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Big 3 are losing money on every vehicle sold
Big 3 Losing Money on Each Vehicle Sold Due to Incentives
Canadian Press - July 31, 2003
Motor Trend
The Big Three vehicle manufacturers lost on average $180 US per vehicle made in North America during the second quarter, the worst performance by the trio since the third quarter of 2001, says a new industry study.
DaimlerChrysler's U.S.-based Chrysler division accounts for most of that average loss due to its $1.1 billion US loss in the quarter, which more than offset narrower profits at General Motors and Ford, Scotiabank auto analyst Carlos Gomes said in a report released Wednesday.
However, skyrocketing incentives are contributing to lower profits for each of the U.S.-based manufacturers, Gomes said.
"Incentive costs at the Big Three have surged by 14 per cent over the past year to roughly $3,800 US per vehicle," Gomes said. "Inducements are now more than double the level of three years ago and show no sign of abating."
The Big Three have been relying on steep discounts such as zero per cent interest financing and rebates to lure buyers as they lose market share to import nameplates such as Toyota, Honda and Nissan.
Despite soaring incentives, the Big Three's share of the U.S. market fell to a record low of 62.1 per cent in the first half of 2003, down from 63.4 per cent a year earlier and more than 70 per cent as recently as 1999.
The discounts are having a bigger effect on Chrysler's returns than those of its two U.S.-based competitors. In May, when it warned of the quarterly loss at Chrysler that was made official a month later, the company said it was forced to cut the value of cars on dealers' lots to reflect the cost of discounts needed to sell them.
"Car prices have been under pressure in the United States, so they were carrying it at higher levels on their books, and so they restated their books" to reflect the lower values, Gomes said.
"In this particular (second) quarter, they were the weakest of the three," he said. Chrysler has "sort of shifted back and forth from time to time with Ford, with GM being sort of in the forefront in terms of being consistently profitable."
Chrysler's discounting of the value of its inventory is intended as a one-time exercise, and if the U.S. new vehicle market rebounds, the division of the German-U.S. auto giant should improve, Gomes said.
"Once we get some sales improvement as we move forwards into the second half of the year, they will probably be in a profitable situation by year end," he said.
Economists expect the pace of U.S. economic activity will be bolstered by President George W. Bush's recent tax cuts, boosting household income by $40 billion US in the second half of 2003.
"Despite sluggish employment conditions - a key driver for vehicle sales - household wealth has started to improve, climbing by five per cent over the past year alongside higher home prices and this year's double-digit gain in equity markets," said Gomes. "Moderately stronger economic growth should lift U.S. vehicle purchases to an average of 16.4 million units in the second half of 2003, from 16 million during the first six months of the year."
Car sales will likely strengthen to 16.8 million in 2004, "matching last year's sales pace," Gomes said.
Gomes said it's unclear when the Big Three will be able to rid themselves of the incentives that cost them money but have essentially become expected and almost mandatory for many prospective car buyers.
"At this point, (the Big Three) definitely are stuck with them," Gomes said. "Even though (incentives) have skyrocketed to the point that they have over the past year, they're still continuing to lose market share.
"If they tried to scale them back, they would obviously be in worse shape."
The discounts on new vehicles are also reducing the values of used cars, raising their appeal to consumers, he said.
Ongoing cost-cutting by the Big Three is also continuing to pressure auto parts suppliers, he said.
Gomes said a sample of U.S. parts makers showed a four per cent year-over-year increase in first-half revenues, but gross profit margins slumped to only 8.3 per cent - the lowest level since the 1990-91 recession and 33 per cent below the average of 1995-99.
Turning to overall market conditions, vehicle sales picked up in the United States last month, but purchases in Canada fell to the lowest level in more than two years.
U.S. motor vehicle sales strengthened in June to an annualized 16.4 million units from an average of 16 million in May. In contrast, Canadian car and light truck sales fell in June to an annualized 1.48 million units, down from an average of 1.63 million during the previous three months.
(c) The Canadian Press, 2003
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i wish chrysler would just quit already...
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Originally posted by joeg i wish chrysler would just quit already... are you sure? their future lineup looks the most promising out of the big 3....
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whos in "the big 3"???
and chrysler hasn't made a car worth driving since.... uhhhh.... i don't know if they ever have...
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Originally posted by joeg whos in "the big 3"???
and chrysler hasn't made a car worth driving since.... uhhhh.... i don't know if they ever have... i was in puerto rico sometime in '01 , anyway, over there the neon is badged as a chrysler car, not dodge.
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Originally posted by joeg whos in "the big 3"???
and chrysler hasn't made a car worth driving since.... uhhhh.... i don't know if they ever have... crossfire
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true... that might be nice...
and i guess, technically the "laser" oh so many years ago...
theres probably been a few others, too...
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Originally posted by joeg whos in "the big 3"???
and chrysler hasn't made a car worth driving since.... uhhhh.... i don't know if they ever have... hey hey.... the Chrysler 300M is a kick ass ride.
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Pressurized Lunacy
the Chrysler 300M is the same thing as nearly every other vehicle GM, Chryler and Ford put out.
an econobox rental chassis with oversized poofy tires, cheap bouncy struts and no eye towards handling or performance... then they stick a couple of limited edition badges on it, slap a different lip spoiler on and a shiny exhaust tip and call it a "performance sedan."
they aren't fooling anybody and i'ts about time they started paying for making such mundane shitmobiles.
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Originally posted by cintron an econobox rental chassis with oversized poofy tires, cheap bouncy struts and no eye towards handling or performance... then they stick a couple of limited edition badges on it, slap a different lip spoiler on and a shiny exhaust tip and call it a "performance sedan." as much as i like the 300M, cintron has a point. for its power rating (255hp), its acceleration figures are pretty lame. the maxima has better performance figures for the same money. the Special Edition was a step in the right direction though.
the upcoming 300C and Magnum on the other hand...
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for the cost of brand new cars these days, i'd really like to see car companies focus on bringing the "Weight" standard down....
start using aluminum, fiberglass, or dare i say it... *gasp* carbonfiber....
no "CAR" should weigh more than 3500lbs...
anything with the word "sport" "performance" etc... needs to be 2800 or so for 2wd and 3200 or so for AWD...
if chevy can keep the corvette at 3000 with a v8 and all the other cool shit that has, i don't think its an unreasonable goal for anything else in that pricerange or higher....
carmakers seem to be getting back to the 'old' style of making cars... where they just made massive boxes of metal and used higher output (heavier) engines to compensate....
thats ASSHOLE ENGINEERING, IMO...
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Originally posted by joeg for the cost of brand new cars these days, i'd really like to see car companies focus on bringing the "Weight" standard down....
start using aluminum, fiberglass, or dare i say it... *gasp* carbonfiber....
no "CAR" should weigh more than 3500lbs...
anything with the word "sport" "performance" etc... needs to be 2800 or so for 2wd and 3200 or so for AWD...
if chevy can keep the corvette at 3000 with a v8 and all the other cool shit that has, i don't think its an unreasonable goal for anything else in that pricerange or higher....
carmakers seem to be getting back to the 'old' style of making cars... where they just made massive boxes of metal and used higher output (heavier) engines to compensate....
thats ASSHOLE ENGINEERING, IMO... what about luxury performace sedans? the M5, E55 AMG, and XJR weigh well over 3500 pounds
hell....the all aluminum Audi A8 weights close to 4400 pounds
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oh...i hope you realize that your cutoff weights for performace cars excludes your own car
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Originally posted by bigpoppanils what about luxury performace sedans? the M5, E55 AMG, and XJR weigh well over 3500 pounds
hell....the all aluminum Audi A8 weights close to 4400 pounds
i think that sucks... luxury or performance... but don't pretend to be both when you weigh as much as a ford explorer...
luxury AND performance can be done in the same car... but its just going to bring along a nice price tag if its done right...
when i think luxury, performance sedans, i think S4 & M3... both of which are somewhere around 3800 if i'm not mistaken... and the s4 is only using a VERY modest amount of its potential...
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it also excludes the aston martin vanquish (4000 pounds), Porsche 911 turbo (close to 3400 pounds)
BMW M3 (also 3400 pounds)
Mitsubishi Lancer Evo (over 3260 pounds)
Lamborghini Murcielago (over 3600 pounds)
various versions of the Nissan 350z (3100-3250 pounds)
Ferrari 575M (3800 pounds)
quite frankly, todays safety regulations make it hard to make lightweight cars anymore
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