, McAlinden believes, but is 10 to 30 months behind GM. Chrysler also will be "tightening its belt." By the end of this decade, the goal is three profitable companies. But they would be "smaller companies," McAlinden predicted, "much smaller." McAlinden, Shaiken and Taylor pondered "What Drives Detroit" at a January seminar hosted by the Foundation for American Communications (FACS), at the "Detroit News" office.