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US car makers battle for survival

The auto industry, cannot gloss over the fact that the major US car makers are facing their worst crisis ever.

india Updated: Jan 21, 2006 11:14 IST

The North American International Auto Show in Detroit, Michigan, which traditionally sets the mood of the industry, cannot gloss over the fact that the major US car makers are facing their worst crisis ever.

The show, which started Jan 14, gets over January 22.

Chrysler is the only one of the 'big three' US auto manufacturers running a profit while General Motors and Ford are making headlines with factory closures, overproduction and loss of market shares.

Both GM and Ford are facing "a battle of survival", according to German auto researcher Professor Ferdinand Dudenhoeffer as US consumers are deserting the big fuel guzzling SUVs and buying smaller and more frugal Japanese vehicles.

Toyota set the trend with its hybrid Prius and Lexus 4x4, a combination of petrol and electric motor. Although hybrids make up only a small share of the market at present they are expected to rapidly capture a larger share of the market.

Hybrids totalled 190,000 vehicles sold in the US by the end of November 2005 and they are expected to total 400,000 by next year, according to J.D. Power and Associates.

The trend towards smaller and more fuel-efficient cars is also expected to favour the German manufacturers, according to Dudenhoeffer.

BMW, which owns the popular Mini, set a new sales record in the US with 300,000 units. In Detroit, BMW presented a third Mini Traveller concept car indicating an expansion of the Mini segment.

While the foreign manufacturers appear geared for the new market trend, US car makers were banking on past glory.

GM flashed a new version of the Cadillac Escalade - a waning symbol of the petrol-guzzling "hulk" culture.

Few analysts, therefore, believe that the two major US auto makers are likely soon to overcome their crisis.

Ford has plans that could include the closure of up to 10 of its plants over five years and laying off nearly one-third of its 100,000 workers, according to unconfirmed reports circulating since July.

GM is planning to sell a portion of its profitable GMAC finance business in order to raise cash for restructuring after losing $4 billion during the first nine months of 2005.

First Published: Jan 21, 2006 11:14 IST