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.