Big Three Auto Makers Are Down Again

Headlines from around the world are proclaiming the demise of the US Big Three auto makers as Honda and Toyota ring up record sales volume while at the same time domestic auto sales fall drastically. Most experts blame the drop in sales at the US Big Three on concerns about gasoline prices, but I think there is much more to this story than record high gas prices. For years the “big three” auto makers in the US have worked on a month by month basis to generate sales. This marketing idea while successful in the short run will produce disastrous results over the long haul.

Almost ten years ago I saw this problem coming, as did many other folks who look at life through a time capsule of longer than one month. Almost all domestic auto dealerships could care less about next month because to their way of thinking you only run an automobile dealership, one month at a time. What this means to the average consumer is that there is a good and a bad time to buy a car at one of these dealerships each month and most of them figured this out a long time ago. This is why it is hard to find a customer on a Ford, Chevrolet or Dodge lot early in the month, but during the last few days of the month they are packed with customers.

While this pattern has continued to play out over the past decade, domestic automobile dealers have been losing profit share as customers learn their mode of operation. Unless a person is extremely impatient, they just wait until the end of the month when sales managers are under pressure to make their quota and are at a disadvantage to hold profit margins for their dealerships. This activity has been going on for years and what is at the heart of this problem is the month by month goal setting which is used by most automobile dealerships in the US.

Another huge problem is that the American consumer looks at US made vehicles as some kind of a “Wal-Mart” car or truck which must be bought at a discount. At the same time consumers have been taught that import vehicles from Honda and Toyota are built to a higher standard of quality and their dealers don’t start cutting prices dramatically at the end of each month which further feeds into this consumer attitude of a better built vehicle. Like so many other things that are strictly American, the US domestic car business is built on hype and impatience. Just look at television advertisements for Ford, Chevrolet and Chrysler vehicles. These ads are always encouraging customers to rush to their dealership before all the “good deals” are gone.

There are those who love to criticize the Japanese for various reasons, but when it comes to building a quality vehicle, pricing it fairly and not playing games with customers, they beat the US manufactures and dealers, hands down. The good news is that no matter what happens to the US Big Three auto manufactures in the future, there will have to be changes made in the advertising and at the dealership level or their long-term prospects are dismal. The customers have spoken loud and clear on this issue and they prefer the Japanese way of doing business when it comes to automobiles and the US manufactures must change or they are eventually doomed to failure.

Related: Toyota Leads GM, Ford Motor Troubles, Chrysler Pink Slips, Trouble In Motor City

Big Three Down