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Big 3 pact fail to close gap with foreign competitors
Detroit, Sept 26: The Big Three automakers and their top two suppliers could cut up to 50,000 jobs over the next four years under tentative union contracts reached last week and still fail to close the competitive gap with Asian and European automakers, analysts said.
Detroit, Sept 26: The Big Three automakers and their top two suppliers could cut up to 50,000 jobs over the next four years under tentative union contracts reached last week and still fail to close the competitive gap with Asian and European automakers, analysts said.
General Motors, Ford Motor Co. and the Chrysler arm of Germany's DaimlerChrysler AG won the right to close or sell at least 10 aging and underperforming plants, which had been forbidden under previous contracts with the United Auto Workers union.
But that might not be enough to hold back the rising tide of foreign automakers, which grabbed record US market share in August and many of which rack up most of their profits from the United States. The Big Three, forced to offer hefty marketing incentives to spur sales, struggle to make a profit on their US automotive operations.
"Unless the Big Three break their pattern of deflation and market share losses, it is likely that each of them will experience reductions in profitability despite their restructuring efforts," Deutsche Bank analyst Rod Lache said in a recent research report. Just as the labour talks intensified in early September, US sales for the Big Three fell to a record low of 57.9 per cent of US vehicle sales for August. Foreign automakers dominate car sales, and are gearing up to sell more pickup trucks and large sport utility vehicles, a stronghold of the Big Three.
According to summaries of the contracts released by the UAW, GM could close one US assembly plant and one parts plant and Ford two of each, while Chrysler won the right to close or sell four parts plants. But Wall Street had expected more.
"The Big Three gained some ability to close plants. However, the amount and timing appear to be somewhat disappointing" Morgan Stanley analyst Steve Girsky said in a report. Bureau Report
But that might not be enough to hold back the rising tide of foreign automakers, which grabbed record US market share in August and many of which rack up most of their profits from the United States. The Big Three, forced to offer hefty marketing incentives to spur sales, struggle to make a profit on their US automotive operations.
"Unless the Big Three break their pattern of deflation and market share losses, it is likely that each of them will experience reductions in profitability despite their restructuring efforts," Deutsche Bank analyst Rod Lache said in a recent research report. Just as the labour talks intensified in early September, US sales for the Big Three fell to a record low of 57.9 per cent of US vehicle sales for August. Foreign automakers dominate car sales, and are gearing up to sell more pickup trucks and large sport utility vehicles, a stronghold of the Big Three.
According to summaries of the contracts released by the UAW, GM could close one US assembly plant and one parts plant and Ford two of each, while Chrysler won the right to close or sell four parts plants. But Wall Street had expected more.
"The Big Three gained some ability to close plants. However, the amount and timing appear to be somewhat disappointing" Morgan Stanley analyst Steve Girsky said in a report. Bureau Report