A Tough Year for U.S. Carmakers
Cooling sales and rising tech costs and more took their toll on General Motors, Ford and Chrysler last year.
The Big Three carmakers saw sales and earnings slide, and all three offered muted forecasts for 2020.
But the trio also made good progress in solidifying their plans for the plants, products and partnerships they’ll need to implement their electrification, autonomy and other high-tech programs.
This year, their focus will increasingly shift from planning, preparation and development to the tricky task of executing their plans. The biggest challenge will be generating the funds needed to make it happen.
Headwinds at GM
GM was hammered by last autumn’s 40-day strike by the United Auto Workers union, which cost the company $3.9 billion.
GM’s headquarters in China (Image: GM)
The company posted 2019 declines in unit sales (-2% to 2.89 million), revenue (-7% to $137 billion) and net earnings (-17% to $6.7 billion).
Overseas operations were no help. The slumping China market dragged down foreign wholesales by 14%. Operating earnings from the international group swung from $423 million in 2018 to a loss of $202 million in 2019.
Earnings also headed the wrong way at GM’s Cruise autonomous vehicle affiliate. The startup’s pretax loss deepened 38% to $1 billion last year.
Cruise’s dream is to establish a profitable ridesharing service that’s cheaper, safer and more attractive than existing options. But the company won’t be ready to begin doing that until its new Origin driverless shuttle goes into production in 2022.
Crank Up the EVs
Undeterred, GM is ramping up its spending on electrification with an eye toward an “all-electric future” at an unspecified time in the future. To get moving on that vision, the company is investing $2.2 billion to transform its Detroit-Hamtramck assembly plant into an electric vehicle factory.
The plant is a year away from launching production of a Hummer-branded electric pickup truck. In 2022, the facility also will begin making Cruise’s Origin shuttles.
GM notes that consumers aren’t exactly clamoring for EVs and other fuel-saving technologies. CEO Mary Barra says GM’s short-term solution will be adding products that can make money right now, namely SUVs and luxury vehicles.
Ford Stumbles on the Basics
A year ago Ford CEO Jim Hackett predicted that 2019 would be a turnaround year for the company, whose net income in 2018 plunged more than 50% to $3.7 billion.
It didn’t turn out that way. Last year’s net shrank to a microscopic $41 million. Factory sales skidded 10% to 5.39 million units, and revenue declined 3% to $156 billion.
Hackett doesn’t blame the lousy results on the cost of pursuing fancy new tech. Nope. He says it was almost all due to fumbling an auto industry fundamental: launching new products smoothly.
Which is exactly what went wrong when Ford relaunched production of its redesigned Explorer SUV last year. The model, and its Lincoln Aviator variant, are big moneymakers. But they got stuck in the starting gate at the Chicago plant that builds them.
“Our operational execution, which we usually do very well, wasn’t nearly good enough,” Hackett admits. He says the needed procedural changes are in place.
One hopes. This year will be a busy one for Ford with critical launches of an updated version of the company’s most profitable product, the F-Series pickup truck, not to mention the all-new Bronco SUV and electric Mustang Mach-E crossover vehicle.
On a happier note, 2019 marked several milestones for Ford’s slow-moving restructuring effort. Now in its third year, the $11 billion program aims to prepare the company to excel in what Hackett calls the coming era of “smart vehicles for a smart world.”
Last year Ford secured a $2.6 billion investment from Volkswagen in its Argo AI autonomous-driving tech development company. The two carmakers also spent much of last year expanding their alliance to co-develop and produce trucks, commercial vans and EVs on a global scale.
Separately, Ford finalized a partnership with Rivian, the Michigan-based EV startup, to supply it with platforms for an all-electric Lincoln SUV due in 2022. In November, Ford also unveiled its highly anticipated and internally developed Mustang Mach-E electric crossover, due a year from now.
These are encouraging signs that Ford is moving closer to Hackett’s vision for the future. But last year’s financials make it clear we’re not there yet.
FCA Shines in N. America
Like its domestic rivals, Fiat Chrysler Automobiles saw declines last year in unit sales (-9% to 4.42 million vehicles), revenue (-2% to $119 billion) and net income (-19% to $3 billion).
There was good news from North America, though. Granted, wholesales sagged 9% to 2.40 million units in 2019, as dealers tightened inventories. But a richer sales mix generated revenue of $80.5 billion, down only 1%.
Better still, FCA’s pretax earnings in North America climbed 7% to a record $7.3 billion, and the region’s EBIT margin rose to 9.1%.
Partnerships to the Rescue
FCA’s U.S. headquarters (Image: FCA)
FCA has been notably slow to jump on the electrification bandwagon. It won’t debut its first high-volume EV, an electric version of the Fiat 500 minicar, until later this year.
But it’s lining up key partnerships to help get up to speed. In Europe, where emission standards make electrification essential, FCA has arranged alliances with Enel X (a maker of charging stations) and Engie Group (the French electric utility) to help develop EVs for the European market.
FCA also is forming a joint venture in China to make EVs for the local market.
The big news for FCA, of course, is its pending merger with France’s PSA Group. The deal is expected to be finalized around the end of this year.
Combing the two companies will result in the world’s third-largest carmaker by revenue, after Volkswagen and Toyota.
The deal also will give FCA instant access to considerably more in-house EV expertise than it has now. This year PSA’s Citroen, Opel and Peugeot brands are debuting a bevy of all-electric cars, commercial vans and SUV/crossovers.
To Each His Own
America’s three traditional domestic carmakers are blazing decidedly different trails to a future where personal mobility looks very different than it does today.
The sobering 2019 financial results they presented this week show it won’t be easy to get there. But the reports also prove all three are making headway on how they plan to move ahead.
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