Drowning, Detroit Faces More Competition

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Detroit has gone to the government well and collected enough money to get it through to late March. It will present forecasts to the government based on cutting costs, keeping market share, and operating in a fairly depressed domestic market.

With Toyota (TM), Honda (HMC), and Nissan struggling, US car companies have at least a chance of holding their piece of the US pie.

Detroit’s plans face a new threat. Two of the strongest car brands in the world, VW and BMW, want a bigger share of the American market. They come to the table with excellent balance sheets and good products. They already have a strong presence in Europe and do well outside their home markets.

VW is the largest car company in Europe, but has less than 1% of the market in the US. This has to be painful for the firm. Before the Japanese entered the US market, its Beetle was the small car of choice. BMW has done well in America and is now producing less expensive cars and SUVs to attack the high end of the product line-ups of domestic firms.

Congress and the administration are going to have to ask themselves whether the entire car market in the US is going to be transformed by competition from companies which can more into the market and afford to stay in the market through the recession.

Douglas A. McIntyre