If Detroit's three automakers could each get a wish for Santa this holiday season, it would be to keep the healthy gains in sales and market share they've racked up over the past year. The so-called Big Three have come through the worst automotive downturn since the Great Depression in far better shape than even their most ardent admirers might have hoped.
Individually, all three have gained market share this year, the first time that has happened since 1998. And if they can maintain the pace of the first 11 months of 2011, they should be able to end the year with a collective two percent increase in market share – which they've gained at the expense of two import rivals who, until recently, seemed on an inevitable and irreversible path towards domination.
Of course, it certainly didn't hurt that Toyota and Honda saw much of their global production network idled for much of the past nine months, hobbled by the March 11 earthquake and tsunami that devastated Northeast Japan – home to much of that country's automotive supplier base. And just when the Japanese thought they'd weathered the worst, they were slammed by flooding in Thailand that put ambitious recovery plans on hold.
Were it simply because of those disasters, one might have to write off Detroit's recent gains as a temporary aberration and prepare for a return to a more painful status quo in 2012. That very well could happen. Indeed, the Japanese makers are signaling that they intend to come back with a vengeance, rolling out plenty of new product – like the recently launched Toyota Camry and the new Honda CR-V – and backing it with the sort of incentive programs that used to be a Detroit specialty.
Yet, it's far from certain the Japanese will be able to regain what they've lost – or that, as in the past, General Motors, Ford and Chrysler will simply roll over for the new import assault.
There's no question Toyota and Honda, in particular, will be forces to be reckoned with, and as their dealer inventory levels have begun to bounce back, they've picked up some of their lost share. Research suggests there are plenty of potential buyers who've chosen to sit on the sidelines waiting until they could find a Camry, CR-V or Civic rather than switching brands.
But even before this year's series of natural disasters there were already signs of disaffection, with more once-loyal Toyota and Honda buyers shifting brands than we'd seen in years. And plenty didn't bother to wait, in recent months, until those Japanese inventories recovered.
That was great news for domestic makers who have been rolling out some unexpectedly well-reviewed products. Sure, that included light trucks and crossovers, like the redesigned Jeep Grand Cherokee and Ford Explorer – the latter winning North American Truck of the Year honors last January. But Detroit has also delivered some solid offerings in passenger car segments where they've been weak for years – indeed, where they hadn't even bothered to compete for years, as is the case with the Ford Fiesta subcompact.
And the product assault is only going to get more aggressive in 2012 with the likes of the new Ford Escape and Fusion, the Dodge Dart and the new Chevrolet Malibu.
What's particularly significant is that many of the Japanese products they're going up against have been taking some surprising hits. The latest-generation Honda Civic has been widely lambasted – by, among others, the normally import-friendly Consumer Reports. That prompted Honda CEO Takanobu Ito to issue an unusual mea culpa during a Tokyo Motor Show media roundtable and promise to rush a revised model to production.
But the Civic isn't alone. The maker's new CR-V is receiving tepid reviews and recent offerings like the CrossTour, Insight and Acura ZDX haven't exactly ignited consumer passions. Acknowledges Tetsuo Iwamura, CEO of American Honda, "Some of the sales results (for recent new models) have been quite a disappointment."
The tepid response to the new Toyota Camry raises the prospect for the upcoming Ford Fusion remake to become one of the midsize segment's top sellers, contends Jim Farley, Ford's marketing chief. But Farley – himself an ex-Toyota senior exec – acknowledges that Ford and its cross-town rivals have had a history of snatching defeat from the jaws of victory. We've heard plenty of talk about how things have changed since the GM and Chrysler bankruptcies of 2009. But can the domestics walk the walk?
"The most important element of growth is building up residual values," contends Farley, suggesting you can measure whether a maker "has a headwind or tailwind by walking down the aisles at the auto auctions" where used cars and off-lease vehicles are traded and sold between dealers.
Traditionally, Detroit residuals – trade-in prices, if you prefer – have lagged well behind the better imports. And for good reason. All those $5,000 incentives have effectively undermined the products the domestics have sold. It's hard to command a premium at a fire sale.
Lately, Detroit givebacks have been coming down while import incentives are fast on the rise. In turn, the residuals of many Honda and Toyota products have been on the decline. The Fusion is now averaging several percentage points, and about $2,000 higher, than the Camry. That matters because it impacts what a consumer will pay for a lease and what a smart shopper might expect at trade-in time.
The Detroit makers still aren't over the hump. Their residuals lag well behind on many other products. And they still have to prove they have developed new discipline when sales start slipping and they'll be forced to choose between ramping up rebates or cutting production on weak models. But GM is clearly showing a new face with its decision, this week, to stop building the Chevy Cruze while a key supplier resolves a quality problem that might otherwise lead to unhappy customers.
Of course, the Japanese are no longer the only threats. As much as the domestics have benefited from Japan's recent problems, so have Koreans Kia and Hyundai, both of which have been setting sales records seemingly month after month.
And then there's the perception issue. As good as Detroit gets, GM, Ford and Chrysler continue to face resistance from buyers in many parts of the country – especially along the coasts where domestic products have become little more than afterthoughts.
But, for the first time in years – make that decades – there's reason to believe the Detroit makers actually can maintain momentum and without their competitors having to be sidelined by the forces of nature.