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Ford Motor Will Win Car Wars

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"You can buy a Ford in any color so long as it's black" - Henry Ford

So who will win the Car Wars?

Smart money is betting Ford Motor Co. among Detroit's Final Three even though it's declined to accept any bailouts from governments.. If so, it means that the industry will end up where it started: cheap and simple. Ford stock has soared since it fell this past year to US$1.01 a share and is now around US$5.85 a share.

(GM has collapsed from US$23.24 in 52 weeks to US$1.27 while Chrysler is in the ditch being rebuilt.)

Ford's strategy is to return to its roots. The everyman Ford Fiesta is at the heart of its new "single Ford" strategy globally. The company will launch a retooled, compact, no-frills People's Car next year.

The new global auto market

But here are some other factoids which shows that the road ahead is not bumpy for automobile manufacturing, just different.

-- In 2008, amidst the worst world economy since the Depression, some 72 million vehicles were bought.
-- In 2008, there were roughly 14 million passenger vehicles sold in the four BRIC nations (Brazil, Russia, India and China) or the same number as were sold in North America. In 2005, the U.S. outsold the BRIC by 10 million vehicles.
-- In April 2009, China overtook Germany in car manufacturing
-- In 2008, Toyota overtook General Motors as the world's largest vehicle maker
-- In 2008, Volkswagen overtook Ford as the world's third largest vehicle maker
-- In 2008, Hyundai overtook Renault/Nissan as one of the top ten largest in the world
-- By 2020, China will overtake the U.S. car market in size
-- By 2020, Russia will overtake Germany
-- In 2008, some 65% of all vehicles sold by General Motors were sold outside North America - a trend that could save the company if it gets the rest of its act together.
-- Some 65% of Fiat's (partner in Chrysler) net income in 2008 was derived from emerging markets, mostly Brazil, according to a Morgan Stanley analysis.
-- Volkswagen is the market leader in China and aims to overtake Toyota as the world's biggest. China has indigenous manufacturers but they are in joint ventures with American, European and Japanese giants.
-- Tata of India is the biggest innovator with its US$2,500, four-seater Nano and unique business model for the emerging economies.

The conclusions are pretty obvious. The North American market has become saturated with vehicles and the Great Recession means that the size of the pie will remain permanently smaller as Americans keep their cars longer rather than buy new ones. The only way to increase demand is to embark on a grants-for-guzzlers scheme as Germany and Britain have undertaken to get the low-mileage clunkers off the road.

More likely, supply will be decreased to meet the lower demand which means that Detroit is well-advised to impose a moratorium on all manufacturing for a year or even more based on how quickly the inventories are bought.

See Diane Francis' blog at Financial Post