Ford and GM: Proof They Can Do It
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According to some of the more virulent death watchers in the media, the Detroit Three are run by a bunch of clueless morons, and specialize in building crap vehicles nobody wants. The reality, however, is a little different. Their North American operations might be on the verge of imploding, but elsewhere around the world America's automakers (well, Ford and GM -- Chrysler has never really had much of an international presence) are aggressive and competitive players.
In the white-hot crucible of the European mainstream market, products like the Ford Ka, Fiesta, Focus and Mondeo, and the Opel Agila, Corsa, Astra and Insignia hold their own against rivals from Germany, France, Italy, and -- yes -- Japan and Korea. More importantly, these Fords and GMs compete against VWs, Renaults, Fiats, Toyotas and Hyundais on style, performance, handling, efficiency, innovation, not price.
Both Ford and GM have been quick to move into emerging markets. GM has a 10 per cent share of the Chinese market -- second only to Volkswagen, the first western automaker to move into manufacturing in China -- and last year sold twice as many Buicks there as it did in the U.S. GM also has 20 percent of the Russian market, 22 percent of the Brazilian market, and last year its sales growth in India outstripped that of Hyundai. Before the global economic collapse emerging markets accounted for 35 percent of total GM sales, and helped boost total GM sales outside of North America to 65 percent of the company's total volume earlier this year.
Ford lags behind GM in China and India, but it was one of the first western automakers to invest in Russia, establishing an assembly plant near St. Petersburg in 1999. It now has 10 percent of the Russian market, selling more cars in a week than it did in a year when it started. Emerging markets now account for about 25 percent of Ford's global sales.
Before the bozos on Wall St. drove the world's economy off a cliff, both Ford and GM planned further significant investments in emerging markets. Here's why: In the U.S. there are more than 900 cars and personal use trucks already on the road for every 1000 people of driving age. In Europe, where cities are more densely packed, and there is a more effective public transport network, there are still more than 600 vehicles per 1000 people of driving age. But in Russia, that number is under 200, Brazil it's about 130, China 30, and India under ten.
With those four countries alone accounting for about 42 percent of the world's population, the growth potential is huge. Assuming the global economy gets back on track, China will soon surpass the U.S. as the world's largest auto market, and Russia will surpass Germany as Europe's largest within a few years. In Brazil, sales have been growing at the rate of 30 percent a year for the past two years.
Apart from the fact the Ford and GM experiences overseas suggests the senior management do know something about running an auto business, and the companies do know how to build competitive products, all this raises some interesting questions.
First, if Ford and GM can be competitive in other markets around the world, why not here in the U.S.? What special factors are preventing Ford and GM performing here more like they do in the rest of the world? Is it solely a problem with management? Unions? Product? Or is it a wider structural problem with the U.S. economy?
And then there's this: If they can survive the impact of the economic meltdown on their North American operations, Ford and GM currently look well positioned to profit from the explosive growth in demand for cars and trucks in emerging markets over the coming decade or so. So does it make sense to just let them die?
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