Some Global Car Makers Beginning to "Bite the Dust"

We've been writing about the glut in worldwide auto manufacturing capacity and what it means to global competitors.

It's going to be a long lasting Darwinian struggle, and in the final analysis, the world's customers will be calling the shots, regardless of what the subsidizing or bailout politicians may think or say.

It's a little bit like outrunning the other guy when the bear is chasing both of you. You don't have to be all that fast; just not all that slow. In other words, if you can outrun the other slow guy, the bear won't get you. At least not this time.

With respect to Japanese car makers, Toyota is running much faster these days than are Susuki and Daihatsu. And in Europe, Volkswagen is quicker than Peuguot and Fiat. And in the U.S., it looks like Ford is faster than either GM or Chrysler.

We'll begin with Japan as Toyota posts tripling of net profit, hikes outlook has this happy news:

"TOKYO--Toyota Motor Corp. said Monday that its net profit more than tripled in the July-September quarter from the same period a year earlier, when the earthquake and tsunami disasters in Japan derailed production. The company also raised its profit forecast for the full fiscal year.

Japan's biggest car maker by volume posted a net profit of 257.92 billion yen ($3.2 billion) in the three months ended September, up from Y80.42 billion in the same quarter last year when parts supply bottlenecks caused by the disasters made it difficult to meet demand in the U.S., Japan and other markets. . . .

Revenue jumped 18% to Y5.407 trillion in the quarter from Y4.575 trillion."

On the other hand, Suzuki to Stop Selling Cars in U.S. After Three Decades has some bad news to report:

 "TOKYO—Suzuki Motor Corp. said it would stop selling cars in the U.S., ending nearly three decades of sales in the world's second-biggest auto market after China as the yen's strength and a limited, compact-car-focused lineup have made it difficult to profit with such low sales.

Suzuki, which specializes in small cars and is the biggest car maker in the key emerging market of India, said it will now focus on motorcycles, all-terrain vehicles and marine equipment such as outboard motors in the U.S.

American Suzuki Motor Corp., the brand's sole distributor in the continental U.S., said on Monday it had filed for Chapter 11 bankruptcy protection and will stop selling new cars. The decision to exit the market reflects challenges that include low sales, a limited number of models, high production costs, and stringent state and federal regulations, the company said.

Suzuki entered the U.S. market in 1985 and sold a high of 102,000 vehicles in 2007. It had thought about raising its presence in the U.S. by expanding its lineup to include more larger vehicles such as the Kizashi midsize sedan. But those plans were sidelined by the onset of the financial crisis in 2008, and by a sharp rise in gasoline prices.

Following the collapse of General Motors Co. in 2009, Suzuki had to dissolve its joint production venture in Canada with the U.S. partner.

Suzuki has since exported vehicles from Japan, but the yen's strength in recent years has cut into the profitability of its U.S. business. Meanwhile competition in the small car market from U.S. and South Korean rivals has intensified. . . .

Meanwhile, Daihatsu Motor Co., another Japanese car maker that focuses on small cars, plans to pull out of the European market in January partly due to the yen's strength."

SPEAKING OF EUROPE .... VW'S WINNING ... PEUGUOT and FIAT ARE LOSING

 VW Revs Up Its Capital Advantage says this about Volkswagen's continuing outperformance, gaining strength both in car sales and financially as well:

"Volkswagen is determined to assert its superiority. Sure, issuing a rarely used mandatory convertible bond isn't the most obvious tool the German auto maker could use to rub in the distance between it and its rivals. But at a time when other European car makers are struggling to make profits and raise funds, VW easily raised €2.5 billion ($3.2 billion) on Tuesday . . . .

VW certainly isn't short of money: Its auto division had net cash of €9.2 billion at the end of September. Sure, that is well under half of the level a year ago: Since then, Volkswagen has paid €3.9 billion to buy the 50.1% of Porsche it didn't already own, while investing €6 billion in its production facilities. . . .

The capital raising certainly contrasts with French rival Peugeot's need for the French government to guarantee up to €7 billion of its future bond issuance; Italian car maker Fiat has, meanwhile, become heavily reliant on U.S. arm Chrysler amid slumping European demand for its cars. If VW can continue to spend on new technology and products, its already nearly 25% market share in Europe could rise further."

SUMMING UP

 In true Darwinian fashion, the strong will get stronger while the weak will struggle to survive.

Toyota and Volkswagen can be safely put in the survivor category, along with Ford. 

GM, Honda, Nissan, Hyundai, BMW, Mercedes and others very much remain in the race.

Names like Peuguot, Daihatsu, Volvo, Chrysler, Fiat and others are on the bubble with respect to their long term viability.

Of course, the customers will decide who gets to stay and play in the end. They always do when markets are allowed to work.

Thanks. Bob.