US Automakers Face Financial Losses But Hope for a Brighter Future

Mil Arcega
Voice of America
Washington, D.C.
February 6, 2007

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The financial slide continues for U.S. automakers.  Detroit's "Big Three" -- General Motors, the Ford Motor Company and DaimlerChrysler -- posted big losses in 2006 while Asian carmakers profited.  Despite this gloomy snapshot, chief executives at General Motors and Ford say there's reason for optimism.  The report is narrated by VOA's Jim Bertel.

Last year, Ford posted the biggest annual loss in the company's history, $12.7 billion.  GM has fared slightly better.  The world's largest automaker has lost billions over the past two years but expects a small profit in the last quarter of 2006.

To hear GM's Rick Wagoner and Ford's Alan Mulally talk about it, the future looks bright.

"You'll see some cars that I think will knock your socks off," said the GM chief executive officer.

"Ford is an American icon.  It's a wonderful brand," Mullaly said to his audience.

But it is a brand that's losing money.  U.S. automakers lost eight percent of the U.S. market in 2006, while Asian and European manufacturers gained five percent and three percent, respectively.

Compounding the problem is the rising cost of health care.  Last year, American automakers spent $12 billion on medical benefits, almost 10 times as much as foreign manufacturers' health-care costs.

The result?  U.S. automakers are closing plants and laying off workers while foreign carmakers are building new plants and hiring more workers.

To compete, Mulally says, Ford has to downsize and make a profit while producing fewer cars.  "The consumers have moved to lower, to smaller SUVs [Sport Utility Vehicles] and cars.  And so we need to shift with that and create cars now that are more efficient, that customers really want and value."

The challenge is convincing a new generation of consumers that American cars are more reliable and provide better value.  Automotive analyst John Casesa says Detroit's Big Three have to move quickly, because time is running out.

"Everything is at stake for Detroit right now,” says Casesa.  “This is the last chance to get it right. Detroit has lost an entire generation of car buyers, and it will probably take another generation to win these customers back."

Auto experts say Toyota, which sold more than 9 million cars last year, could overtake GM as the world's largest carmaker by the end of this year.

But Rick Wagoner says that remains to be seen.  "I mean, there's a lot of people who are predicting the outcome, but that's why we play the game: to see who wins at the end,” syas the GM chief.  “And we're going to be fighting for every sale, right to the last part of the year.  And if we win, great.  If we don't, we'll come back the next day and try harder."

Wagoner says GM is banking on design and the latest fuel-saving technologies to sell more cars here in the U.S., in Europe and in China.