Who is failing the grade on new model updates?

AUTOS IN FUTURE: Detroit short on new vehicles, analyst says

U.S. automakers fail to update lines

General Motors Corp. and Ford Motor Co. are not updating their model lineups as fast as their competitors and likely will continue to lose U.S. market share as a result, an annual analysis of the auto market by the brokerage Merrill Lynch says.

IN THE PIPELINE
A Merrill Lynch report says General Motors Corp. and Ford Motor Co. lag competitors in updating their product lineups. But the automakers caution that the findings are incomplete. Merrill Lynch's data suggest a link between the percentage of new models and how much market share an automaker gains or loses, with the freshest lineups doing the best. Above are vehicles expected to appear in showrooms for the 2006 model year.

GM and Ford will replace just 16% and 15% of their lineups a year on average over the next four years, estimates Merrill Lynch's report, Car Wars 2006-2009: The Product Pipeline and its Investment Implications.

Meanwhile, Korean, Japanese and European competitors will update their models much faster, replacing 30%, 21% and 15% of their lineups annually during the same period, a summary of the report says.

The Merrill Lynch findings, which GM and Ford dismissed as incomplete and speculative, were released in a recent conference call and presentation, and the full Car Wars report is to be available in about two weeks.

John Casesa, the Merrill Lynch auto analyst who writes the annual analysis on the auto industry, said Tuesday that Detroit automakers' relatively weak investment in new products compared with their Asian competitors "gets to the heart of the problem" at GM and Ford.

Merrill Lynch's data suggest there is a strong correlation between the percentage of new models and how much market share an automaker gains or loses, with the freshest lineups doing the best.

GM sales are down 6.7% for the year through May, while Ford sales are down 5.7%. Their combined share of the U.S. market the first five months of the year was 44.8% -- down from 47.3% a year ago.


DaimlerChrysler AG, whose Chrysler Group is in Auburn Hills, "will continue to lead Detroit with the freshest lineup," Casesa wrote in the presentation summarizing the findings. He estimates the automaker will replace about 17% of its lineup annually between 2006 and 2009.


Automakers do not typically release their future product plans, for competitive reasons. So Merrill Lynch's conclusions are based on proprietary research the company's analysts gather through auto suppliers, manufacturers and other sources.


Ford spokesman Said Deep said the automaker does not believe the Merrill Lynch report accurately reflects its future product plans. He noted it excludes some new 2006 models, such as the Explorer and Mountaineer SUVs.


"We've got a lot more coming," Deep said. "He doesn't have the full picture. ... We have publicly said that we're going to deliver more products faster, and we're doing that."


GM spokesman Tom Wilkinson also said that, because the report is based on "data that we try to keep secret," the findings are not complete. He said the automaker is trying to replace more models faster.


Wilkinson also noted that, because GM's portfolio of models is so large, at about 80 cars and trucks, it's more difficult to achieve higher replacement rates. Companies with a handful of vehicles can replace just a few models and achieve a much fresher lineup.


"There's a built-in advantage for someone like Hyundai," Wilkinson said of the numbers.


Overall, the Merrill Lynch report anticipates a continuing explosion of new vehicles coming to dealerships.


The firm estimates 195 new products will be available for consumers between 2006 and 2009, for a total of 290 vehicles on sale that last year. That's an average of 49 new vehicles a year, compared to a historical rate in recent years of about 35 new cars and trucks a year. And it means that 71% of the models on the market will be replaced in the 2006-09 model years.


GM and Ford will not be producing enough of those new vehicles to maintain its market share, the report concludes. Neither GM nor Ford would comment on their market-share projections.


While Casesa predicts Chrysler will be able to maintain its market share with its product plans, Chrysler spokesman Jason Vines said the automaker expects to gain market share. DaimlerChrysler's share of the U.S. market through May was 15.2%.


Casesa said GM and Ford could be doing better in the market if they invested more money in their engineering, manufacturing, design and marketing departments.


"The revenue problem will be solved with new product and that is solved with investment," Casesa said. "You have to spend the money on the product and the people who develop the product."


Casesa's estimates reveal that local automakers invest far less of their revenues on capital expenditures, such as new manufacturing equipment, and research and development than foreign competitors. On average, automakers invest about 10% of their revenues on capital expenditures and R&D. But, the report says, local automakers spend less, with GM spending 8% -- the lowest amount in the industry -- Ford spending 8.2% and Chrysler Group spending 8.5%.

MercBasher - 7/1/2005 1:04:36 AM

+1 Boost

This article is dead on - GM and Ford have spent too much money diversifying (including but not limited to overpaying for foreign brands), and on badge engineering mediocrity across their ranges. They need to get the core products right and not let them so long in the tooth.