3 Challenges American Automakers Face


Motley Fool

Despite the recent success of the auto industry as a whole, there are still many issues and challenges that remain for the so-called Detroit automakers.

Learn more about the top 3 problems these automakers currently face.

Problem one: Green pressures will force big changes

…ask any Ford executive about the company’s most important product, and they’ll tell you without hesitation: pickup trucks.

You’ll get the same answer at General Motors, which is starting a huge ad blitz today for its all-new Chevy Silverado, and at Chrysler, too. That’s a good thing right now, because pickup sales are booming. But the whole industry is under massive pressure to create products that use less and less gas, and full-sized pickups are very thirsty vehicles. How can Ford and GM and Chrysler continue to make pickups that buyers will like while making the radical improvements in fuel economy that the government is demanding?

Problem two: Big losses and hard times in Europe
Why should American automakers care about Europe? Because they’re all losing a lot of money there, that’s why. Steep recessions in key European countries have driven new-car sales to a 20-year low. Ford and GM each lost over $1.7 billion in Europe last year, and Chrysler’s partner/owner Fiat would be in dire straits if it weren’t for Chrysler’s recent success here in the U.S.

Problem three: The Japanese government could make it harder to compete
Why should Detroit care about the Japanese government? No, it’s not because of Japan’s trade barriers, which are actually pretty modest despite what you may have heard. It’s because of exchange rates, specifically, because the current Japanese government is trying to jump-start the country’s economy by making its currency cheaper.

…the exchange rates have moved in such a way that you get more yen for your dollar. Instead of 86 yen for the dollar, as it was at the beginning of the year, now it’s around 99 for the dollar.

That’s a big worry for Detroit. After years of struggling, Detroit has finally reached the point where its best products can compete head-on with the likes of Toyota and Honda, with no excuses (or profit-sucking discounts) needed.