Dynamist Blog

Ailing Car Makers

Jerry Flint of Forbes, who has forgotten more about the auto industry than I'll ever know, offers his assessment of Detroit's current prospects. Read the column for the details. Here's the basic conclusion:

In the good old days, car companies lost money only in bad times. Today, the losses are coming with near-record industry sales every year. The Detroit companies just emptied the inventory bank, but it required huge price cuts over the summer. It's hard to make a big profit that way....

What is happening now is another reminder that GM and Ford won't get more money per car until their vehicles are so desirable that people are willing to pay top dollar and factory capacity is trimmed to match demand for such vehicles.

The leading foreign manufacturers, Toyota Motor (nyse: TM - news - people ), Honda Motor (nyse: HMC - news - people ) and BMW--Chrysler is based in Stuttgart, Germany, but its Chrysler division is American--get higher prices for their cars and trucks and give away much less in incentives. So far, these manufacturers are running most of their plants at high-capacity levels, despite the giveaway prices of the competition.

I do wish he'd written more about Chryler, which he calls "the one bright spot among the traditional 'Big Three,'" and what GM and Ford might learn from it. (That's another column perhaps.) Chrysler is in fact producing distinctive-looking cars, including the gorgeous Crossfire. One of my Dallas neighbors is kind enough to keep a red Crossfire parked in front of our building much of the time, giving us a new kind of public art.

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