U.S. still losing race to foreign carmakers

Analysts say Big Three labor pacts won't close gap

? When leaders of the Big Three automakers and the United Auto Workers announced new labor contracts, they touted the four-year deals as closing the competitive gap with foreign automakers.

Now details of the agreements are emerging, with disclosures of job cuts and plant selloffs or shutdowns providing a clearer blueprint of the companies’ plans for streamlining.

In last month’s pacts, General Motors Corp., Ford Motor Co. and DaimlerChrysler AG’s Chrysler Group won the right to close or sell at least 10 mostly aging and underutilized U.S. plants — something that was banned in the previous agreements. Those moves could allow the Big Three and two top suppliers to trim up to 50,000 jobs in the next four years.

The closings and sales also give GM, Ford and Chrysler the chance to better streamline their operations by removing unneeded manufacturing capacity.

The lingering question among many industry analysts is whether the pacts go far enough to combat the increasing success of the Toyotas and Nissans and Hondas, who generally have more efficient and flexible U.S. plants, lower labor costs and few retirees to support.

The early answer seems to be “no.”

“When you start talking about trying to keep up with the Joneses, or in this case keeping up with the Asian automakers, there still seems to be a ways to go,” said Mike Wall, an analyst with CSM Worldwide.

“They made some progress — anything is better than nothing — but it doesn’t seem to be enough,” Wall said.

Chris Ceraso, who tracks the industry for Credit Suisse First Boston, was even more straightforward in a research report on the pacts: “There does not appear to be any fundamental game-changers that will dramatically improve the competitiveness or profitability of the Big Three.”

An auto dealer signs compete for attention along a south Philadelphia street. When leaders of the Big Three automakers and the United Auto Workers announced new labor contracts, they touted the four-year deals as closing the competitive gap with foreign automakers. But many analysts disagree.

The foreign companies are operating U.S. plants with the capability of producing a variety of models, Wall noted. Nissan North America, for example, eventually will build five products at its new plant in Canton, Miss.

“When you can do that, it’s much easier to match your production to demand,” Wall said.

The foreign automakers have not had to offer the profit-dwindling consumers incentives to the extent that the Big Three have.

Edmunds.com, which provides online vehicle buying information, said incentive spending by GM, Ford and DaimlerChrysler reached $3,687 a vehicle in August, an industry record.

Japanese automakers spent an average of $1,032 per vehicle on incentives in August.