Although American automakers have faced stiff competition from Asian manufacturers for decades, the past year has seen the Detroit Three decline along an unprecedented scale. Ford Motor Co., Chrysler LLC and General Motors Corp. have lost billions in sales, struggled against bankruptcy and petitioned the government for bailout funding to avoid collapse. By comparison, Asian automakers have remained competitive in the U.S. market. Some see this as a sign of the demise of American car manufacturing.

However, it may still be too early for obituaries, as Asian firms have not been immune to the recession and Detroit has some options on the table yet.

The combined market share for General Motors, Chrysler and Ford fell to a low of 43 percent in February after some of the most precipitous drops in the companies' histories in January, with a 55 percent decline in sales for Chrysler and 49 percent for GM, the Chicago Tribune reports. These losses are the low-point of a steady long-term decline from 80 percent market share in April 1985.

Ford — the only Detroit automaker not taking federal aid — recently said it slashed $9.9 billion from a debt pile of $25.8 billion at the end of 2008. Through March, Ford's U.S. sales were down 42 percent. Although better than GM's or Chrysler's sales, it is still below industry average. The automaker lost $1.4 billion in the first quarter.

Ford, whose last annual profit came in 2005, "will 'meet or beat' a goal to 'break even or better' in 2011," Bloomberg News reports Chief Executive Alan Mulally as having said.

Meanwhile, GM and Chrysler received a total of $17.4 billion in federal aid this year under the promise of restructuring their business models to become more competitive. Nonetheless, Chrysler filed for bankruptcy protection on April 30 and GM is expected to file for bankruptcy ahead of a June 1 deadline for an equitable restructuring plan. Should they survive, they could reemerge smaller, stronger and more flexible.

The downturn is not unique to Detroit. According to Plunkett Research, U.S. sales for cars and light trucks decreased by 2.9 million units in 2008, and the industry as a whole showed a decline of 41 percent in sales between February 2008 and February 2009 despite rebate offers and discounts.

Americans simply are not buying as many cars. So why do Detroit automakers seem more vulnerable to the general downturn in the automotive industry, while Asian automakers have remained strong?

One answer may be that Asian companies have produced more of the kinds of vehicles that Americans want to purchase. In the automaker report cards recently published by Consumer Reports, the highest marks in every category were for Japanese cars, with Honda Motor Co., Subaru and Toyota Motor Corp. taking the top overall spots.

Additionally, adapting to a changing marketplace may be the key to Asian automakers' resiliency in an economic downturn. "Among Asian brands, Hyundai and Honda are in the best position," Jesse Toprak, director of industry analysis for auto-research firm Edmunds.com, told Bloomberg News. "Hyundai's value-brand image is helping them in these times when consumers are worried about money and jobs. Honda has the right product mix to be ready for any kind of change in consumer demand."

Efficiency is another major factor in Asian automakers' relative success. Flexible production methods among Asian car companies, like Toyota's Just-In-Time system, allow them to adjust inventory levels more efficiently than their American counterparts. The difficulty and expense of shifting manufacturing goals has made Detroit slower to switch from SUV production to the smaller, more fuel-efficient vehicles that increasingly more Americans demand.

A Wall Street Journal report found that a Honda manufacturing plant could switch production line work from one model to another in roughly five minutes. Meanwhile, Ford spent $75 million over 13 months to overhaul an SUV plant to produce smaller cars, and GM spent $350 million to switch model production in its Lordstown, Ohio, factory.

It is also argued that the American automotive industry's long and sometimes contentious history of labor relations likely contributed to the current decline. GM, for example, owes $20.5 billion to an employee health care fund and supports the pensions of 391,000 retirees, while Ford owes roughly $13.1 billion in health care costs for 175,000 former employees and their families, Forbes reports.

While the wages paid by Asian auto companies in the U.S. are comparable to those of Detroit automakers, added benefits in terms of pension and health care mean that actual compensation rates are drastically different. In a late-2008 editorial in the Los Angeles Times, Daniel J. Ikenson of the Cato Institute argued that the average cost difference between the Detroit companies' and Asian automakers' compensation was roughly $30 an hour. Much of this added expense is passed on to the consumer, who may pay hundreds or thousands more for an American vehicle.

While Asian automakers are more streamlined in their production processes and employee benefits programs, more adaptable to consumer needs and more financially stable (i.e., not immediately facing bankruptcy), they haven't been impervious to the contracting auto market.

Toyota, the world's largest automaker, and Nissan recently lowered their vehicle production for the first time in seven years. Total Japanese automotive production fell by 15 percent and exports by 17 percent for the year ended March 31, Bloomberg News reports.

In addition, automotive sales in the U.S., which is traditionally the Japanese automakers' most profitable market, fell from an annual rate of 16.1 million in March 2008 to 9.86 million in March 2009.

Meanwhile, despite the severe decline in its American market share, GM is doing surprisingly well in China. This year, its sales rose by 29.9 percent in the Chinese market and the company is planning on adding a new plant to double annual sales to 2 million units within the next five years, Agence France-Presse reports.

"It's definitely one of the market leaders here — in drastic contrast to their performance in the U.S.," Shen Jun, an auto analyst at Roland Berger, told AFP.

Interestingly, as American automakers lose ground at home to Asian competitors, they may need to shift their focus to Asian markets, where the opportunities for growth are vastly outpacing domestic prospects.

Earlier

Which Car Brand is the Most Reliable?

Automotive Report: Why Aren't We Buying?

Detroit States its Case for Relief

The Toyota Way Forward

Toyota to Supplant GM as World's Top Automaker? It's Happening It's Happened

The Cautious Big 3 and the Asian Auto Market

On the Downhill

Resources

Detroit Three's US Market Share at Record Low
by Tom Krisher
Feb. 4, 2009

Chrysler Files to Seek Bankruptcy Protection
by Jim Rutenberg and Bill Vlasic
The New York Times, April 30, 2009

Ford Cuts Debt by $9.9 Billion
Agence France-Presse, April 6, 2009

Ford Targets Rivals as Loss Eases (subscription required)
by Matthew Dolan
The Wall Street Journal, April 25, 2009

Ford Posts $1.4 Billion Loss
Agence France-Presse, April 24, 2009

Ford's Chairman: We Don't Need No Stinking Bailout!
Up To Speed (The Los Angeles Times), April 21, 2009

Ford Loss Beats Estimates on 49% Slash in Cash Use
by Keith Naughton
Bloomberg News, April 24, 2009

Automobiles and Trucks Overview
Plunkett Research

Who Makes the Best Cars?
Consumer Reports, April 2009

Honda, Hyundai Lead Asian Automakers' U.S. Market-Share Gains
by Alan Ohnsman and Keith Naughton
Bloomberg.com, May 2, 2009

Honda's Flexible Plants Provide Edge
by Kate Linebaugh
The Wall Street Journal, Sept. 23, 2008

Toyota Production System
Toyota Motor Corporation, 2009

Survey Shows Americans Want More Fuel Efficiency
by Jeff Bartlett
Consumer Reports, Feb. 5, 2009

Why GM Might Not Follow Ford
by Joann Muller
Forbes, March 11, 2009

Is Big Labor Killing the Big Three?
by Gary Burtless and Daniel J. Ikenson
The Los Angeles Times, Dec. 4, 2008

Toyota, Nissan Lead Decline in Japanese Auto Production
by Naoko Fujimura
Bloomberg News, April 30, 2009

Ailing at Home, GM Leads Chase for Chinese Car Buyers
Agence France-Presse, May 14, 2009