Automotive Study on Competition

A recent study, “Automotive Competitive Challenges: Going Beyond Lean”, provides a snap shot of the key issues impacting the gap between the Detroit Three and Honda, Nissan, and Toyota. It includes a summary describing revenue per vehicle; labor-cost issues; capacity; design, product and manufacturing engineering; yen exchange rate; and future investments.

The North American automotive scene today is marked by a strange dichotomy: surveys show that the three major Detroit-based automakers have dramatically improved their manufacturing performance, particularly in quality and productivity. But, they continue to lose market share amid consistently weak profits.

Many of their major suppliers are bankrupt, and some analysts have raised the alarm that General Motors, Ford, and Chrysler are headed down the same path. Meanwhile, their three major Japan-based rivals are rapidly gaining ground while recording strong and consistent profits.

Profitability in North America for the three Detroit-based firms has deteriorated sharply since peaking in 1999. Today, an average gap of $2,400 per vehicle exists. This imbalance is usually explained by a crushing burden of so-called “legacy costs” – health care and pensions for the Detroit firms’ large group of retired workers. But there’s far more to the story.

This study highlights many reasons why Detroit is failing to defend its home turf, most of them in fundamental aspects of the automotive business where the Detroit-based companies haven’t yet fully addressed structural and cultural barriers to full competitiveness.

GM, Ford and Chrysler remain behind in many key areas – product engineering, manufacturing flexibility, labor practices, supplier relations, steep price discounting, unfavorable currency exchange rates, and high costs of health care and pensions – that still add up to an uncompetitive overall business model.

You can read more about the study at the Harbour-Felax Group web site.