CAW 'yelling at the highest hills' as Big Three market share skids under 50%

10:03 PM EST Nov 02
by GARY NORRIS

TORONTO (CP) - The fall of the Big Three North American automakers to under half of the Canadian market is a milestone in a decade-long decline that threatens their future, industry players and observers said Wednesday.

"I'm very, very concerned about it," Canadian Auto Workers president Buzz Hargrove said after General Motors, Chrysler and Ford sold a record low 49.96 per cent of the new vehicles delivered in Canada during October. That was down from 51.3 per cent in September - and from over 75 per cent in 1995 when sales of sport utility vehicles and minivans were growing vigorously.

"I have been yelling at the highest hills," Hargrove said, noting that the union has been pressing for government incentives to build new auto factories in Canada while demanding action to open overseas markets for Canadian-built cars.

The minority market share for GM, Ford and Chrysler in Canada could deepen and extend across North America, suggested Chris Johnsen, Canadian automotive practice leader at Deloitte & Touche consultants.

Last month's continent-wide market share for the Detroit-based Big Three was 55 per cent, down from 65 per cent in 2000.

Deloitte had been projecting that the Japanese Big Three - Toyota, Honda and Nissan - would reach sales-volume parity by 2008 or 2009.

"With this situation that just happened in October, the question now that I'll be asking is: Is that date now 2006 or 2007?"

Johnsen added that "it's quite feasible that we're in for a series of months where the Big Three are going to be beaten (in Canada) from a market-share perspective."

And the bald sales numbers understate the problems of the old Big Three.

"Out of that 50-50 market share, Honda, Toyota and Nissan in North America will have something like 20 or 21 plants, and General Motors, Ford and Chrysler will have something like 75," Johnsen said.

"So who's making the money?"

He said the labour cost component of a Japanese-brand vehicle is only about one-third that of the traditional Big Three with their crushing pension, health-care and other legacy expenses.

The Detroit-based carmakers have been losing market share year after year going back to 1996, observed CAW economist Jim Stanford.

On a North American basis they have lost over 15 percentage points in the past decade and "every one of those percentage points is an assembly plant," Stanford said.

"I don't believe there's any real economic significance to the 50 per cent number, one way or the other - it's mostly a symbolic issue," Stanford added.

"But I do believe that the North American auto industry is reaching a tipping point. We have a situation where we import about one in four of the vehicles that are sold in North America, and we export almost nothing outside of North America. That one-way imbalance of close to five million vehicles . . . is threatening the whole North American industry."

The good news for Canada is that the most popular Japanese-branded cars are made in Ontario - the Honda Civic in Alliston and Toyota's Corolla and Matrix in Cambridge.

Deloitte's Johnsen noted that the Ontario auto-parts industry has grown in less than a decade from $8 billion to over $20 billion.

He also observed that GM and Chrysler have well-regarded Canadian assembly plants running at or near capacity.

"From an Ontario perspective, we're not in bad shape," he said.

"But from a Big Three perspective, overall in North America they've got a lot of legacy issues that they need to deal with, and I think most of them are south of the border."

A big problem for the Big Three lies in their big products, notably heavy sport utility vehicles which in past years hauled in outsize profit margins.

"Rising gasoline prices in October continued to cause consumers to switch from less efficient vehicles like SUVs to cars," commented JPMorgan Canada economist Ted Carmichael.

But the CAW's Hargrove dismissed high gasoline prices as the cause of the problem.

"The overall average of fuel consumption for the importers is no better than for the Big Three," he asserted.

"When the Big Three moved to produce fuel-efficient cars a few years ago, the consumers wouldn't buy them."

© The Canadian Press, 2005