U.S. auto makers’ ability to finance costly technology and emissions requirements from earnings will be tested by a broader group of strong competitors that for the first time include more profitable Indian and Chinese car makers.
Top auto makers in China and India earned 37.5% more profit excluding preferred dividends in fiscal 2014 than their U.S. counterparts, joining European and Japanese auto companies in out-earning the Detroit Three, said AlixPartners LLP, a New York-based consulting firm with a global automotive practice. Its 2015 automotive outlook, released on Tuesday, shows emerging Asian auto makers last year generated margins that were about double those of General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV’s Chrysler unit.
The emergence of Asian powerhouses—notably India’s Tata Motors Ltd. and China’s SAIC Motor Corp. and Great Wall Motor Co.—represents the latest dent in Detroit’s once-global dominance. Over the past 15 years, U.S. auto makers went from delivering more than 60% of world-wide car-company profit to delivering about 17%, the consulting firm said.
The trend raises questions about the global competitiveness of GM, Ford and Fiat Chrysler on the eve of labor negotiations with the United Auto Workers union and amid an aggressive push by Fiat Chrysler Chief Executive Sergio Marchionne for industry consolidation. The U.S. market is on pace for 17 million light-vehicle sales in 2015, the best year in more than a decade, but Detroit needs better returns to develop self-driving cars and electric powertrains and to combat new entrants like Google Inc. and Tesla Motors Inc.
via Indian and Chinese Car Makers Out-Earn U.S. Rivals – India Real Time – WSJ.
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