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Can Detroit Export to the World?




It hasn’t been a good year for Chrysler, not that 2007 was much better. The smallest of the Big Three has been steadily losing market share, as domestic demand for its cars, trucks and minivans declines. But one thing looks good, amidst the bleak terrain: Chrysler’s overseas sales set a modern-day record of more than 200,000 last year, and indications are those numbers will continue to improve in 2008, according to Vice Chairman Jim Press.

Chrysler isn’t the only member of Detroit’s Big Three seeking opportunity abroad, although General Motors and Ford Motor Co. have far more well-established operations in Europe and other foreign markets. In fact, GM’s foreign operations now account for as much of its total unit sales as North America, (though U.S. and Canadian revenues far exceed the overseas total). GM’s Vice Chairman and product chief, Bob Lutz, told TheCarConnection.com, earlier this year, that he envisions a time, not that many years from now, when the North American market will make up little more than a quarter of GM’s global vehicle volume.

There was a time, a decade or so ago, when Detroit saw an opportunity to fill the foreign sales gap with American-made vehicles. Chrysler, for example, tried to push its old Neon compact into Japan about the same time that GM tried selling Saturns through a new Japanese dealer network. Both efforts were quickly aborted due to lack of demand.

Design and quality problems didn’t help sell Detroit iron in places like Tokyo and Paris. But export attempts also ran into the issue of foreign exchange. With Detroit’s high cost of production, there was simply no business case to be made when the dollar drew 1.3 Euros.

Suddenly, though, the exchange rate equation has turned upside-down. With the dollar hovering at record lows, about 1.5 to the Euro, American exports are suddenly looking good in many parts of the world. Things could prove especially positive for the auto industry.

A key reason? The new contracts the United Autoworkers Union inked with each of the Big Three, last Summer. It provides for the creation of a two-tier, $14-an-hour wage structure for thousands of GM, Ford and Chrysler workers. Though those on the Big Three assembly lines will still make around $26, plus benefits, the new agreement will eventually eliminate as much as two-thirds of the cost gap between Detroit plants and those operated by its foreign-based rivals.

The UAW contracts also provide specific remedies to improve productivity. The annual Harbour report, produced by the consulting group, Harbour & Associates, shows that even pre-contract, GM was close to Toyota levels of productivity, and the consultancy’s president, Ron Harbour, predicts that the domestic maker could surge to the number one spot in the 2008 Harbour Report.

"Combined with the weak dollar, we've got a contract that puts ourselves in a great position to ship products to other countries and do it making a profit," Mike Herron, a UAW official at GM's Spring Hill, Tennessee assembly plant, tells the Wall Street Journal.

GM has been slowly ramping up its U.S. exports, though so far, it has limited such programs primarily to high-line and specialty products, such as the Cadillac CTS and Chevrolet Corvette. The latter sports car has gained a bit of traction in Europe, while Cadillac, on the whole, is finding a niche within the car-crazy Chinese market.

But Caddy’s success there underscores the need to understand the needs of local markets. When first shown at the Beijing Motor Show, in 2006, the CTS sedan didn’t have the rear-seat entertainment and climate controls expected of a luxury product in a market where many high-line buyers still are chauffeured. With the subsequent launch of a Chinese-edition STS, Cadillac not only included those featured but stretched the sedan several inches to provide more backseat legroom.

This coming year, GM intends to start shipping the Buick Enclave to China. The big crossover/SUV will expand the line-up of what is already one of that country’s biggest brands, and could account for up to 25,000 U.S. exports annually, if it connects with the market.

Ford and Chrysler are also mulling export opportunities. Some of the strongest appear to be in the Mideast, where fuel prices are less likely to turn potential buyers away from the fuel-thirsty truck models Detroit is best known for. Low mileage is a particular concern in much of the world, notably Europe. But many foreign consumers remain reticent, studies show, because of concerns about quality. Recent studies show that the Big Three have made big gains in that area, but it will take time for that message to spread worldwide.

Before the American manufacturers make too much of a commitment to export, they’re going to want to be sure that the current, lopsided exchange rate holds. It would be a financial nightmare to base an export program on the current U.S.-Euro rate, only to see it flip-flop again, two years from now.

Ironically, while Detroit only slowly re-embraces exports, its foreign-owned rivals have long seen its advantages. Daimler AG, for example, ships its M-Class sport-utility out of a plan in Alabama. Honda and Toyota have also been big automotive exporters from their U.S. “transplants,” in some years well exceeding the total shipped by the Big Three, as a group.
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Comments (8)
  1. There is no reason Detroit can not export but it has to work on quality, driving experience and well quality.

    Here in Australia there is always excitement when US cars/truks come and then this is replaced with disapointment as even if look good on the outside they tend to be let down in quality, cheap interiors and poor driving characteristics. Jeep once had a good name here but now with the terible product they are putting out they are killing the brand. Other than the 300C not a lot has had continued success in sales.

    My advice is get your own market in order then export your best (not just what you can not sell at home). though maybe if Detroit has to pay attention to other markets this will improve the domestic products too. In the end concentrate on making the best cars you can, if it is a great car then it will sell.
     
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  2. Detroit products will only have marginal appeal in many overseas markets as long as product quality remains low. Let's face it, US standards have now been overtaken by almost everyone else in the World: look at the latest products from Korea and Eastern Europe, the markets everyone used to laugh at. They're streets ahead of anything from the US. The joke's now on Dodge, Jeep, Chrysler and even Cadillac. And it won't be long before the emerging markets like China wake up to this too.
     
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  3. Here is a REALITY CHECK.

    Detroit used to dominate the very profitable US Luxury Car market segment, Lincoln and Caddillac used to have a 90% market share in Luxury Cars.

    TODAY, this has been reversed!!! It took 3 decades of losing home games to the imports, every single of the 30 years, and many execrable Ford and GM luxury (so-called) products, but now Domestic luxury cars and trucks are barely 17% of the US market, and 83% are IMPORTS.

    So stop barking under the Japanese tree, for one thing: Most of these Luxury Imports are M-B's and BMWs and Audis (and to a lesser extent near-luxury Volvo and Saab). Lexus is th e ony major Japanese luxury import, Acura and Infinity are far behind.

    So to all of you that think Accord and Camry when they think Imports, the devastation has been MUCH larger (%wise) in the luxury segment.

    Back to the question: WHy would Detroit, who has lost 83% of its OWN domestic share of luxury cars, would be successfule xporting the cars that even the locals don;t want overseas?

    It can't. But what it CAN do and HAS been doing is produce millions of cars OVERSEAS, esp. in China, (GM Shanghai Automotive).
     
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  4. "Here in Australia there is always excitement when US cars/truks come and then this is replaced with disapointment as even if look good on the outside they tend to be let down in quality, cheap interiors and poor driving characteristics."

    Yeah, those Austrailian imports to the US have been paragons of quality & driveability. Such classics as the Mercury Capri, Mitsubishi Diamante, and even the Pontiac GTO.

    Cadillac & Buick are doing nicely in China, were there are no prejuduces against them.
     
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  5. It's the same scenario in Europe. The Japanese have taken over a lot of marketshare in Europe. Now all the major European manufacturers rely on exports for profits & percentages. Most of them now have manufacturing plants in North America.
     
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  6. "Cadillac & Buick are doing nicely in China, were there are no prejuduces against them."

    Caddillac is negligible (in numbers) in China, but Buick is HUGE and very popular. But actually, it is not that there are no prejudices against the US brands,

    it is that there are far greater prejudices, due to 20th century history, largely, against the accursed Japanese and the genocidal behavior they exhibited when they invaded china in the 30s (remember the rape of Nanjing?)

    So GM benefits from the prejudice AGAINST Toyota in Shanghai.
     
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  7. A review of objective measures of vehicle manufacturer's product quality, such as JD Power & Associates surveys, will disclose the fact is, U.S. (GM & Ford) quality is in the hunt for #1 in the world with the best of the best Japanese. U.S. quality is far ahead of the Europeans (with exception of niche maker, Porsche), as well as the rest of the world. Unfortunately, as mothers tell their children, "Protect your good reputation. A bad reputation is very hard to repair." The U.S. makers will have to "pull themselves up by their bootstraps" to build export sales.
     
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  8. SURE!?
    The world wants and need "FORD" to be EXPORTED?.
    The major Glitch: Some[thing] along the Lines OF: *"OLD WORLD ORGANIZED CRIME"*!:

    {ergo} Chrysler: ***France**"AND THE **""SIMCA"" AND WHAT FRANCES ORGANIZED CRIME DID WITH THERE BUILD AND EXPORT ARRAIGNMENTS:{there is} "NO MORE" Simca"???ODD!.

    May-be?, JUST MODERN "INSTANT REPLAY!
     
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