Don't Share Your Market Share

Like it or not the Big Three will lose market share for years to come. And there's not much they can do about it, even if they come out with red-hot products that shoot to the top of the quality charts.

No, I'm not a pessimist. It's just a matter of simple arithmetic.

For years the Big Three had three market segments to themselves: fullsize pickups, SUVs and minivans. And for years the offshore auto makers ignored these segments.

For one thing, they couldn't bring themselves to believe that consumers actually preferred truck-type products to passenger cars. For another, they didn't want to compete in these segments because there was little demand for them outside the U.S., and they couldn't afford to build products strictly for the American market.

Today, of course, that's all changed. Now the Europeans, Japanese and South Koreans are eagerly building their own sport utes: big, small, medium and luxury. Toyota, Honda, Kia and Nissan sell minivans. Toyota is making fullsize pickups, and Nissan has one on the way. Every new entry in these segments represents competition that GM, Ford and Chrysler never had to face before.

All market share numbers have to add up to 100%. So when an import company comes in with a new product, it nicks off some market share that Detroit used to own.

And make no mistake, every new product that comes in will find a buyer. They don't disassemble a vehicle at the end of the year and send the parts back to the suppliers. Now, maybe they have to cut the price, or offer some incentives, and maybe they lose money on it. But every vehicle that gets built will find a buyer.

I figure that sometime toward the end of the decade, the importers will be in all the segments they used to ignore. Only then will the Big Three collectively start to see their share stabilize, probably somewhere between 50% and 60% of the U.S. market. But that's when this hyper-competitive market will become even more cutthroat than it is today, as the importers struggle to hold onto what they've got.

Now, the key is to discover what the next hot segment will be. Maybe it will be cross/utility sport wagons like the Chrysler Pacifica, Cadillac SRX or Mercedes GST. Or maybe it will be alternative-powered vehicles such as hybrids, fuel cells or diesels. Whatever it is, adaptable body architecture and flexible assembly plants will prove more critical now than ever. Once the public starts to go for something new, you better be ready to run to the front of the parade.

The history of the industry shows that whoever gets to a new segment first can dominate it for years to come. Chrysler did it with minivans, Ford with midsize SUVs, Lexus with luxury cross/utility vehicles. Like the old saying goes: “Victory goes to the firstest with the mostest.”

John McElroy is editorial director of Blue Sky Productions and producer of “Autoline Detroit” for WTVS-Channel 56, Detroit.