It's business as usual. That's what General Motors and Chrysler want car buyers to believe as each automaker charts its way through the biggest financial crisis in its history.
It's also wishful thinking. As the two companies, which control nearly one-third of the U.S. car market, work through bankruptcy, they are undergoing profound disruption. Ford, Toyota and several other automakers are losing money and revamping their own operations. On top of that, the Obama administration is speeding up the pace at which car companies need to introduce new technology, cut tailpipe emissions and make major gains in the fuel efficiency of their fleets.
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With the whole U.S. economy in flux, in fact, there's probably no industry being transformed more rapidly than the car business. Here are some of the changes that will hit consumers over the next several years:
Higher sticker prices. It's a buyer's market right now because sales are terrible and automakers are still building more cars than shellshocked shoppers worried about the recession can buy. There may even be some fire sales over the summer, as nearly 3,000 GM and Chrysler dealers slated for closing shut down and liquidate their inventories.
But the sweet deals will probably dry up by the end of the year. Most automakers are aggressively cutting production to halt chronic overbuilding, and as inventories get leaner, prices will rise. Fewer GM and Chrysler dealerships means there will be less competition to drive down prices. And the administration's tougher mileage requirements will force automakers to adopt expensive new technology, such as direct-injection drivetrains and advanced transmissions, that will ratchet up the sticker price. For consumers who can afford it, the time to buy is now. (See "Fire-sale prices lift GM, Chrysler.")
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"A lot of new business models could emerge," says Craig Cather, the CEO of forecasting firm CSM Worldwide. "We could see some crazy things in the next few years."
In Mexico, for instance, at least one retail outlet sells Chinese-made cars alongside other types of consumer products. There's no reason such a model couldn't migrate north.
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Cars selling below costEdmunds.com's editor-in-chief, Karl Brauer, reveals 3 models you can buy right now for less than dealer cost.
Toyota at the top. With the Detroit automakers trying to shrink their way back to profitability, it seems inevitable that Japan's Toyota will end up as the No. 1 seller of cars in the United States. GM has long been the market leader, with U.S. market share of about 19% today, compared with 17% for Toyota and 16% for Ford. CSM's projections show Toyota edging to the front of the pack by 2011, with Ford right behind and GM a close third. Those three automakers are likely to cluster at the top of an intensely competitive market for the foreseeable future.
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