TRAVERSE CITY, Mich. (Reuters) -- Struggling U.S. automakers are not counting on a strengthening national economy to lift their profits and win back market share lost to foreign rivals despite steep incentives.
Speakers at the Management Briefing Seminars here this week noted that the Big 3 are barely making money on their car operations despite heavy sales driven by steep incentives.
"Even though cars are flying off the lots, you are still struggling to survive," Michigan Governor Jennifer Granholm said, while lamenting the recent loss of manufacturing jobs in the auto industry's home state.
Granholm said she hoped to convene a summit of governors from manufacturing states to seek steps the states and the federal government can take to help the automotive industry.
The automakers face impending contract negotiations with the United Auto Workers at a time of mounting pension deficits, growing health care costs, and slipping market share.
Detroit kept the economy alive after the Sept. 11 attacks, one speaker reminded the audience, by rolling out zero percent financing offers that sent car and truck sales to record levels and kept manufacturing plants humming.
High incentives kept sales moderately strong through the recession. But nobody expects incentives, which can devour profits, to back off quickly from the current average of nearly $4,000 per vehicle.
The federal government bailed out Chrysler Corp. in 1980, but most in the industry said the automakers and suppliers must change their own practices to compete against the Japanese and Europeans.
"The only way that we can hope to survive in this hyper-competitive industry is to restore the vitality and profitability of our car and truck business," Nick Scheele, president of Ford Motor Co. said, encouraging suppliers to become more innovative and efficient.
Ford's automotive unit earned just $3 million, before taxes, in the second quarter. The Chrysler arm of DaimlerChrysler AG lost $1.1 billion during the second quarter, while General Motors' automotive operations made $140 million, down from $1.07 billion in the year-ago quarter.
Meanwhile, some foreign automakers have posted record earnings, largely due to strong sales in the U.S. market. The Big 3's U.S. market share tumbled more than 10 percentage points over a decade to 61.5 percent last year, bringing job losses to manufacturing states.
The popularity of U.S.-made pickup trucks and sport utility vehicles have helped Detroit earn profits even as its automobiles have lost ground to foreign rivals. But competition in trucks and SUVs will soon stiffen.
Toyota Motor Corp. and Nissan Motor Co. Ltd. are both opening new plants in the south to manufacture pickup trucks. Nissan will launch its new Titan full-size pickup this fall.
"That dog can hunt," said Mike Wujciak, vice president of global automotive consulting with Cap Gemini Ernst & Young. "That will be the turning point for the industry."
In one upbeat note to the conference, GM North America President Gary Cowger announced a new vehicle to go on sale in about two years. GM hopes the Chevrolet HHR, a tall wagon similar to the popular Chrysler PT Cruiser, will boost Chevrolet sales above 3 million a year.
But Cowger ended his speech with a note of caution.
"A lot of people are counting on General Motors for their present and their future, and I hope you can see that we are working very hard to rebuild this company to last a very long time," he said.