January 19, 2007 / 11:29 PM / 13 years ago

Market share erosion slows for Big Three

DETROIT (Reuters) - The U.S. market share of Detroit’s traditional Big Three automakers has been in a slow and seemingly inexorable state of decline for years, but a leading industry analyst said it probably won’t fall below the key 50 percent level any time soon.

General Motors Corp. (GM.N), Ford Motor Co. (F.N) and the Chrysler arm of DaimlerChrysler DCX.N DCXGn.DE have seen their combined market share fall from more than 67 percent in 2000 to about 58 percent at the end of August, as smaller and more nimble foreign rivals carved out a growing piece of the world’s largest car market.

But that erosion, accompanied by a dramatic fall in profits, is likely to slow over the next few years, according to Jeff Schuster, executive director of global forecasting at J.D. Power and Associates.

Schuster spoke in an interview on the sidelines of the Reuters Autos Summit, which began in Detroit on Tuesday.

“Through our forecast horizon right now, which goes out to 2012, we do not have (combined share) slipping below percent 50,” Schuster said.

“What we do see is continued decline in the collective market share of the traditional Big Three, but we see it at a slower pace than we’ve seen, say over the last five years,” he said.

“In other words, it’s our view that the traditional brands will become more competitive than they are today,” he added.

That may sound a bit too hopeful, particularly since GM and Ford are mired in a deepening financial crisis and losing money in their core North American automotive business.

But Schuster, who admits to being optimistic about Detroit’s automotive giants, said they were already taking many steps in the right direction in terms of cost cutting, improved manufacturing and product quality.

Equally, if not even more important, he said GM, Ford and Chrysler were all poised to start rolling out more vehicles with bold styling and other attributes that mark a dramatic departure from their typically “vanilla product” of the past.

“I think that’s a major aspect of our assumption that they’ll be able to slow the (share) decline,” he said. “We believe that overall, over the next few years, we will see much more successful and competitive products than we’ve seen to date.”

AN SUV REBOUND?

Sales of Detroit’s most profitable vehicles, full-sized sport utility vehicles, have been hurt by this year’s run-up in gasoline prices. Some analysts have said that means trouble for GM, which is due to launch a new lineup of full-sized SUVs in January, and for Ford, which just introduced its new Explorer, America’s best-selling SUV.

Chrysler also just launched its beefy Jeep Commander model, the first vehicle from the military-inspired nameplate with three rows of seats.

Schuster said there was upside potential for Detroit, even when it comes to gas-guzzling SUVs.

“I don’t think Americans are necessarily ready to walk away from the larger products,” he said. “I think we have seen a decline, and we’ve probably seen the peak in full-size SUVs through the early 2000s.”

He added: “But I think there is a stability level and we would actually expect to see a slight rebound in the full-size segment in 2006 and into 2007 with the onslaught of new products coming out.”

Schuster acknowledged that Detroit’s automakers will have to get a lot of things right to slow their demise as the dominant force in America’s car industry.

But by 2012, the last year of Schuster’s current forecast, he sees them holding onto a collective 54 or 55 percent of the U.S. market for new cars and trucks.

That would stand in stark contrast to 1960, when U.S. automakers, including former American Motors Corp., accounted for nearly 90 percent of vehicles sold in the United States. But given recent sales trends, and gains by foreign-based companies, Detroit auto executives might not be too disappointed if Schuster’s forecast is on the money.

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