CSM: Detroit-2 Will Soon Be In Minority of NA Manufacturing

Posted by: David Kiley on December 10, 2008

For leading auto industry forecasting firm CSM Worldwide, the Detroit-3 is already the Detroit-2.

At a gathering of the Automotive Press Association in Detroit today, the firm’s chief of forecasting Michael Robinet said, “Chrysler doesn’t have the scale to survive.”

Robinet and his partners posited that the only pieces of Chrysler worth saving going forward are the company’s unique platform models—minivans, Jeep Wrangler and perhaps the pickup truck business. The firm also noted that the company’s dealer network should be attractive to a foreign automaker, which, if acquired, would wind down Chrysler’s models and start to introduce its own—think one of the Chinese automakers.

One of the more disturbing reports from CSM was that with auto sales dropping to 11 million or so next year, capacity utilization among the companies will be about 50%. Ouch. That’s down from around 75%. The ideal, of course, is between 90% and 100%. The drop in utilization is because the planst aren’t closing fast enough and because slow-selling models haven’t been cancelled fast enough.

Case in point: Chrysler operates a plant in Sterling Heights Michigan that turns out Chrysler Sebrings and Dodge Avengers. Last month, Chrysler sold only about 4,200 Chrysler Sebrings and Dodge Avengers. Through November, those two models only sold 106,000. The assembly complex is 3 million square feet and 286 acres. I don’t have the current employee level. But in March 2007, it was carrying 4,500 workers.

That’s the kind of capacity removal that the UAW is going to have accept without condition if they still want to have an industry. The Sebring and Avenger, developed by Daimler have been hopeless. They languish at te bottom of almost every third-party measurement of quality and consumer appeal. It’s not the UAW’s fault that the designs and executions of these models were botched. But there it is. And here we are.

Another interesting point raised by CSM: By 2011, after planned plant closures by the Detroit-Two and Chrysler, the U.S. auto industry will account for a minority of U.S. vehicle production. Today, it’s about 54%. In a couple of years, they will be down to 46%.

The CSM report and partners also pointed out an incredibly obvious point that is worth making again while the Congress debates whether to let the domestic auto industry take its chances in bankruptcy court.

CSM’s Eric Fedewa, who is the firm’s power-train expert, made the point that very few members of Congress care about; that Japan and Germany have created an industrial policy in their countries that creates stability in their marketplaces for energy prices. “If we had gas prices [a price floor] between $3.50 and $4.00, we would see more stability in the marketplace to allow for better product planning, innovation and technology investment.”

Case in point: If the U.S. had a policy that our partisan, dysfunctional Congress could get behind, the U.S. industry wouldn’t have over-committed to making SUVs in the late 1990s and in the first few years of the new century.

Fedewa called Congress’s approach to policy-making “ad hoc” and seat-of-the-pants.” He was being generous.

Reader Comments

The Political Stray

December 10, 2008 9:12 PM

Drove Mah Chevy to the Levy...

Anyone out there have a good memory of a time they had in an American car?

Many years ago we dropped a 409 into a Chevy Impala and could blow the doors off of anything but a Porsche.

What'd we get, 'bout 9 gallons to the mile?

And it was fine.

Paul (Vw)

December 11, 2008 5:59 AM

>>> That's the kind of capacity removal that the UAW is going to have accept without condition if they still want to have an industry. The Sebring and Avenger, developed by Daimler have been hopeless. They languish at te bottom of almost every third-party measurement of quality and consumer appeal. It's not the UAW's fault that the designs and executions of these models were botched. But there it is. And here we are.

"It’s not the UAW’s fault..."

That's an overly generous statement. Part of the reason why the Big-er-Detroit Three are not competitive is because of the labor cost imbalance (perks, etc) compared with other automakers. That's a huge cost in competitiveness and quality. If the Detroit 3 had the ability to compete with foreign automakers, they could afford to invest in "designs and executions of these models." But here we are.

>>> Case in point: If the U.S. had a policy that our partisan, dysfunctional Congress could get behind, the U.S. industry wouldn’t have over-committed to making SUVs in the late 1990s and in the first few years of the new century.

Maybe, maybe not. Detroit was already in crisis before the oil price spike this year. When you have a dysfunctional industry such as the Detroit 3 along with the UAW, it's going to be a mess no matter what.

Tom in Texas

December 12, 2008 10:30 AM

It's time for all "over paid" people to realize we just got our butz kicked. Wall Street, Banking, Government, Union,
and any other have to realize that American greed is dead. Obama wants to create infrustructure jobs? (illegals pour concrete). The auto industry workers are paid more that MD out of college. The Senators get their pay for life and pay no tax or insurance. Even sports figures are out of control. Watch and see Toyota and Honda build more automobile plants in the US with cheaper labor and the rest is history.
Baseball, Toyota, and Chile Pie.

mona

December 24, 2008 12:15 AM

I know that the big 3 are in trouble but lets face it if they really want to keep their jobs taking a pay cut would be a good place to start. I work for a school system and I would think that a child education would be worth more them 9.00 a hr, I live in northern IL and would comuite to a plant to work for the money they make.I am so tired of hearing about what can happen if we don't bail them out, and that they are to big to fail it makes me sick. maybe if they fail they would relize that they screwed up. I know I don't want my tax money to go and bail them out, if I wanted to invest in the auto stocks I would do it my self, maybe I am smarter then that, I put my money in a safe place.
Let them fail , figure out where they screwed up and try again, because if we keep going they will be back in another 6 months wanting more and when will it stop.

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