Q&A: Can the 'Big Three' automakers survive?

I'm not surprised with the decline of the Big Three auto makers. I'm surprised they have been able to hold onto their markets for as along as they have given the last 25 years of stiff competition from quality cars from overseas. Isn't it fair to say: "In a global market, was it ever realistic to expect, for example, GM to maintain over 50 percent market share in the US?"

It was until the 1980s. But since then, the American market has been an incredibly competitive and wide-open market. I actually think the American market is going to evolve into something like Europe's. We might have room for one big player, like GM, with 20 to 25 percent of the market. Then the rest of it will get split up into smaller chunks. If sales trends continue, you could have Ford and Toyota both around 15 percent, Honda and Chrysler around 10 to 12 percent, and then single-digit shares for all the others. What that will mean will be fierce battles for consumers like we haven't even seen yet.

Which of the Big Three is likely to have a true, energy-efficient, mass-produced hybrid - gas/electric - car first?

It's a race between Ford and GM. Ford plans a hybrid version of the Escape; GM will have a hybrid Saturn VUE. But "first" is a consolation prize, because both Toyota and Honda are on their second-generation hybrids.

For patriotic-minded carbuyers, how big an effect does the purchase of a US-built Toyota have on the US economy compared with buying a GM? Once foreign car companies like Honda and Nissan started building cars in the US, didn't the Big Three lose their edge with "patriotic" buyers? Then once that happened, the next step had to be quality and price ruling the market, sealing the ascendancy of foreign-owned cars over Detroit-built cars?

Yes, the presence of the "transplant" factories has helped to eat into "patriotism" among car buyers. Now that they have been here for 20 years, one of my friends terms these companies "implants." First they were imports, then they were transplants, now they have "implanted" themselves into the American psyche. When I interviewed car buyers, I had numerous people mention the fact that Toyotas were built in Kentucky, Hondas in Ohio, Mercedes in Alabama, etc. This has permeated the car buyer's consciousness and I think these companies have scored valuable points because of those factories.

Why do you say the American automakers don't know their customers as well as the imports? The imports totally missed the light trucks trend for almost a decade, even after they'd been doing business here for 20 years? You win some, you lose some. When the market swings toward smaller cars, the imports are better positioned to take advantage of it. When it swings back to big cars it seems to me the Big "Three" talk to even more customers, but because of their size and cost structure are simply not in a position to be as responsive.

I agree that the imports missed the light truck trend. One reason is that their home markets - Japan, Korea and Europe - are very car focused. They didn't have the sensitivity to the truck market that Detroit had and they lost valuable time. But once they got into the light truck market, they have gobbled market share. In 1992, Detroit had 94% of all minivan sales. In 2003, that's down to 70 percent, thanks to vehicles like the Honda Odyssey and the Toyota Sienna. Same with SUVs: Detroit once had 95 percent of SUV sales; that's down to about 74 percent.

Size and structure have something to do with it. Between one-quarter and one-third of the vehicles that Detroit sells are to a) rental car companies; b) their own employees and retirees; and c) people with a connection to the companies, like suppliers, dealers, and their families. The imports, by contrast, sell 10 percent or fewer of their vehicles to these "captive" markets. They aren't producing vehicles by the pound, as Professor Gerald Meyers, the former head of American Motors, has said. They are targeting each sale at individuals. It is a much different approach. That said, Detroit has now had almost 25 years to deflect the inroads made by the imports. It has scored some successes, namely the Ford Taurus, and Saturn. And, had Ford and GM stuck with them, they would have solid competitors for the imports. It's still possible, but the bar has been raised.

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