Even as the future of General Motors Corp. and the entire U.S. auto industry remains in question, its major rivals are hardly celebrating, according to this story from the Associated Press. Toyota and other Japanese carmakers say the bankruptcy of any of Detroit’s Big Three would spell serious trouble for them as well.
Should that happen, “the damage to our business is certain to be tremendous,” Toyota Motor Corp. spokesman Hideaki Homma said today. “The conditions for the U.S. auto market are extremely tough right now, and any additional negative is sure to make things worse.”
One major problem is that Japanese carmakers in the United States share many of the same parts suppliers. If a Detroit automaker were to collapse, suppliers would likely follow, setting off a chain reaction that could wreak havoc for Japanese production in the United States, a vital market.
More broadly, the U.S. crisis could lead to huge job losses and further weaken consumer spending, especially for big-ticket items such as automobiles. Together, the Big Three Detroit American automakers directly employ 239,000 workers in the United States.
Counting other businesses that depend on the automakers, economists estimate that 2.5 million jobs would be lost if all three companies went out of business.
“Whether it is the impact on consumer confidence or the impact on the suppliers that we all share, having one or more of the major automakers in severe distress has consequences for the entire industry,” Simon Sproule, corporate vice president of global communications at Nissan Motor Co., Japan’s third-biggest carmaker, said.
A possible advantage from a collapse of the U.S. auto industry could come only many years later—perhaps in a decade—when Japanese manufacturers would compete against weaker rivals in the United States, especially if they further exploit their lead in green technology with hybrids or electric vehicles, said Koji Endo, auto analyst with Credit Suisse in Tokyo.
“But that’s for the long, long term,” he said. “For now, the situation is bound to get worse for the Japanese.”
After the U.S. Senate last week rejected an auto industry lifeline, the Bush administration is considering ways of providing emergency aid to General Motors and Chrysler LLC, which have said they could run out of cash within weeks without federal aid. Ford Motor Co. says it can survive 2009, but it also has asked Congress for a line of credit.
While Japanese automakers are in far better financial state than their American counterparts, they are all getting battered in the shrinking U.S. vehicle market. Vehicle sales in Japan and Europe also are waning, and even demand in developing economies in China, India and Latin America is weakening.
“This is a global crisis affecting the entire auto industry: No one is immune,” Nissan’s Sproule said. “And it is in everyone’s interest to see a healthy auto industry that is able to manage through this crisis.”\
Toyota, Japan’s top automaker already has slashed its profit forecast for the fiscal year through March to $5.9 billion, or about a third of its previous year’s earnings. Expectations are rife that another downward revision is coming. For now, there are even alarming signs the Japanese may be falling in the footsteps of the U.S. automakers, said Endo.
GM, which has already idled five factories this year, announced Friday it is temporarily closing 21 factories across North America. Toyota has also suspended production at several North American plants in recent months.
The region is critical for Japan’s automakers—both Toyota and Honda sell more vehicles in North America than they do in Japan.
“There is absolutely no way, in my view, that the Big Three’s woes can work as a plus for the Japanese automakers,” Tsuyoshi Mochimaru, analyst for Barclays Capital in Tokyo, said. “So what if there might be a market-share increase some years ahead? The pie itself is shrinking. Sales volume is plunging. And that’s why all the automakers are suffering.”