Big Three Auto Woes

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In recent years, the recurring troubles of the American Big 3 automakers have been coming to a head. General Motors (GM), Ford, and Daimler Chrysler AG face a host of problems. Legacy costs inherited from past manufacturing heydays in the form of costly pension and health care plans for retired employees add up to hundreds of billions of dollars. Unappealing gas-guzzler product lines that are a step behind current auto buying trends aren't driving strong earnings, either; instead, the Big 3 are trying to pad flagging normal sales rates with price incentives. Finally, continuing tussles with the United Auto Workers make it hard to cut costs and downsize to profitability. Meanwhile, Asian and European competitors are rapidly outstripping these traditional auto manufacturing powerhouses.

The Big 3 auto woes strike North American auto components manufacturers particularly hard, and hit in more than one way. Reductions in production volume and capacity will obviously decrease sales for the parts suppliers, but spending cuts within the Big 3 infrastructure also translate into decreased earnings for suppliers.

Toyota's eco-friendly offerings, including the hybrid electric Prius, are making it difficult for the Big 3 to compete.

[edit] Who wins from Big 3 woes?

• The Japanese's own Big 3- Toyota, Nissan, Honda, and other prominent foreign car manufacturers are ready and waiting to fill the production capacity and demand vacuum left by the Big 3's failure to continue dominating the North American market.

[edit] Who loses?

• American Axle & Manufacturing Holdings (AXL), Dana Corporation (DCNAQ), Lear (LEA), ArvinMeritor (ARM), TRW Automotive Holdings (TRW), and BorgWarner (BWA) are all auto driveline/other components suppliers who derive about 40% or more of their profits from North American sales, and most of these North American sales from the Big 3. Although many of these suppliers are trying to branch out into European/Asian markets, pricing pressures mean that it won't be easy to immediately replace lost volume from the Big 3.
• General Motors (GM) spinoff auto parts makers Delphi Corporation (DPHIQ) and Visteon (VC) still rely heavily on a Big-3-market, especially on Ford.
• Magna International (MGA) and Johnson Controls (JCI) both depend on the Big 3 for a large portion (almost 40-50%) of auto interior component sales.
• Cooper Tire & Rubber Company (CTB) and Goodyear Tire & Rubber Company (GT) are examples of tire companies who are also affected by the Big 3's decline. CTB is particularly hard hit, since nearly all of its business comes from North America and the Big 3.
• Auto-retailers like AutoNation (AN), who derive a substantial portion of their revenue from sales of Big Three autos.
• Car rental companies like Hertz Global Holdings (HTZ) and Avis Budget Group (CAR) who depend on the big three for their supply of rental vehicles.
• The domestic steel industry that produces much of its steel for the domestic auto industry: AK Steel Holding (AKS), Commercial Metals Company (CMC), Nucor (NUE), US Steel (X), Arcelor Mittal (MT)