Blog Posts by Tom Libby

Missing in Action: Competition

Competition permeates the U.S. auto industry. Whether it's dealer vs. dealer, OEM vs. OEM, or model vs. model, competition is an integral part of the automotive environment. One probable reason is that competition is a core attribute of the country's capitalist economy. Another reason – perhaps – is that we all love to watch a match-up of two motivated and similar parties. Whether it's the Super Bowl, the World Series, Michigan vs. Ohio State, or another rivalry, we watch because it's fun and enjoyable.

I would submit that what we are seeing now in the U.S. new vehicle market is not competition. The March 11 Japanese earthquake and tsunami, both of which were completely beyond the control of any automaker, have curtailed the supply of Asian vehicles, and this situation will persist well into the fall. This has made it impossible for the Asian OEMs to sell at normal rates in the U.S., and will cause some shifting in the sales results this spring and for all of 2011. Forecasters are saying that Hyundai/Kia will out-sell Honda in the U.S. in May, and that Toyota worldwide may fall to third place among global OEMs for all of 2011, behind both GM and Volkswagen. Because the Asian companies simply cannot supply the product, these forecasted results are of much less interest to me than they would be in normal conditions. It's analogous – in some ways – to watching the Super Bowl knowing that one of the teams is playing without their star player(s). Frankly, who cares?

Mr. Akerson, GM CEO, agrees. In the May 13 edition of The New York Times (page B6), the reporter Nick Bunkley says, "Mr. Akerson said it (GM out-selling Toyota for the 2011 calendar year) would be a hollow distinction until the Japanese auto industry got back on its feet." Mr. Akerson himself is quoted as saying, "I want to win in the marketplace, but I want to win against a healthy and vibrant Toyota and Honda. Next year, we'll put the gloves back on, and I'm sure they'll go right back at us and we'll go back at them."

As an American, I can say, yes, it would be nice to see GM regain its global sales leadership crown. But it will mean a lot more when "the gloves are back on" than it does now.

Posted by Tom Libby, PolkInsight Advisor, Polk (06.02.2011)

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