Foreign automakers face their own struggles

U.S. automakers landed a $17.4 billion bailout package from President Bush last week, but carmakers around the world also could use a dose of holiday cheer.

Carmakers from Stockholm to Tokyo report problems of their own in a slumping global economy. Some answers about the state of carmakers outside the U.S.:

Q. Which foreign automakers are hurting?

A. Take your pick. Toyota expects to lose money on an operating basis for the fiscal year ending next March.

Honda Motor Co. expects its profit for the fiscal year ending in March to be less than a third of what it earned last year.

In Germany, BMW’s global sales slid 25 percent in November compared with a year earlier. Daimler plans to cut work hours and lengthen holidays at its domestic plants after its global car sales fell 25 percent.

The Chinese state media says car sales in the world’s second-largest auto market fell 10 percent in November.

Q. What are their problems?

A. A double whammy of sorts battered carmakers worldwide this year. Soaring fuel prices earlier in the year stoked demand for smaller – and less profitable – vehicles. And big industries aren’t nimble enough to adjust.

Then the credit crunch hit, and it became harder for some buyers to find decent financing terms. Many consumers are also reluctant to make large purchases during a recession.

Q. Are fuel-efficient cars like the Toyota Prius still hot sellers?

A. Actually, Toyota recently shelved plans to build the hybrid at a new factory under construction in Mississippi. Sales of the Prius, which gets 46 miles per gallon on average, sank when the price of gasoline plummeted from the $4-a-gallon range it reached this past summer.

Q. Will the bailout for U.S. automakers give them an unfair advantage against their foreign counterparts?

A. Not at all. Cole thinks it will help level the playing field.

He noted that foreign automakers selling cars in the U.S. already receive help in their home countries, where the cost of health care and pensions often is absorbed across the whole country. Here, companies have to eat those costs themselves.

U.S. automakers also are generally dealing with an older – and more expensive – work force.

Cole says these added costs for U.S. automakers are akin to trying to run a marathon against someone in track shoes when you have galoshes and an overcoat … and carrying a bowling ball.

Q. Is the United States the only country offering auto bailouts?

A. No. Sweden’s lawmakers approved an aid package worth $3.6 billion to prevent a collapse of its auto industry.

Canada just approved emergency loans valued at $3.29 billion to support Canadian subsidiaries of the Detroit Three automakers.

British carmakers also are pressing their government for a bailout, and GM Europe officials have met with German Chancellor Angela Merkel to ask for loan guarantees.

Q. Is the Japanese government planning anything?

A. A strengthened yen has hurt Japanese carmakers because it raises their costs for doing business in foreign markets like the United States.

“That’s really impacted the Prius because that technology all comes out of Japan,” Cole said.

The Japanese government may intervene to limit its currency’s strength, which would have an effect similar to a bailout.