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Dasher 07-15-09 04:11 PM

Cars Hurt Most by the Recession
 
Cars Hurt Most by the Recession
By Rick Newman, U.S. News

2009 Dodge Durango
Last summer, when the prospect of a General Motors bankruptcy started to materialize, CEO Rick Wagoner was insistent: A Chapter 11 filing would be ruinous.

He was wrong, but not by a lot. GM and Chrysler are both still in business following unprecedented bankruptcy filings—but only thanks to billions in federal aid and government guarantees backing their products. And the two automakers will look quite different in their new incarnations. At GM, Wagoner is gone. His replacement, Fritz Henderson, has cut half of GM's eight divisions, leaving Chevrolet, Cadillac, Buick, and GMC. Chrysler is now owned by Italian automaker Fiat and desperately awaiting fresh technology and new models needed to become competitive. Many current Chrysler models may simply disappear.

Those are the biggest headlines, but the rest of the auto industry is reeling as well. Overall sales are down about 35 percent from last year, which itself was a bust, thanks to $4 gas and an incipient recession. Toyota, the world's biggest automaker, lost nearly $5 billion last year and might fare no better this year. Other bankruptcies may be on the horizon, with conglomerates in China and India prowling for bargains and Western know-how amid the wreckage. While some familiar brands could vanish, new ones may soon arrive in U.S. dealerships. Warren Buffett, for instance, believes a Chinese firm called BYD is one of the world's most promising electric-car companies—and has invested about $230 million in it.

The next several years are likely to represent the biggest shakeout in the U.S. auto industry since the 1930s, and I decided to gauge who's falling behind in what has become a frenzied race to survive. With the industry in a tailspin, sales at every major automaker are down, so I used data from J.D. Power & Associates to measure which automakers have been losing the most market share. That reveals which models and manufacturers are doing worst relative to their competitors.

Since brand loyalty matters most when money is scarce, the automakers losing market share today are likely to flounder even if there's an upturn in the economy. These seven nameplates have lost the most market share so far in 2009, compared to 2008:

Chrysler (1.9 percent market share, down 0.9 percentage point from 2008). Fire sales at shuttered dealers may have attracted a few bargain hunters, but Chrysler is proving that bankruptcy is bad for business. Sales of every Chrysler model except the Town & Country minivan are down more than 50 percent in 2009, and there's little on the way over the next 12 months to brighten the picture. The parent company is now officially Chrysler-Fiat, but the Fiat-made Eurodarters we've been hearing about won't arrive until 2011 at the earliest. They could help revitalize the Chrysler brand, the weakest and smallest under the corporate umbrella (which also includes Dodge and Jeep). But it's also possible that the whole Chrysler division could be folded into other parts of Chrysler-Fiat—or sold or dissolved.

Dodge (5.5 percent market share, down 0.8 point). Chrysler's sister division is suffering from the same double whammy: trying to survive bankruptcy with a product lineup that's middling at best. The Ram pickup is the strongest Dodge vehicle, with sales down less than the industry average. A rebound in housing and construction could help turn Ram sales around. The flashy new Challenger muscle car gives the popular Ford Mustang and Chevy Camaro some competition. And the Journey crossover is thrifty and practical. But the rest of the Dodge lineup is aging and underwhelming.

Chevrolet (12.4 percent market share, down 0.6 point). There's reason for optimism at Chevy—GM's biggest division—which can boast a mainstream hit in the Malibu sedan and an exciting "halo vehicle" in the hot new Camaro. But nearly every other vehicle in the lineup has lost market share over the past year, evidence that GM's bankruptcy has hurt even its strongest division. With GM folding Pontiac and selling Saturn, Chevy needs to make a strong recovery if GM is ever going to return to profitability.

Saturn (0.9 percent market share, down 0.5 point). There are still a few loyalists, but Saturn's sales and market share began to plunge on the news that GM would sell its "no hassle" division. The new owner, Penske Automotive Group, hasn't said yet what kinds of cars the new Saturn will sell, but they could be imports from Korea or even China. Until those arrive in a year or two, GM will continue to provide lame-duck vehicles to help keep Saturn's 350 dealerships open.

Toyota (13.6 percent market share, down 0.4 point). The big loser for Toyota has been its Tundra pickup truck, which has failed to wrest key turf from Ford and Chevy even though it's made at an expensive new plant in Texas. The new Honda Insight hybrid undercuts Toyota's Prius on price, and Honda's Accord has been a tough competitor to the Camry. But one reason Toyota has lost market share is that is hasn't cut prices as much as competitors or offered the same costly incentives. Share is likely to bounce back as some GM and Chrysler buyers flee to more stable carmakers.

Scion (0.5 percent market share, down 0.4 point). The trio of small, inexpensive cars that make up Toyota's Gen Y division—the tC, xB, and xD—should appeal to buyers in lean times. But competing thriftmobiles like the Honda Fit and Mazda3 have more mainstream appeal than Scion's funky designs. And other compacts like the Kia Rio and Hyundai Elantra come cheaper.

Suzuki (0.8 percent market share, down 0.3 point). Yes, Suzuki still sells cars here, although it suspended production of its XL-7 SUV last year and pulled the Reno and Forenza sedans from its lineup. What's left? The Grand Vitara crossover, the SX-4 compact, and a pickup called the Equator. That's a pretty flimsy lineup, but if you buy an SX-4, at least you'll get three months of free gas. Better hurry, though: The last company that tried a promotion like that was Chrysler.

Cars Hurt Most by the Recession- Yahoo! Autos Article Page


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