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Comparing the "Big Three": Ford versus Chrysler versus GM

Compare the big three car manufacturers to get a sense of where the market is at data-verified= 

 

General Motors

When William C. Durant started General Motors in 1908 as a holding company for his automotive marque Buick, it was with no clear understanding of what the automobile would become. Durant, at the time, was the largest manufacturer of horse-driven carriages in the nation. Durant came across Buick when he was brought in as a controlling investor in 1904, after Buick was seized from David Dunbar Buick by Benjamin Briscoe, who quickly sold it to James H. Whiting of the Flint Wagon Works. It only took Durant four years to make Buick into the biggest-selling automotive brand in the United States.

With the purchase of Oldsmobile the same year, and Cadillac, Elmore, Oakland, Reliance, the Rapid Motor Vehicle Company (the forerunner to GMC Trucks), and several others in 1909, the blueprint for the modern GM was set – although this came at a great cost to Durant, who lost the company in part to a bankers’ trust calling in his acquisition debt. Durant would retake his company in dramatic fashion in 1916, however, when – through his newly-formed Chevrolet Motor Car Company – he seized back controlling interest of General Motors and merged the two companies into what we now think of as GM.

GM would be the global leader in automotive sales from 1931 to 2007. The GM brand includes Chevrolet (Chevy) and Cadillac – which the company sees as its global flagships – GMC, Buick, and Holden. Among the marques that GM has shuttered are Pontiac, Saturn, Hummer, Saab, Daewoo, Elmore, Beaumont, Geo, Oakland, Passport, Envoy, Viking, and Alpheon. Many of these brands were closed during or following 2009, following Chapter 11 restructuring. The reorganized company, in 2010, issued one of the world’s five largest initial public offerings to date, leading the way back to profitability.

GM today is headquartered in Detroit, Michigan and is a multinational company that markets, manufacturers, and distributes commercial and consumer vehicles and service parts, as well as selling financial services. It is a wholly publicly-owned corporation.

2016 Cadillac Escalade ESV 

2016 Cadillac Escalade ESV (Courtesy: WikiMedia)



Ford

When engineer Henry Ford came up with his gasoline-powered Quadricycle in 1896, it was unclear where this stroke of genius would take him. The path forward would include a bankruptcy, a partnership with Thomas Edison, the formation of two companies before Ford Motor Company (the latter would be renamed Cadillac and would become part of GM’s portfolio), and the building of a winning racer. With the backing of coal dealer Alexander Y. Malcomson, and of John and Horace E. Dodge of Dodge fame, as well as investors John S. Gray and James Couzens, Ford formed the Ford Motor Company in 1903. The company’s first car, the Model 999, set the land speed record that year. On the basis of having the fastest car in production at the time, the Ford brand became well known and respected.

Ford is responsible for introducing the car that set the tempo for the American automotive industry. The Model T. Ford’s relentless publicity machine; network of local dealers; innovations in assembly – including the introduction of moving assembly belts and reduced working hours for employees – affordability; and simplicity of design, operability, and maintenance, turned the Model T into the first must-have American vehicle. There was a point in American history when most drivers learned to drive on a Model T. The 1927 production total of the Model T – 15,007,034 – was to be the record for a single car’s production until 1973.

Ford continues to be family-controlled to this day, through the majority ownership of special Class B shares, which ensure that the company will never leave Ford family control despite the fact that Ford himself left the majority of his shares to the Ford Foundation. The brand is known more for exceptional car models than marque name recognition. The first marque created by the company, Mercury, was created in 1939 to compete with GM’s Oldsmobile and Buick, with the company’s first acquisition, Lincoln, being set to square off against Cadillac and Packard.

Ford’s commitment to research and development led to many firsts in the automotive world, including windshield glass, a fully-enclosed engine compartment, deep-dish steering wheels, rear seatbelts, padded dash and interiors, retractable hardtops, and child-proof door locks. It has also taken Ford in unexpected directions, such as the development of the ultra-sensitive magnetic field detector known as SQUID, or Superconducting QUantum Interference Device.

For the majority of American automotive history, a Ford model has been the best-seller. Even with the notable competition of the Volkswagen Beetle and the Toyota Corolla, the all-time best-selling car in America has likely been an F-series truck, a Model T, or a Model A. Ford’s current marques include Ford, Lincoln, and Troller. Continental, Edsel, Mercury, Merkur, Meteor, Monarch, and FPV have all been shelved by Ford, with the company selling off its shares of Aston Martin, Daimler, Jaguar, Lagonda, Land Rover, and Volvo. It is this slim profile that helped Ford to be one of the few American automakers to avoid bankruptcy.

Ford is headquartered in Dearborn, Michigan. The Ford family retains 40 percent of the corporation’s voting rights and is the majority voting interest. The company is the manufacturer, distributor, and marketer of consumer- and commercial-grade vehicles and service parts, as well as a significant automotive financing underwriter and servicing firm.



Fiat Chrysler

The smallest of the “Big Three,” Chrysler was formed in 1925 when Walter Chrysler reorganized the Maxwell Motor Company into the Chrysler Corporation. Chrysler, a former railroad man, got his start in the automotive business when he was hired as works manager for Buick, where he found ways to reduce production costs. He left Buick in 1919 after three years as president, working a contract that ultimately made Chrysler one of the richest men in America. Following a failed attempt to seize control of the Willys-Overland Motor Company after being hired as a financial consultant, he succeeded with the Maxwell Motor Company, where he was also hired as a financial consultant.

The first Chrysler automobile – launched in 1924 – was a six-cylinder, ultra-engineered but affordable vehicle, with a reputation for luxury that soon extended to the company itself. It featured a then-unheard of carburetor air filter, full pressure lubrication, an oil filter, and a high compression engine. Future models during Chrysler’s early years would feature four-wheel hydraulic brakes, rubber engine mounts, the all-transistor car radio, and a ridged rim, which are all standard today. This push for excellence put Chrysler second in sales in the American automotive market from 1936 to 1949, behind Ford.

In 1928, Chrysler introduced the Plymouth and DeSoto marques and bought out Dodge Brothers – which added Dodge and Fargo trucks. Additional innovations, including electronic fuel injection, continued to make Chrysler a standout in regards to quality and engineering. This success hit a wall, however, when the 1973 Oil Crisis made small cars attractive – something which, in conjunction with increased foreign competition, Chrysler could not deal with. Chrysler is unique in the sense that it is the only one of the Big Three to receive two government bailouts. In addition to TARP, Chrysler was the beneficiary of the Loan Guarantee Act, which secured $1.5 billion in federal loan guarantees.

Chrysler is also unique among the Big Three for having the highest number of ownership restructurings. In 1998, Chrysler merged with German-based Daimler-Benz AG to form DaimlerChrysler AG. DaimlerChrysler sold 80.1 percent of the Chrysler Group to private equity firm Cerberus Capital Management to form Chrysler LLC. The restructuring of the company following the 2009 bankruptcy resulted in “New Chrysler,” officially known as Chrysler Group LLC. Finally, in 2011, Fiat bought the Chrysler shares held by the U.S. treasury as a term of TARP, with Fiat buying the rest of Chrysler’s shares in 2014. This resulted in a new holding company, Fiat Chrysler Automobiles.

While Chrysler is still known for its engineering quality, its management weakness keeps the company from growing or gaining additional market share, and has led to setbacks including EPA accusations that the company used emissions-cheating software to fudge diesel-emissions tests.

Chrysler currently sells Chrysler, Dodge, Jeep, Ram, and Fiat automobiles. Former marques include AMC, DeSoto, Commer, Barrerios, Eagle, Humbler, Imperial, Karrier, Plymouth, SRT, Sunbeam, and Valiant. Fiat Chrysler is a public limited company based in London and with headquarters in Auburn Hills, Michigan and Turin, Italy. The company is publicly-traded, but 44.3 percent of the company’s vote is controlled by Exor S.p.A. and their controlling interest, the Agnelli family. Chrysler is the manufacturer, distributor, and marketer of consumer and commercial vehicles and service parts.



Understand the market position of car companies to become an informed consumer=GM’s sales have shown signs of growth in recent months.

Ford is number two in the American market at 14.2 percent and 2,361,426 units sold in 2016. Despite this, Ford’s F-series (820,799 units sold in 2016) has been the king of American automobiles for 40 years, with no other model coming close to its sales numbers. Ford has shown consistent market growth in the last few months, although – like GM – the move away from fleet sales is hurting the bottom line.

At 12.8 percent of the market, Chrysler is number three in American automotive sales with 2,021,196 units sold in 2016. The company’s Dodge Ram is the third-best seller in the U.S., at 489,418 units sold in 2016. Management and legal problems threaten the popularity and stability of the company, contributing to a weakened market share. 



Brand Loyalty

In 2017, HIS Markit announced the winners of its 21st annual Automotive Loyalty Awards, which are the automotive industry’s only fact-based awards for brand loyalty. The winners were:

Brand loyalty may be an important determinant of GM's success

GM explained to Loyalty360. “This doesn’t happen without loyal customers staying in the GM family of brands. Our customer focus is the driving force behind our strong showing in customer loyalty. It’s a combination of products and people. On the vehicle side, we are very much in tune with changing customer tastes.”

Ford – 2014’s manufacturer loyalty winner – is known more for iconic vehicles than being an iconic company. Ford has invested heavily in customer communications – including creating several exclusive social media channels. This has extended to widespread online promotion of its models, including its record-breaking e-card for the Mustang’s 50th anniversary. The e-card, with over 55,720 signatures, is the most signed e-card in history.

This sharing of stories and fanaticism has helped to create a subculture of Ford lovers. Consistent scores in safety, reliability, and innovation helps, as well.

Chrysler is not big on brand loyalty. However, Chrysler’s vehicles are among the best-engineered, best-designed vehicles on the market. While few scream praise for Chrysler, there are many die-hard devotees of Jeep, Dodge, and Ram. To use a common Chrysler fan colloquialism, “Chrysler is not a sexy company, but it makes sexy cars.”



Financial Health

One of the most important indicators of a company’s current and future performance is its financial health. A financially healthy company not only reflects a company that has a product in demand, but it also shows prudent management, a strong supply chain, and a loyal customer base. A financially healthy company is a company that has adequate control of its production and production costs, a good relationship with its employees and vendors, strong compliance with legal and governmental regulations and requirements, and a strong market share.

It is important for a company to stay financially healthy not only to remain attractive to investors and shareholders, but to help future-proof the company. A financially healthy company is better prepared to adjust to market realities, renovate and upgrade its production lines when needed, innovate and develop new products and solutions, and market to new purchasing segments. A financially healthy company is also better poised to acquire companies and assets that may improve its market position and/or productivity.

With the Big Three, however, it is difficult to get a clear read of the companies’ true financial health. Chrysler and GM are both in the aftermath of large TARP debt investments; both companies’ recent innovation and rollback of debt are not reflective of the corporate culture, but of the federal government’s wish to protect the American automotive industry. With this said, GM has done the most with its second chance. With profits posted every year since 2010, GM has invested heavily in ride-share provider Lyft ($1 billion in equity financing), hedging its bets toward being at the forefront of a new driving economy. However, missteps – like its 2014 recall of faulty ignition switches – have cost GM.

Chrysler’s “Imported from Detroit” and “America’s Import” ad campaigns have helped Chrysler to post annual sales growth for every year since 2010. However, the EPA’s claim against Chrysler for emission cheating has thrown a wrench into this growth cycle. Continuous management and corporate structuring changes have failed to give the company a chance to get back on its feet from a financial point-of-view.

Of the Big Three. Ford is the only one that did not go bankrupt – although it came close – and was the only one that managed to solve its own problems without government intervention. Ford was also the first of the Big Three to return to profitability in 2009.



Conclusion

If one were to assess the Big Three, the takeaway would have to be that while GM is bigger currently, Ford is healthier and bears the most potential to be the market leader in the future. This, however, is secondary to the fact that the American automotive industry is significantly stronger than it was ten years ago and all three major players have taken steps to ensure this in the years to come.

 

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