As many of us are aware, the automotive sector is going through some changes as the Japanese manufacturers are eating away at the no longer "big 3" in North America. I am calling this the tipping point as the death of Ford and/or GM could have serious effects on the US, and Canadian manufacturing base (already hurt by a high dollar and over-taxation). The following will be a brief analysis on why the domestics are losing and what they can do moving forward.

If you would have asked anyone 20 years ago: "which car companies have the worst quality?", most would say without hesitation; the Asian car-makers. This reputation has created motivation to do better and prove to the American market they were formidable competitors. Fast forward 10 years and you would have seen a total role reversal; where the Japanese were lacking in the past, they were now global leaders! Over this time period, the domestics floundered; struggling with legacy costs and antiquated manufacturing methods maintaining the status-quo; stagnating domestic automotive innovation. Fast forward another 10 years and you have GM and Ford on the brink of collapse, diminishing market share, rising costs, and a perception of failure.

Everyone I talk to these days rants and raves about the quality of the Japanese producers and how they are willing to pay the price premium for this perceived long term benefit. I introduce you to the "2005 JD Power and Associates Dependability Study"; a global independent research firm dedicated to testing and researching consumer goods. They have ranked the number of problems per 100 vehicles (best being Lexus at 139, worst being 397). What I then did was averaged the North American, Japanese, European and Korean companies by their defects per 100. I linked the report as nationality is a poor indicator; Toyota does significantly better than its country's grouping. The results in defects are; 224 - North America, 237 - Japanese, 290 - European, and 325 - Korean. From a quality standpoint, it is safe to say the domestics are getting their acts together and are not lagging the Japanese as many tend to believe.

So what are the big 3 doing wrong? a) models b) automation c) vision...and that's it! Notice how I didn't include costs; many people like to blame unions and labour, but when you consider the key issue in the domestic's decline, its market share. The demand for a product is based on many factors including cost; but the domestics have the lowest prices! How can they be losing marketshare on price when the domestics are already the cheapest? Therefore the models themselves aren't in demand; this is something that has plagued the domestics many times in the past: GM having no Solstice's to sell with high demand; too many Aztek's with low demand; Chrysler not producing PT Cruiser's fast enough, watching people on waiting lists leave. I advise the domestics to get rid of all the re-badge names (example example example), drop the quirky ugly cars and make something people want and don't compete against other inter-company cars. Attracting Chevy buyers to Saturn is an utterly pointless gesture; you think Toyota, Honda, Nissan are dying with one model per segment and a luxury brand?

The decline in market share has occurred fairly quickly and from a North American standpoint, has been bitter sweet. Honda and Toyota have opened plants here with more robots increasing our productivity and demand for skilled trades (maintaining robots) and continue to grow a domestic manufacturing base. The big 3 on the other hand have been focusing on closing plants and moving everything to Mexico and China. While I agree these plants are too expensive from a labour standpoint, if the Japanese can make automation work here; why can't the domestics? The cost of building new plants overseas, laying off skilled workers here is expensive; I'd really like to see these numbers (cost analysis) considering the inventory and shipping costs of overseas operations.

So what are you buying when you buy a "domestic" or "Japanese" car? These borders are no longer clearly defined, and should also be thrown out the window, much like the quality perceptions or misperceptions I should say. A tidbit of the grey area: Saturn Vue's engine made by Honda, Suburban made in Mexico, Pontiac GTO in Australia, Toyota Avalon 70% domestic content, Honda Civic 75% domestic content, Chrysler PT Cruiser 60% domestic content.

As for vision, the domestics have offered absolutely no choice when it comes to alternate fuel sources, except Ford's tip over SUV and GM's failed EV1. The Japanese have been leading the way in hybrid technology and even though they continue to lose money on these products, they are the future and the domestics cannot afford to get left behind. The big 3 have the benefit of being in the back pockets of the American government and if they put their last remaining brains together they might be able to implement infrastructure for products unique to this market and even better for the environment than sticking electric motors in Toyota Echo's (sorry Prius). Time to end the drought of innovation and produce something consumers will endorse and buy, because if the big 3 don't; Toyota will, just as they did 10 years ago.

Ford's lineup is much leaner than GM's and their latest products are impressive; all around great looking cars (example), focusing on their mainstream cars and less on their bulky gas-guzzling SUV's. Ford's CEO has also dropped his pay to $0 as he turns the ship around; a far cry from GM's $5 million crappy record CEO. Ford and GM deserve their respective messes; one is making an effort, the other looks like it would rather take the easy way out; ie. pulling an Air Canada (default on debt, with gov't support and emerge a smaller, better run company).

In conclusion; Japanese quality isn't as good as people say, the domestics are not as patriotic as they say, allow the free market to determine the fates of all automotive companies, and finally this fierce competition has helped create some amazing products we should be thankful for.

Is it just me, or does the Ford symbol look like the American Idol logo???