Study: Domestic automakers losing money on every vehicle
A new study by the Harbour Felax Group indicates General Motors lost an average of $1,271 for every vehicle it sold in the United States and Canada last year. Ford, meanwhile, lost around $451 per vehicle, while Chrysler squeezed a narrow profit of $144.
Comparatively, Toyota profited $1,715 per vehicle and Honda made $1,259. Nissan's profits were even stronger at an average of $2,135 per unit sold. Harbour Felax says U.S. automakers could greatly improve their profit margins by stabilizing pricing, cutting back on incentives, and reducing warranty costs. For example, the study shows Toyota's warranty costs at $348 per vehicle versus GM at $512, Ford at $585 and the Chrysler Group at $595.
Even more money could be saved through commonization of platforms, body architectures and components, the report said. Toyota has apparently saved $1,000 per vehicle over the last five years by commonizing commodity components, the research firm said.
Health care also plays a significant role in the labor-cost gap. Detroit automakers pay a heavy penalty for health care benefits for both active and retired workers. The study sites Toyot's competitive advantage in this area ranges between $900 and $1,400 per vehicle.
"It's time for the Detroit Three and the UAW to get together and resolve these problems," Harbour said. "In addition, the government must step up and find a way to eliminate the huge cost penalty for health care for active workers and retirees."
The study shows in 2005 Toyota had a $2,985 profit per vehicle advantage over GM and $2,165 over Ford with $1,570 over Chrysler. However, each domestic automaker has implemented strategies to close that gap. In 2006, the evidence shows these strategies are generating results for GM. In the first two quarters of 2006, GM's North American profit per vehicle gap has improved by $846 per vehicle or 72 percent over the first half of 2005. Much of this increase is due to the improvement in revenue per vehicle which went from $19,977 for the calendar year 2005 to $23,604 for the first half of 2006. In comparison, Ford had a $599 drop in performance in the first half of 2006, losing $738 per vehicle in North America while revenue per vehicle was relatively constant.