llahAutomotive Industry Analysis - GM, DaimlerChrysler, Toyota,

Ford, Honda

Overview of Automotive Industry Analysis

The development of the automobile came from many different people from
different countries. The development stated in 1769 in France, with the
invention of a three-wheeler that was powered by steam (Gale, 2003). Then
in 1800's the first internal combustion engine was created in Belgian and the
first gasoline powered vehicle was constructed in 1885 in Germany (Gale,
2003). Henry Ford built the first car in 1896 (Gale, 2003). He then
revolutionized the industry with the invention of the assembly line. The
assembly line allowed him to mass produce the cars making them more
affordable to the consumers.

Political

Laws and government regulations have affected this industry since the
1960's. Almost all of the regulations come from consumers increasing
concerns for the environment and the concern for safer automobiles. The
first safety act passed by Congress was in 1966 and was called the National
Traffic and Motor Vehicle Safety Act (Gale, 2004). This act forced
manufacturers to improve the safety for the passengers, the driver visibility,
and the braking of the car. It also stated that manufacturers had to inform
the public when it had a recall on the cars. The motivation for the passing of
this safety act was Ralph Nadar's 1965 novel Unsafe at Any Speed: The
Designed-in Dangers of the American Automobile. (Gale, 2004) Safety
concerns were not the only concerns during this period. There was also
growing concern for the environment even before the oil crisis. According to
the article "Motor Vehicles and Passenger Car Bodies", Congress passed acts
in 1965 and in the 1970's. The Vehicle Air Pollution and Control Act was
passed in 1965. This was the first act to set standards for automobile
pollution. Then in the 1970's, Congress passed the Clean Air Act that
demanded a 90% decrease in automobile emission within the next six years
(Gale, 2004).

In the 1970's the oil crisis caused another act to be passed. The Energy
Policy and Conservation Act of 1975 stated that all automobiles must meet a
certain mileage per gallon. The act demanded that all automobiles had to
meet a standard of 20mpg by the 1980 model and then 27.5 mpg for the
1985 model. Then in 1992, the Intermodal Surface Transportation Act
required the installation of front airbags. (Motor Vehicles and Passenger Car
Bodies, 2004)
Demographics

For many years now, the baby boomers generation has been the main target
market for just about every product. As their generation is getting ready to
retire and spend less money, the automakers are looking at the younger
generations. Right now, the focus is starting to turn towards the baby
boomers children (Generation X) who are in their mid 20's and 30's and
Generation Y(Winter, 2002). GenYer's are now hitting the age where they
are able to buy cars. According to Drew Winter, "Analysts say that five years
from now Gen X and Gen Y combined will account for at least 40% of vehicle
sales."

Americans today are choosing to purchase larger vehicles over passenger

size vehicles. Today's generations are still buying the trucks, minivan and
especially the SUV's, even with the ridiculous gas prices. It is not only the
younger generations either; the boomers who are all reaching the retirement
age are more interested in the bigger vehicles (Fetto, 2001). There activities
after retirement are way more active then their parents. They are not just
sitting around and playing golf or going on vacations. They are still working
in some ways and being more active in their grandchildren's lives. Since the
boomers are still active, they want to drive the same vehicles that their
children drive in order to make life that much easier. Studies show that
trucks, minivans and SUV's report increased sales nearly every year (Fetto,
2001).

The manufactures target the sales of their cars to certain people and their
geographic location. Convertibles are not marketed toward people who live
in parts of the world that are cold all year round. A good example of
targeting markets is in Paris. A new is trying to be passed that SUVs are not
allowed inside the city. They are taking up to much room and the vehicles
use a lot of fuel. If this law is passed then SUV's will not be marketed toward
people who live in Paris. Another example is that minivans are mainly
marketed toward "soccer moms". They are marketed toward the moms
because they are perceived, as needed a lot of room to haul kids around and
the easy access the minivans provide.

Economic

The automobile industry has a huge impact on the U.S. economy. The
University of Michigan and the Center for Automotive Research stated that
this industry is the major user of computer chips, textiles, aluminum,
copper, steel, iron, lead, plastics, vinyl, and rubber. (Gale, 2004) The study
also showed that for every autoworker there are seven other jobs created in
other industries (Gale, 2004). These industries include anything from the
aluminums to lead to vinyl. In 2001, the total sales of automobiles were
3.7% of the nation's gross domestic product. This percentage works out to
be $375 billion dollars in sales.

Technology

The internet has affected just about every industry in the world and has also
had a huge impact on the automobile industry. A study was conducted by
J.D. Power and Associates in 2002 and involved more 27,000 new vehicle
buyers. The study showed that 60% of the buyers referred to the internet
before making their purchases and out of that 60%, 88% went to the auto
websites before going and taking a test drive. Business-to-business
marketplaces have given the industry many opportunities because of the
internet, such as more efficiency and lower cost. Ford, GM, and Daimler
Chrysler announced in 2000 their plans to create a global online exchange
for suppliers and the original equipment manufacturers. The exchange was
originally called NewCo, and then it was changed to Convisint. According to
Motor Vehicles and Passenger Car bodies, "In August 2002 General Motors
announced it was about to begin sending requests for quotes to suppliers
through Covisint using a tool called Quote Manager."

Concerns for the economy and global warming have caused the automobile
industry to develop alternate fuel vehicles. In the beginning, automakers did
not want to look into the development because of the high cost and the
many risks involved. Because of new legislation, they had no choice but to
come up with the technology to make the fuel-efficient cars. The automakers
decided that electric cars would be the best way to meet the legislation
demands. "Early models were unpopular because of slow cruising speeds
and lack of performance, but by the end of the century, electric car
production began to be practical."(Motor Vehicles) At the end of the 1990's
manufacturers was coming up with the technology to produce internal
combustion engine with an electric motor. Toyota and Honda were both
selling the hybrid vehicles at retail value in 2001.

Global

General Motors, Ford Motor Company, Daimler Chrysler, BMW, Volkswagen,

Volvo, Toyota, Mazda, and Nissan Motor Company come together to create a
new trade association created the Alliance of Automobile Manufacturers
(Gale, 2004). The organization was to replace the American Automobile
Manufactures Association that only consisted of American manufacturers, the
goals of the associations "were to work together on public policy matters of
common interest to provide credible industry information and data, and seek
consistent global regulatory standards (Gale, 2004). The manufacturers also
started merging in the late 1990's. American companies started buying
foreign manufacturers created some of the largest foreign takeovers. In
19998 Daimler-Benz A.G. merged with Chrysler Cooperation to form
DaimlerChryler A.G (Gale, 2004). Some other big mergers were Ford with
Volvo, and General Motors and Saab (Gale, 2004).

Sociocultural

Today's society judges people on the type of car you drive. Society does not
like to admit to this but it is very true. Manufactures know this happens and
targets their markets by these thoughts. For example, anyone who drives a
mini van is perceived as a soccer mom. This is because the manufactures
target mini vans to mothers. Anyone who drives a nice vehicle is thought to
be wealthy. No one wants to be seen driving an unattractive piece of junk
because of what other people will think of him or her. Consumers also just
feel better when they are driving a nice or new car, if makes them feel
better about themselves.

Another aspect of the sociocultural is the environmental concerns for the

need of fuel-efficient vehicles. Many environmentalists are worried about the
impact that the gas cars have on the environment. There is even legislation
that requires cars to average a certain miles per gallon.

Automotive Industry Five Forces of Competition Model

Threat of New Entrants

The threat of new entrants is very low in the automobile industry. The
industry is very mature and it has successfully reached economies of scale.
In order to compete in this industry a manufacture must be able to achieve
economies of scale. For this to occur, manufacturers must mass-produce the
automobiles so that they are affordable to the consumer. Another barrier to
entry is that it takes an incredible amount of capital to manufacture the
automobiles. It takes an extreme amount of capital not only to be able to
manufacture the products but also to keep up with the research and
development that is necessary for the innovation requirements. Access to
distribution channels is another high barrier to entry. A company must find a
dealership to sell their automobiles or have their own dealership. Space in
the dealerships lots is very limited making it difficult to have a wider variety
of inventory.

Bargaining Power of Suppliers

The bargaining power of suppliers is very low in the automobile industry.

There are so many parts that are used to produce an automobile, that it
takes many suppliers to accomplish this. When there are many suppliers in
an industry, they do not have much power. There are so many suppliers to
this industry; manufactures can easily switch to another supplier if it is
necessary.

Bargaining Power of Buyers

The bargaining power of the buyers is moderately high. The buyers being
consumers purchase almost all of the industries output. The manufacturers
depend on them to stay in business. The buyers also are a significant portion
of the industries revenue. If they can not keep their buyers happy then they
risk losing them to their competitors. The buyers have low switching cost if
they are not happy. All the buyer has to do is sell the car they own and
purchase a new one. The reasons why the power is not completely high is
that the buyers are not large and few in number. The buyers do not have
the ability to integrate backwards into the industry. If they want a car then
they have to purchase it from a dealership.

Threat of Substitute Products

There are not many substitute products for automobiles. Some of the
substitutes are walking, riding bike or taking a train. Substitutes products all
depend on the geographic location of the consumer. In some cities such as
New York or Chicago, a car is not as necessary. In cities such as those, the
subway is the most effective means of transportation. However, in most
places a person must have access to an automobile in order to get around.

Intensity of Rivalry among Competitors

Rivalry among the competitors is very strong is this industry. The major
competitors are so closely balanced that it increases the rivalry. In order to
gain market share in the automobile must gain market share by taking it
from their competitors. One of the other reasons there is such high rivalry is
that there is a lack of differentiation opportunities. All the companies make
cars, trucks or SUV's. The competitors are compared to one another
constantly. The price, quality, durability, and many other aspects of different
manufacturers are greatly taken into consideration when deciding what type
of vehicle to purchase. When the different manufacturers advertise they
even compare their products to their competitors. For example, the
commercials will focus on areas where the company outperforms its
competitors.
General Motors SWOT Analysis

The strengths, weaknesses, opportunities, and threats, are quite dynamic for
General Motors and each can be integrated into another. For example, what
might be a threat in one category for General Motors, can turn into an
opportunity or become a new strategy for General Motors in the future. One
of the major strengths that General Motors possess is the global awareness
and presence it holds in today's market. General Motors today has
manufacturing operations in 32 countries and its vehicles are sold in 192
countries (www.gm.com). To gain a better idea of General Motors position in
today's market, refer to table 1. By having such a strong presence globally,
General Motors can integrate its operations so each manufacturer can
concentrate on its core competencies. For example, automakers are trying to
drive down costs by sharing costs through their own global alliances, or in
joint ventures or partnerships with other companies (Harbour, 2001). This
has become one of Europe's strategies for the problem where small vehicle
continue to dominate the market and provide only small profit margins for
General Motors. Through global alliances, General Motors can stay in
business in Europe and continue to satisfy its' customers.

Another strength for General Motors is having the largest amount of annual
sales at $185,524.00 million, reaching about 15 percent of the global market
(Company Press Release). Leading the industry in sales enables General
Motors to spend time and money in its' R&D department. One of General
Motors' current projects is releasing two Hybrid cars in China and hopefully
more in the United States in the year 2007 (Stein, 2004). Troy Clarke,
president of Asian-Pacific, claims that developing Hybrid cars is the new
strategy for General Motors (Stein, 2004). One reason that General Motors is
sitting at the top of the industry could be due to the fact that it also lead the
industry in ad spending. Last year, General Motors spent close to $2.12
billion on advertising in the United States alone. This large amount of
spending has reached customers through the first internet coupons worth
$500 towards a Buick Regal (Halliday, 1999), and is another method of how
General Motors' innovation strategies enables them to remain at the top of
the industry.

The opportunities for General Motors globally are almost endless and the
ways in which General Motors turns threats into opportunities proves why
they are number one in the industry. With sales growing at 60 percent in the
Middle East last year, General Motors would like to institute a dealership
network in Iraq (Ridder, 2004), which would help Iraq's economy recover
from the war. Another threat of losing "safety professionals" due to
retirement at General Motors has been turned into an opportunity of
developing the recruiting and training program at General Motors (Minter,
2002).

In terms of taking a threat, such as losing any global market share, General
Motors has made advances in the E-Business strategy and technology for the
Asian automotive industry, and turned this threat into an opportunity. It is
crucial for every company to try and turn threats into opportunities for
improvement and development.

However, not all threats can be turned into a positive. General Motors CEO
never thought that the price war he launched three years ago would still be
going on. This has caused General Motor's market share to fall in the past
year (Welch, 2004). The main problem with General Motor's plants in the
United States is that they have too much capacity, which in turns causes
them to make bad long-term business decisions. Other major threats have
to deal with worker dissatisfaction. The dissatisfaction of the workers is not
only in America, but is occurring globally. A strike in Germany has squeezed
some of European production due to lack of two essential parts that are
usually provided by the German plants (Three, 2004). As one can see, a
strike at one plant or factory can have a domino affect on other plants or
factories. In this particular case, the strikes of one plant in Germany, causes
other plants in Europe to lay-off close to 12,000 jobs across the continent.
This demonstrates the importance of keeping each plant happy. Nationally,
General Motors has plans to make 10,000 temporary layoffs (G.M., 2004).
What General Motors needs to do is make sure that the people who are laid
off are treated with respect. This entails helping them find other jobs, or
promising them the opportunity to come back work when it is available, and
keeping this promise. This is crucial to keep employee morale high for those
workers who still have a job.

The main weakness that General Motors has been battling for the last
century is employee satisfaction which leads to constant strikes throughout
the corporation. Managers have been battling with employees and unions on
keeping wages, hours, and retirement plans fair. General Motors is currently
spending a large proportion of their earnings on health care for their retirees
as compared with newer automakers. In the past, General Motors has
offered generous plans to attract workers to its plants (Hakim, 2004), but no
one thought about what would happen when these workers got to the age of
retirement. Well, that time has arrived and General Motors is facing a
difficult future as these costs of retirement continue to rise.

Critics have been criticizing General Motors for waiting so long to develop
what is now the new wave of vehicles, the Hybrid cars. However, General
Motors is first in line when it comes to the HydroGen3 fuel cell prototype.
Recently, General Motors has sped up the pace of innovation with the
successful completion of a trans-Europe endurance run for its HydroGen3
fuel cell prototype (Kisiel, 2004). Although General Motors is just now
releasing a Hybrid car in China, it hopes to be the leader in the future with
hydrogen fuel.

As dynamic as General Motors is, it must have multiple strategies being

implemented at the same time to keep up with the fast, changing pace of
the industry. One of the major strategies which General Motors is changing
is the switch from producing seventy percent light trucks to producing
seventy percent cars. General Motors does not plan on letting the production
of light trucks slip away however. Gary Cowger, president of GM North
America, still believes there is a strong market for trucks, but America is
switching to a more economic commercial car (Guilford, 2003). General
Motors also plans on implementing a line of compact pickups which include
more car-like creature comforts and style. This change has come about to
match what the customers want with one of General Motors' slogans: 'A car
for every purse and purpose' (Greensberg, 2003). General Motors has
realized that it can make the add-ons, such as CD and DVD players,
affordable for those who desire them. Another add-on which has become the
most popular add-on and almost a standard for General Motors vehicles is
the OnStar feature. OnStar has expanded its premium services to let the
customer check his or her E-mail as well as trade stock via different voice
commands (Galvin, 2001). General Motors has started licensing the
technology of OnStar to other companies which might erode its brand name.
With everything that General Motors is doing right and with what little it is
doing wrong, there is still room for improvement. Recommendations can be
given in the fields of employee satisfaction, innovation, and new markets.
Being one of General Motors' main weaknesses, it is imperative that the
managers and executives review the policies and procedures which the lower
employees must abide by and determine if these rules are fair or not. With
every strike that General Motors goes through, the competition gains a little
bit of ground on the leading corporation. Open communication and open
minds between the managers and the unions' needs to become a must in
the General Motors Corporation. If the money to pay for the rising health
care costs cannot be found by cutting costs, then management needs to find
other ways to give benefits and incentives to the employee staff that will
keep everyone happy. Implementing the process of improving customer
satisfaction is a timely and excruciating process. The major advantages of
improving employee satisfaction are higher worker morale, higher
productivity, and an overall sense of corporate loyalty both internally and
externally. Employee satisfaction has a domino effect on the corporation. As
the morale of the worker increases, workers tend to be more efficient and
profit margins rise, which increases stakeholders' satisfaction and everyone,
becomes more loyal to General Motors. The disadvantages of trying to
improve employee satisfaction are that it cost a lot of money to have
external consultants work with the corporation to figure out what exactly is
wrong, and it takes a lot of time. However, in the long run scheme of things,
increasing worker satisfaction will have an overall positive effect on the
corporation.

Innovation is the backbone for any corporation these days, and it is crucial
that General Motors stays a leader in innovation as well as sales. Although
General Motors might be the leader in hydrogen fuel in the future, currently
the competition is way behind the rest if its competitors in Hybrid
automobiles. It has been recommended by critics across the globe that
General Motors should pick up the pace and not let the competition gain an
edge in the next few years with the Hybrid cars. General Motors needs to be
extremely careful on how far in the future it is looking ahead. It would only
seem wise to be at the same level, if not ahead of the competition with what
is going to be the new fad in the years to come. If General Motors does not
see the customers adapting to Hybrid cars then it might be making a good
decision on jumping ahead to the next level of fuel efficiency. It would be
extremely difficult for General Motors to catch up with Honda, Toyota, and
Accura, and their manufacturing of Hybrid cars. The advantage of doing so
however is that in case Hybrid cars are the future of the automobile industry
and not hydrogen fuel, General Motors will still be able to contend with the
rest of the industry. Hopefully, the technology on how to produce Hybrid
cars with economy of scale will be shared throughout the industry, enabling
General Motors to compete at the same level as its competitors. The
disadvantage of waiting for the improvement of technology and for it to be
shared is of course the waste of time not improving the corporation. And as
has been discussed before, time is money, and no one can compete with out
money.

General Motors has recently entered into the retail industry with its first ever
General Motors Collection store in Detroit's McNamara Terminal. General
Motors Collection store was the third highest in net sales at the McNamara
Terminal in August, 2002 (Geist, 2002). The retail stores sells merchandise
from miniature models of General Motors manufactured cars and racing cars,
to hats and t-shirts with its most popular automobiles on them. With sales
on average of $2,000 a day, this retail store is a perfect template for
General Motors to use in other cities where General Motors manufacturing is
a large part of the community. By targeting cities that have large
manufacturing plants, General Motors will continue to sell to its employees
who take pride in where they work. Also, large cities with high tourist rates
will have more flow in the shops and will in turn have higher sales. It would
also be interesting to see if such retail stores could do as well in foreign
markets who might not as ego-savvy as Americans and their possessions.
Before General Motors starts putting these collection stores all over the
world, it is essential that much research be put into the location selection. If
a store enters into a market place and fails miserably, the consumers in the
market may in turn form a negative view about General Motors. This would
come about through the association of the store failing to survive and the
lack of quality decision General Motors produces. The opposite effects
however is what General Motors would like to see. General Motors already
leads the industry in advertising and by offering the public the choice of
supporting their favorite sports car or any General Motors product, General
Motors gains free advertising. Not only will free advertising be gained, but
customer's brand loyalty will be increased and more cash flow will be
available for General Motors.
DamilerChrysler SWOT Analysis

As the number two auto manufacturer in total revenues DaimlerChrysler has

positioned itself as an industry leader, with this come many strengths. The
DaimlerChrysler umbrella covers many well-known brands such as Dodge,
Chrysler, Mercedes Benz, and Jeep. This means DaimlerChrysler has strong
brands that are recognizable in almost every part of the world. Within these
brands DaimlerChrysler also has wide variety of automobile products that
span all price ranges and model types, from economy cars to luxury models.
Brands such as Jeep are recognized worldwide for off-road and SUV vehicles,
while Mercedes Benz is one of the highest quality luxury car makers in the
industry. DaimlerChrysler is even represented in the realm of ultra luxury
with its Maybach brand which competes directly with manufacturers such as
Bentley and Rolls Royce.

In the arena of American car makers the Chrysler brand stands out as a
leading innovator in vehicle design. Chrysler is well known for category
breaking models such as the PT Cruiser and Plymouth Prowler. The Dodge
Viper is a vehicle that broke away from the mold of other American sports
cars to drive the imagination of car buyers, and increase the connection of
style and image with DaimlerChrysler vehicles.

The merger of Chrysler and Daimler Benz which created DaimlerChrysler

gave the company a large worldwide presence. This presence is a quality
one because DaimlerChrysler is considered to be one of most respected
companies worldwide according to a Financial Times survey of world
corporate leaders. This presence is further increased by DaimlerChrysler's
strategic partnership with Japanese car maker Mitsubishi. This partnership
gives DaimlerChrysler presence in the Asian regions which is does not
currently enjoy with its current stable of brands. This partnership will not
only allow for greater product visibility for DaimlerChrysler in one of the
largest automobile markets, but will also allow for sharing of technology
between DaimlerChrysler and Mitsubishi.

DaimlerChrysler is currently a leader in hydrogen fuel cell technology.

Hydrogen, considered to be the next big breakthrough in automobile
engines, has the ability to revolutionize the industry. If or when this is the
case DaimlerChrysler's commitment to research and development of the
technology will help ensure the company remains on the top of the
automotive world.

With all of the strengths that come with being a top auto manufacturer every
company must also face weaknesses that can arise from the current
business landscape and DaimlerChrysler is not immune to these
shortcomings. As the automotive industry continues to move in the direction
of globalization it is important for manufacturers to be strongly represented
in all large and emerging world markets. Although DaimlerChrysler is well
represented in the American and European markets they are not strongly
represented in the Asian markets. DaimlerChrysler has no brands of its own
that command significant market share in either the Japanese or emerging
Chinese markets. DaimlerChrysler's partial stake in Mitsubishi was supposed
to be an answer to this problem but current drops in Mitsubishi's market
share accompanied by other problems has left DaimlerChrysler's future
investments in Mitsubishi uncertain, and more importantly with no strong
plan to compete in Asian markets.

Related to the problem of Asian representation is the reality that none of

DaimlerChrysler's brands are truly marketable to worldwide consumers.
Brands such as Dodge and Chrysler are strong in the US, but have had
limited success in other markets. The Mercedes Benz brand is the most
recognizable world wide, but as a luxury car maker it is harder to market to
a majority of consumers in different markets. The Jeep brand is well known
and respected throughout most markets, but its appeal is limited to the
specialized group of SUV and off-road buyers.

The growing use of hybrid engines could also cause problems for
DaimlerChrysler. There strategy to focus on the entirely new hydrogen
technology has left them behind many other major manufacturers in the
development of hybrid technology. As other major car companies are
preparing to roll out hybrid options for many of there most popular models
DaimlerChrysler does not plan to do the same anytime soon. By hitching
there wagon to hydrogen power and not trying to capitalize on rising hybrid
trends DaimlerChrysler could be missing out.

What has been billed as a merger between America's Chrysler and

Germany's Daimler Benz has turned out to be more of an acquisition of
Chrysler by Daimler Benz. The result is that most top managers of
DaimlerChrysler are from Daimler Benz and many of the leaders of Chrysler
choose to leave or retire. Many have speculated this "brain-drain" of
Chrysler executives could hurt the innovative reputation of the American
brands in DaimlerChrysler's portfolio of manufacturers. Much of the
operations of DaimlerChrysler have also been moved to Germany where
current wage rates and labor laws have made it hard for DaimlerChrysler to
cut costs and bolster its bottom line.

With the evolution and changing environment of the Automotive industry

DaimlerChrysler has many opportunities to increase its strengths and fix
some weaknesses. With DaimlerChrysler's current shortage of Asian market
share there Jeep brand could be a bright spot. With the growing trend of
consumerism in China it is currently the fastest growing auto market in the
world, and the Chinese desire for all things American could provide
DaimlerChrysler with a golden opportunity. In Chinese surveys of the most
sought after American brands in China, Jeep is in the top 5. DaimlerChrysler
has also recently inked deals to build manufacturing plants for Mercedes
Benz in Beijing, China. These recent developments provide DaimlerChrysler
with more chances to push its products into a hugely coveted consumer
market.

The decision to focus on hydrogen power research and development could

also bode well for DaimlerChrysler if the current prices of oil and gas become
a future standard. The high prices will help to put more focus and energy
into viable fuel alternatives which could push the demand for hydrogen
powered vehicles, as well as provide opportunities for government subsidies
for continuing advancement of the technology. As a leader in hydrogen
power DaimlerChrysler is poised to be a large benefactor of any of these
scenarios.

Along with new opportunities come the inevitable threats and opportunity
costs associated with any course of action which have the ability to affect
DaimlerChrysler.

A current major threat is the shaky alliance between DaimlerChrysler and

Mitsubishi. The current downturn of Mitsubishi has left DaimlerChrysler in a
very vulnerable condition. If they continue in the partnership and hope
Mitsubishi can pull out of its slump DaimlerChrysler could still face the
consequences of not finding other ways to bolster presence in Asian markets
even is Mitsubishi does right the ship. Even worse if Mitsubishi continues to
flounder DaimlerChrysler may have to cut its losses and find itself even
further behind other manufacturers in the race to sure up some of the
largest auto markets in the world.

Another great threat is due to DaimlerChrysler's decision to put all its eggs
into the hydrogen fuel basket. If the current trend of hybrid engines
continues to catch on and grow throughout world markets DaimlerChrysler's
reluctance to follow suit could cause loss of market share to rivals who offer
better hybrid engines in more vehicle models. Even worse, if hydrogen
proves not to be a viable energy source in the near future than
DaimlerChrysler would not be able to profit from recent heavy investments
in the technology and be faced with huge sunk and opportunity costs.

DaimlerChrysler has embarked upon a strategy of becoming a world wide

leader in the automobile industry, representing all vehicle types across all
world markets. This is summed up by DaimlerChrysler's four-pillar strategy.
The four pillars include: Global presence, Strong Brands, Broad product
range, and Technology leadership.

DaimlerChrysler, formed by a merger of the American Company Chrysler

and the German Daimler Benz in 1998, was instrumental in the achievement
of many of these pillars. DaimlerChrysler currently sells products in over 200
countries and manufacturing plants in 17. DaimlerChrysler also has
headquarters covering all major geographic regions on every continent
except Antarctica. After the merger DaimlerChrysler had ownership of
several major car manufacturers with certain geographic presence. Daimler
Benz was one of Europe's largest car manufacturers, while Chrysler was a
leading American country. This gives DaimlerChrysler a large presence in
two of the largest auto markets in the world. They also choose to purchase a
30 percent stake in the Japanese Mitsubishi Motors as a way to penetrate
the Japanese markets. These three markets are the largest in the world and
gives DaimlerChrysler a strong global presence.

DaimlerChrysler also wished to produce strong brands of automobiles with

broad product ranges to be offered in these markets. DaimlerChrysler
currently lays claim to passenger vehicle brands such as Chrysler, Dodge,
Jeep, Mercedes, Maybach, and Smart. They also have ownership of
Freightliner, which is one of the largest commercial truck producers in the
world.

These brand names represent all vehicle types currently offered to

consumers. From Dodge and Chryslers cars and trucks covering all price
ranges and styles to Mercedes' and Maybach's representation in the luxury
market. Even specialized vehicles are represented; Jeep is a top producer of
off-road and SUV vehicles, while the smaller Smart brand produces
economical urban vehicles for sale in Europe and the Freightliner brand gives
DaimlerChrysler a strong share of the market in the commercial shipping
and transportation.

In the arena of Technology leadership DaimlerChrysler boasts that it is a

world leader in the development of hydrogen fuel cell powered automobiles.
DaimlerChrysler hopes that its research into the new power technology will
result in affordable vehicles powered by the alternative fuel source in the
neat future. This Technology has the potential to be the next industry
standard for engines and DaimlerChrysler is heavily invested in assuring that
if or when it is they will be positioned to offer the best hydrogen engines
available. They are also looking in the direction of cleaner, more efficient
diesel engines as an alternative to hybrid technology. DaimlerChrysler
believes that advances in diesel engines are superior to the improvements
made by gas/electric hybrids currently offered by many competitors.
DaimlerChrysler that strong research into these alternative power sources
will facilitate their desire to be a technological leader in innovation among
other companies in the automobile manufacturing industry.

Not all strategies are implemented seamlessly and DaimlerChryser is no

exception to this. One of DaimlerChrysler's biggest current problems is its
weak market penetration in Asia. While they do have a strategic partnership
with Mitsubishi motors it is apparent that Mitsubishi isn't fulfilling the high
expectations DaimlerChrysler expected. DaimlerChrysler is already on the
right track with its plans to open manufacturing facilities in China, but a
more immediate impact might be needed to ensure DaimlerChrysler doesn't
fall behind in the region. A more immediate presence could be achieved
through another strategic partner, specifically with one of the Korean
builders Daewoo or Hyundai. Both companies have successful small car
divisions, which are a need for DaimlerChrysler, and more importantly they
come with distribution centers throughout the Asian market. Both companies
have been recently seeking a large partner which provides an opportunity for
DaimlerChrysler. The addition of a new Asian partner to the DaimlerChrysler
stable can prove to be a great advantage through the immediate presence
DaimlerChrysler could gain presence in the underrepresented Asian market,
but it could also turn out to be a drawback. By taking on another acquisition
or strategic partner DaimlerChrysler could face the same problems it is
currently experiencing with Mitsubishi. By only being partners with another
Asian firm DaimlerChrysler would not have ultimate control of the partner
firm leaving more of a liability than if DaimlerChrysler opted to simply
acquire of the company.

DaimlerChrysler could also hedge its bets on hydrogen engines by investing

more in hybrid technology to provide more immediate returns.
DaimlerChrysler's resistance to go ahead with full scale implementation of
hybrid engines has come from a number of sources, most notably their focus
on hydrogen and a belief that other fuels, such as diesel, may hold greater
promise than hybrids. DaimlerChrysler believes that hybrid power is only an
interim step until the before mentioned technologies are realized.
Nevertheless, if DaimlerChrysler's assertions about the future of hydrogen
power are incorrect they could face large consequences of not embracing
hybrid engines. To fill this gap DaimlerChrysler could purchase plans for
hybrid engines to hedge their bets of the upcoming market for more efficient
fuels. Many manufacturers have begun licensing their hybrid technologies to
other manufacturers, and while this isn't as good as DaimlerChrysler
producing there own technology, it will allow them to introduce hybrid
engines in there own models quicker and not lose precious market share to
rivals. This would be an advantage for DaimlerChrysler because the
promises of hydrogen power, while great, are still many years away and the
use of hybrid engines and technology is growing exponentially in the
present. However, DaimlerChrysler believes that more efficient Diesel
technology is the better near-term solution t increase fuel economy. If
Daimler were to follow the crowd into hybrid technology they could face a
loss of investment in new diesel technologies that may well be a better
answer than current hybrid technologies.
Toyota Motor Corporation SWOT Analysis

The Toyota Motor Corporation was incorporated in 1937 and has many
strengths being one of the industry leaders in the automotive industry.
Toyota has three major brands underneath the company umbrella; Toyota,
Lexus, and Scion. By having these three distinct brands, it lets the company
reach many sectors of the globe in a choice of vehicle for customers. They
produce their vehicles and target specific global regions, such as the Carina
E for the European segment (Amherst). Toyota has traditionally also been
the leader in Total Quality Management or TQM. The belief that no process
could ever be declared perfect, and that therefore there was always room for
improvement was introduced by Toyota Sakichi (Financial Times). This
brought about the Japanese word, Kaizen meaning continuous improvement
(Financial Times). By using the Kaizen theory of continuous improvement,
Japan caught up the U.S. auto makers during the 1980's (Financial Times).
Toyota has also introduced it's newest hybrid power car, Toyota Pirus, at the
2003 New York Auto Show and hit the dealerships in the fall of 2004
(Toyota). In September of 2003, orders for the new and improved Pirus
totaled 17,500 which is five times more then the company target of 3000
(MSNBC). With the price of gasoline and oil ever rising, this is a great
market for Toyota to exploit.

Toyota does have some company traits that are portrayed as a weakness in
the industry. The brand Toyota is not perceived as many to be prestigious
(Amherst). Another perceived weakness is that it is in the top five of sales
but not in the top five in dividend payouts or stock performance (Yahoo
Finance). This may put up a red flag to investors around the globe that
Toyota is not paying dividends as frequent or as efficiently as they should to
their shareholder of the company. In Europe, the Lexus brand sold 18,206
vehicles last year compared with 509,720 BMW's. The reason for this is the
Lexus brand lacks the diesel V-8 engine (Bloomberg). In certain European
countries such as Belgium and Greece, diesels make up 90 percent of BMW
sales in part to the tax subsidies the consumer receives (Bloomberg).

The opportunities for the Toyota Motor Company seem to be endless. Today,
Toyota has passed the Ford Motor Company to become the world's second
largest automaker in the world trailing only GM (Forbes). Toyota has also
rounded out it's product line to suit the U.S. market with the redesigned
passenger trucks and SUV, but they have also hit the market hard with eco-
crazed society with the introduction of the second generation hybrid car, the
Prius (Business week). The company is also being pushed in the right
direction for opportunity with the strengthening of the Japanese Yen
(Bloomberg). With the yen gaining strength and shifts in other world
currency, the operating profits dropped during the April-June quarter by
fifteen percent or seventy billion yen (Bloomberg). Because of the saving the
company acquired in currency shifts, Toyota has extra money on hand to
use possibly in R&D to improve on their vehicles or in several other areas
causing great opportunities for the company. Toyota has doubled its market
share in Europe in the past four years to 5.1 percent due to import
restrictions being dropped in the 1990's (Bloomberg). The opening up of
imports in the European market is a great opportunity for Toyota because
that enables them to put their luxury line of automobiles Lexus, up against
the European BMW and Mercedes Benz. Toyota is considering the idea of
introducing a beefy three-quarter-ton pickup truck into the U.S. Market (Big
News). This model would combat the Ford F-250 and the heavy-duty Chevy
Silverado and these two pickups typically sell for more than $30,000 (Big
News). If Toyota will decide to enter the heavy-duty truck market now it
could be very profitable with construction, where the use of heavy-duty
trucks are needed, booming all over the United States.

Threats to the Toyota Motor Company are an everyday occurrence. A major

threat to Toyota is the Hyundai motor company. On average, Hyundai
usually has thirty more horsepower in their vehicles, and costs around 3000
dollars less than a comparably segmented Toyota vehicle (Amherst). In the
luxury line of Lexus, they are still losing ground to BMW in sedan sales and
in SUV sales (Business week). Technology increases in cars today is a major
driving force in the automobile industry, and if Toyota can't keep up with its
other competitors, they could quickly lose market share in sectors they are
involved in. The latest trend in the U.S. market is the eco-friendly vehicle
that uses less gas and even more use of electronic power (MSNBC). Toyota
has introduced the Prius hybrid vehicle, but Honda also is selling a hybrid car
right now and Ford, GM and DaimlerChrlsyer have all announced plans for a
soon release of their hybrid vehicles (MSNBC). If the Toyota Company can
gain market share before the other big three release their hybrid, this won't
become much of a threat, but if the Pirus does not fit consumer's needs in
the hybrid sector, they will quickly switch and try the other products on the
market.

The Toyota Motor Company has a slogan that is plastered across one of its
assembly plant; Yoi kangae, yoi shina (Business week). That slogan
translates to "Good thinking means good products", and that sums up what
Toyota is all about as a company (Business week). There combination of
speed and flexibility is world class with the 30 plants they have worldwide
with some of them able to produce up to eight models of on the same line
(Business week). Toyota also lives by the word Kaizen which translate into
continuous improvement (Financial Times). Toyota introduced TQM and
Kaizen to the world with the help of Edwards Demming to take the world by
surprise and focus on quality and improvement constantly instead of just the
bottom line and this focus has helped the Japanese company to become one
of the leaders in the auto manufacturing industry (Financial Times).

Toyota, to be as profitable in the future as they are right now needs to keep
their focus on the hybrid sector when selling in the U.S. market. Toyota has
also launched a joint program with it's suppliers to drastically cut the
number of steps it needs to make cars and car parts. Over the past year, the
company chopped out 2.6 billion dollars out of its 113 billion dollar
manufacturing costs without any plant closure of layoffs (Business week).
They are also putting the finishing touches on a plan to create a more
flexible manufacturing system. In this new plan, plants Indonesia to
Argentina will be designed to make more customized cars that fit the
demand in the local markets and Toyota believes that by doing this at their
plants the can save 1 billion dollars normally needed to build a new factory
(Business week). These are the recommendations that the Toyota Motor
Company needs to take into consideration to keep their company moving in
the right direction globally.

The advantage that Toyota would have by being the leader in the hybrid car
sector is unknown right now. Nobody knows for a certain fact if the "green
trend" will be a large factor in the future. In the U.S. market, it appears that
having a marketable hybrid car in their line up of automobiles will be a good
plan for Toyota in the future. The advantage of producing automobiles
customized to a certain market is a good plan to keep a competitive
advantage over the competitors in the same geographic region.
The hybrid car market could be a failure in the U.S. market and others in
better technology increases before Toyota's Pirus begins to turn profits for
the company. If this happens, Toyota could have a huge failure with all of
the R&D and advertisement they have put into their new hybrid vehicle.
Toyota also has an advantage over their customers today using the TQM
model of operations. If the rest of the industry begins to implement this
also, and Toyota fails to keep improving, this could prove to become a
disadvantage for the company.

Ford Motor Company SWOT Analysis

"Ford Motor Company is a global company with two core businesses:

Automotive and Financial Services. The Automotive business consists of the
design, development, manufacture, sale and service of cars, trucks and
service parts. In 2003, the Company organized its Automotive business as
two primary segments, Americas and International. The Americas segment
includes primarily the sale of Ford, Lincoln and Mercury brand vehicles and
related service parts in North America and Ford-brand vehicles and related
service parts in South America. The International segment includes the sale
of Ford-brand vehicles and related service parts outside of North and South
America and the sale of Premier Automotive Group brand vehicles and
related service parts throughout the world" (Yahoo Finance).

Ford's chairman and CEO, Bill Ford has a simple strategy, "Our vision for the
future is simple: We want to build great products, a strong business, and a
better world." Ford's vision is, "To become the world's leading consumer
company for automotive products and services" (Ford.com).

Ford has been focusing on cutting costs to increase margins more than its
competitors. In 1997, Ford cut $1 billion in costs as a result of work
suggestions and using standardized parts for different Ford models. As a
result of using standardized parts, Ford was able to decrease the number of
inventory parts, which decreased the chance of inventory parts not in stock.
This meant the assembly plant would be shut down less for out of stock
parts, saving Ford money (Stevenson 548).

Ford has used reverse engineering in the development of their products. The
Taurus is one example of this tactic. Ford examined the close competitors of
the Taurus to see which parts on each car were the best of the group. Ford
then designed the same parts as well or even better than the competitions.
Since the Taurus had the best parts when compared with its competitors,
the Taurus was viewed as the best-in-class car. This tactic allowed Ford to
"leapfrog" ahead of the competition in the family sedan category (Stevenson
130).

Ford has been an innovator in the auto industry when it comes to

technology. "Ford Motor Company has aggressively adopted
videoconferencing and computer-assisted design and manufacturing
technologies." These innovations have led Ford to staying successful and
efficient in the auto industry. Another technology innovation is the "use an
online computer network to share ideas, create the actual designs, integrate
the designs for the various parts and components, and build and test
prototypes via computer simulations" (Thompson and Strickland 157). Ford
has recently added Voice over IP phones to help control costs. Ford paid SBC
$100 million to install and manage a network of 50,000 VoIP phones. "The
immediate benefit is going to be efficiencies in cost and operations related to
moves, adds and changes" (Pappalardo 14). Ford is hoping that VoIP phones
will become a long term cost saver and help the company save their profit
margins. "Ford Motor Co's state-of-the-art F-150 truck-assembly facility,
expected to be operational by summer and running at full capacity by year's
end, is a body shop and final staging area where trucks are assembled and
prepped before being shipped to dealers. It's also Ford's first completely
wireless assembly factory." The factory utilizes a flexible body shop,
automated-materials-replenishment system, "self-adjusting platforms at
each bay station, and software-driven systems that monitor maintenance for
tooling, conveyers, robots, and other machines. The wireless infrastructure
Ford is deploying for parts replenishment and vehicle tracking comes from
WhereNet Corp Inventory replenishment is driven by Ford's Auto Call, part of
its synchronous material-replenishment trigger system, with assistance from
about 58 antennas around the compound" (InformationWeek 26). This
wireless technology will allow Ford to be more effective and efficient in all
operations of manufacturing vehicles at this facility.

Bill Ford said, "We've made solid progress in the last two and a half years
and we're building momentum. We're not going to let up on our efforts to
raise our quality, lower our costs, or improve on the fundamentals of our
business, and we'll continue the biggest product roll-out in our company's
history" (Company News). Ford has been introducing new products to the
market which include the all-new Ford Mustang, Ford GT, Ford Five Hundred,
Ford Freestyle, and the redesigned F-Series Super Duty; the all-new Mercury
Montego and Mercury Mariner; the all-new Ford Escape Hybrid - the world's
only hybrid SUV; the redesigned Ford Focus in Europe and Asia; the Land
Rover LR3; the Volvo S40 and V50; and the long wheelbase Jaguar XJ"
(Company News).

The first quarter of 2004 was a great quarter for Ford Motor Company. Ford
reported earning of $1.9 billion. This was "twice as much as the company
had told Wall Street to expect and far more than historical rival General
Motors, which made only $ 1.3 billion." Ford's management says that
"Rather than relying on windfall profits from a couple of hot-selling models
that might cool off later, the company showed a mastery of the myriad small
but important details that bolster the bottom line. It reduced overheads, cut
product expenditures and slashed warranty costs. At the same time, it
boosted revenues by targeting incentives and increasing the mix of high-
profit vehicles, such as sports utility vehicles (SUVs) with four-wheel-drive
packages" (Taylor 10).

"Behind the earnings hoopla, something even more interesting is beginning

to emerge: Bill Ford's strategy for the company. It is uncharacteristically
audacious and sweet in its apparent simplicity. Ford wants to make more
money selling fewer cars. In Detroit that makes him a virtual heretic and
threatens to turn accepted industry practice on its head. This is a business
where the fixed costs are so enormous that bosses like DaimlerChrysler's
Juergen Schrempp have staked their company's future on selling more cars,
whatever the immediate impact on profits. Pushing fewer cars out of the
factory also means accepting lower market share, blasphemous to some
ears, particularly since Ford has been losing share since 1995. And
prioritizing profits might also threaten brand loyalty, a fragile commodity.
Customers who shop elsewhere because Ford's prices are a few dollars
higher could be lost forever" (Taylor 10).

Bill Ford is taking a very new outlook on the automobile industry. While
economies of scale always determined if an automobile was successful or
not, Bill Ford wants to make money by selling fewer cars. This viewpoint is
an unbelievable stance from the CEO of an automobile manufacturer.

Ford has been struggling to maintain consistent sales numbers. Its first
quarter numbers were twice what was expected, but the rest of the quarters
have been lagging. Ford hopes that the release of the many different new
vehicles will revitalize Ford. The financial numbers will turn out decent for
the year due to the money made on the financing side. Some critics say that
the financing side of Ford is what makes the money. Ford counters with
saying that they must sell vehicles before the financing side can make the
money.

Some recommendations are needed for Ford to maximize profits. Ford needs
to capitalize on all the new vehicles coming on to the market. Aggressive
advertising campaigns might entice consumers to go to a Ford dealer and
look at the new products. The only way Ford can make money from theses
new vehicles is to sell a lot of them. Costs need to be reasonable for the
appropriate class of vehicles.

Along with selling all the new vehicles, Ford must make sure that the new
vehicles are what the consumer wants. The consumer won't buy the car if he
or she doesn't like its appearance, performance, and price. If Ford can meet
these three needs better than its competitors can, Ford will gain market
share. Extensive testing is needed before a new vehicle is launched onto the
market. If Ford has not done enough testing and surveys of potential
customers, sales might lag causing Ford not to get much return on its
investment.

Ford needs to stop using reverse engineering on the development of their

automobiles. If reverse engineering is used, then Ford is behind its
competitors. Ford must stay on the cutting edge for developing new ideas.
Stealing its competitor's ideas does not make Ford first to the market with a
new concept. Ford appears that it wants to be seen as an innovator. This is
seen with the first wireless truck manufacturer facility and using VoIP
phones. Ford needs to find ways to cut costs while maintaining or improving
efficiency. To be viewed as an innovator, Ford must continue to be the
pacesetter for anything new related to the auto manufacturer sector.
An advantage for releasing new products by Ford would be the potential
profit making opportunity. Humans have a natural tendency to be
competitive. This competitive nature carries over to automobiles. One
person will usually want a better car or truck than his or her neighbor. If a
new car or truck is released on the market, the neighbor with the new car or
truck that very few others have will have bragging rights. This explains why
brand new vehicle sales are very large immediately after the release date.
People want what others don't have. Ford is playing this game. Releasing
several new cars and trucks will hopefully entice the masses to purchase a
new automobile. The down side of this is the cost to create the new vehicle.
Millions and even billions of dollars are put into designing, developing,
testing, and producing a new vehicle. In order to make a profit on the
specific car or truck, thousands of that type of vehicle must be sold in order
to cover the development costs. If that number of sales is not met, the car
or truck was not a success. Ford would not make a profit on it and would
end up losing money on the project.

There are many advantages for Ford to be an innovator in its industry. Costs
can usually be saved in the long run. The publicity of the new innovation will
help sales. Newer efficient ways of running the company can be found. The
major disadvantage of innovation is the initial cost of the innovation.
Savings in the long run might be large, but the costs to switch from the old
way of doing something to a new way are usually a sizeable amount. If the
innovation doesn't work, the company will lose lots of money. They would
lose the initial investment to switch and create new costs to switch back to
the old way of doing something.

Honda Motor Company SWOT Analysis

Honda motor company is not your average Japanese car manufacturer.

Originally know for motorcycles, Honda has managed to elude the dominate
keiretsu system in Japan and become one of the dominant automobile
manufactures in the world.

There are many strengths to Honda. Honda has a reputation for producing
high quality products from cars to motorcycles to lawn mowers. In fact they
are the largest manufacturer of motorcycles in the world. Honda has won
many awards for initial quality and customer satisfaction. Their automobiles
are reliable and generally fuel efficient. Their research has afforded them
competitiveness in innovative products. The cutting edge Asimo robot and a
successful motor sports programs provide innovations that are passed to
consumers as well as press recognition. Honda won the MotoGP
manufacturers title and came in second in the F1 constructors'
championship. While these race cars and motorcycles are much different
than production vehicles, the lessons learned on the track transfer to better
performance and engineering of future consumer vehicles. They were a
pioneer in engineering low emissions internal combustion and hybrid
technology. Honda is the only other manufacturer outside of Mitsubishi to
branch out into many other areas outside of automobiles.

However there are weaknesses, Hondas products are fairly bland and
inoffensive in terms of styling. Their prices are higher for non-luxury vehicles
than comparable modes by other manufactures. They do not have a strong
offering in a truck line. Their vehicles also have a reputation for being
underpowered or pokey econo-boxes. Even for a broadly diversified
company like Honda, there exist opportunities. An offering in a pickup type
truck would be profitable, even if priced under competitors. These are types
of vehicles have among the highest profit margins. Another opportunity
would be to continue progressing low emission vehicles and alternative
power sources. While they have made progress in this area, the technology
is still overpriced for the consumer, and the infrastructure does not exist.
Another area of opportunity would be developing nations like china and
India. These are large markets, and cheap dependable transportation would
be a hot seller.

Honda's success has not gone unnoticed by its competitors. Like racing, if
you don't come up with something new this year, competitors will beat you
with last year's technology. Not that other companies are taking Honda's
technology, but for others to catch up is for Honda to fall behind. While once
upon a time Honda cut the low emissions trail, now they are no longer at the
vanguard.

Honda's strategy is to create value through expanded sales via innovation in

research and manufacturing. Instead of having one large manufacturing
plant Honda uses an idea of "manufacturing products where they are sold".
In this way manufacture is increased in areas where sales increase. This
practice has led to over one hundred manufacturing plants in over thirty
countries, a process they call "globalization". They also are guided by a
commitment to the future. This ideal is reflected in several ways. Low
emissions vehicles are one example, anther are manufacturing plants that
are focused on environmental friendliness as well as efficiency and quality.

Honda needs to come out with a truck, which evidently is in the making (the
"Ridgeline" coming spring 2005) and progress with efficient low emissions
vehicles. It also wouldn't hurt if they were to come up with some sort of
distinctive styling. Research should be continued because that has provided
the innovative and competitive products, and Honda's diversification into
areas other than automobiles should also be continued as this has been
historically and asset by providing synergies in technology and distribution
as well as name recognition. Also as mentioned earlier, a simplified
inexpensive transportation is it motorcycle or car would sell like hotcakes in
China and India.

After further review Honda's extensive web site, it appears that they are
expanding into India and China. China expansion includes a new plan that
will quadruple production by 2006. Meanwhile in India production has
started on a motorcycle that will cost less than two thousand US dollars. This
appears to be the right move and is in line with Honda's production in the
location of sales. These actions should put Honda in a position for much
more sales.

As far as new low emissions vehicles, they need to put something on the
market soon to recapture their image as the green leader. The new hybrid
Accord looks to fill that gap on paper. However even higher performance
than the regular Accord; the hybrid is well just uninspiring. Yes is quicker
and gets better mileage and has more power, but it looks the same, a car
your parents would drive.

The expansion into China an India will provide increased sales and spread
the image of Honda. However caution should be taken. If Honda can put a
affordable transportation in the hands of the masses then great, but if
instead of affordable they opt for cheap, then the two largest concentrations
of people on the planet will know Honda as crap.
Regaining the lead of low emissions is a risky proposition. If Honda goes fuel
cell and every one else goes electric, then they just rolled craps. But to be
the leader, they need to put something out to be recognized. Even though
the Accord hybrid has better performance, it still looks the same to the guy
on the street.

Financial Comparisons of Major Competitors

Our competitors' financial ratios from three areas were compared. Ratios in
liquidity, asset management, debt management, and profitability were
compared. Data for the years 1999 through 2003 was obtained from
research insight. While data for the year 2004 is available from various
sources, it was not used in comparison because the methods of computation
would have been various as well, thus rendering the comparison
meaningless.

The first area of comparison is liquidity. Historical data for Ford and GM was
not available as well as two years of data for Daimler Chrysler. DCX had the
highest current ratios and managed to raise them by over thirty percent
over 5 years. Likewise DCX also improved their quick ratios to lead the
comparison group, but not by a decisive margin. Toyota had the highest
cash to current liabilities, and with all 3 companies with marginal change in
this area, TM decreased by almost twenty percent. And lastly DCX led net
working capital to total assets, doubling this ratio over 5 years. Generally
DCX had the most liquidity of the three firms that were compared in this
area, and for the most part their ratios changed in a scale larger than the
group (caveat n=3).

The second area of comparison is asset management. All companies had

data for asset management ratios, so the whole group can be compared in
this area. Ford strongly led the group in days to sell inventory in the high
teens. After the closest rival TM, other competitors had numbers around the
forties. Poor GM had increased its days to sell inventory by nearly eighty
percent over five years to seventy one days while Honda had the only
improvement decreasing by nearly ten percent. Honda led fixed asset
turnover, while Toyota was most improved. DCX made negative progress in
this area. None of the companies manage an improvement in total asset
turnover with GM doing the worst over all and in change, while HMC kept
their turnover higher than competitors. So while Ford had the lowest days to
sell inventory, HMC pulled better turnovers to be the winning asset manager.

The third area is debt management. GM and Ford lead total debt to total
assets by a wide margin. They also lead long term debt to total capital
decisively by a wide margin. Toyota and Honda had interest coverage, while
the big three had interest coverage between one and one and a half, the two
Japanese companies had almost doubled their already high interest coverage
to 56 for Honda and 43 for Toyota. So GM and Ford use much more debt.
This could be good or bad. They assume more business risk, while the
Japanese companies could in theory take more debt to exploit opportunities.

The last and arguable most important area of comparison is profitability.

Data was incomplete for price to book comparisons, so those will not be
used. Toyota holds a whopping fourteen percent, while the big three barely
have any margin. The two Japanese companies also have very strong return
on assets compared to domestics. Surprisingly GM has double the ROE of
Toyota or Honda, with the others in the middle, with all facing declines since
1999. Return on investment has slid for all except GM, who nearly doubles
the Japanese returns. Price to earnings run around 15 with the exception of
GM at 10 and Toyota at 17, this is the markets reward to Toyota for
producing a superior product, and punishment for GM for turning out
unexceptional products.

Even though efforts were taken to keep these numbers accurate and
meaningful, it should be understood that there are several factors working
against this effort. The two Japanese companies operate in a different
business environment and face different regulations than the domestic firms.
Also the effects of Daimler's merger/takeover of Chrysler should have
affected numbers in ways that would make data not as suitable for
comparison. With companies on three continents doing business in dozens of
countries, currency translation also becomes an issue. The five companies
have different business models and search out different parts of the market
(even though they compete in areas). They have different regulations to
face and varied access to capital. These differences are reflected in the
difference in the ratios, as much as management effectiveness is shown.
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