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The development of the automobile came from many different people from different countries. The development stated in
1769 in France, with the invention of a three-wheeler that was powered by steam (Gale, 2003). Then in 1800's the first
internal combustion engine was created in Belgian and the first gasoline powered vehicle was constructed in 1885 in
Germany (Gale, 2003). Henry Ford built the first car in 1896 (Gale, 2003). He then revolutionized the industry with the
invention of the assembly line. The assembly line allowed him to mass produce the cars making them more affordable to
the consumers.




Laws and government regulations have affected this industry since the 1960's. Almost all of the regulations come from
consumers increasing concerns for the environment and the concern for safer automobiles. The first safety act passed by
Congress was in 1966 and was called the National Traffic and Motor Vehicle Safety Act (Gale, 2004). This act forced
manufacturers to improve the safety for the passengers, the driver visibility, and the braking of the car. It also stated that
manufacturers had to inform the public when it had a recall on the cars. The motivation for the passing of this safety act
was Ralph Nadar's 1965 novel Unsafe at Any Speed: The Designed-in Dangers of the American Automobile. (Gale, 2004)
Safety concerns were not the only concerns during this period. There was also growing concern for the environment even
before the oil crisis. According to the article "Motor Vehicles and Passenger Car Bodies", Congress passed acts in 1965 and
in the 1970's. The Vehicle Air Pollution and Control Act was passed in 1965. This was the first act to set standards for
automobile pollution. Then in the 1970's, Congress passed the Clean Air Act that demanded a 90% decrease in automobile
emission within the next six years (Gale, 2004).

In the 1970's the oil crisis caused another act to be passed. The Energy Policy and Conservation Act of 1975 stated that all
automobiles must meet a certain mileage per gallon. The act demanded that all automobiles had to meet a standard of
20mpg by the 1980 model and then 27.5 mpg for the 1985 model. Then in 1992, the Intermodal Surface Transportation
Act required the installation of front airbags. (Motor Vehicles and Passenger Car Bodies, 2004)

 

For many years now, the baby boomers generation has been the main target market for just about every product. As their
generation is getting ready to retire and spend less money, the automakers are looking at the younger generations. Right
now, the focus is starting to turn towards the baby boomers children (Generation X) who are in their mid 20's and 30's and
Generation Y(Winter, 2002). GenYer's are now hitting the age where they are able to buy cars. According to Drew Winter,
"Analysts say that five years from now Gen X and Gen Y combined will account for at least 40% of vehicle sales."

Americans today are choosing to purchase larger vehicles over passenger size vehicles. Today's generations are still buying
the trucks, minivan and especially the SUV's, even with the ridiculous gas prices. It is not only the younger generations
either; the boomers who are all reaching the retirement age are more interested in the bigger vehicles (Fetto, 2001).
There activities after retirement are way more active then their parents. They are not just sitting around and playing golf
or going on vacations. They are still working in some ways and being more active in their grandchildren's lives. Since the
boomers are still active, they want to drive the same vehicles that their children drive in order to make life that much
easier. Studies show that trucks, minivans and SUV's report increased sales nearly every year (Fetto, 2001).

The manufactures target the sales of their cars to certain people and their geographic location. Convertibles are not
marketed toward people who live in parts of the world that are cold all year round. A good example of targeting markets is
in Paris. A new is trying to be passed that SUVs are not allowed inside the city. They are taking up to much room and the
vehicles use a lot of fuel. If this law is passed then SUV's will not be marketed toward people who live in Paris. Another
example is that minivans are mainly marketed toward "soccer moms". They are marketed toward the moms because they
are perceived, as needed a lot of room to haul kids around and the easy access the minivans provide.

! 

The automobile industry has a huge impact on the U.S. economy. The University of Michigan and the Center for
Automotive Research stated that this industry is the major user of computer chips, textiles, aluminum, copper, steel, iron,
lead, plastics, vinyl, and rubber. (Gale, 2004) The study also showed that for every autoworker there are seven other jobs
created in other industries (Gale, 2004). These industries include anything from the aluminums to lead to vinyl. In 2001,
the total sales of automobiles were 3.7% of the nation's gross domestic product. This percentage works out to be $375
billion dollars in sales.

 

The internet has affected just about every industry in the world and has also had a huge impact on the automobile
industry. A study was conducted by J.D. Power and Associates in 2002 and involved more 27,000 new vehicle buyers. The
study showed that 60% of the buyers referred to the internet before making their purchases and out of that 60%, 88%
went to the auto websites before going and taking a test drive. Business-to-business marketplaces have given the industry
many opportunities because of the internet, such as more efficiency and lower cost. Ford, GM, and Daimler Chrysler
announced in 2000 their plans to create a global online exchange for suppliers and the original equipment manufacturers.
The exchange was originally called NewCo, and then it was changed to Convisint. According to Motor Vehicles and
Passenger Car bodies, "In August 2002 General Motors announced it was about to begin sending requests for quotes to
suppliers through Covisint using a tool called Quote Manager."

Concerns for the economy and global warming have caused the automobile industry to develop alternate fuel vehicles. In
the beginning, automakers did not want to look into the development because of the high cost and the many risks
involved. Because of new legislation, they had no choice but to come up with the technology to make the fuel-efficient
cars. The automakers decided that electric cars would be the best way to meet the legislation demands. "Early models
were unpopular because of slow cruising speeds and lack of performance, but by the end of the century, electric car
production began to be practical."(Motor Vehicles) At the end of the 1990's manufacturers was coming up with the
technology to produce internal combustion engine with an electric motor. Toyota and Honda were both selling the hybrid
vehicles at retail value in 2001.

"

General Motors, Ford Motor Company, Daimler Chrysler, BMW, Volkswagen, Volvo, Toyota, Mazda, and Nissan Motor
Company come together to create a new trade association created the Alliance of Automobile Manufacturers (Gale, 2004).
The organization was to replace the American Automobile Manufactures Association that only consisted of American
manufacturers, the goals of the associations "were to work together on public policy matters of common interest to provide
credible industry information and data, and seek consistent global regulatory standards (Gale, 2004). The manufacturers
also started merging in the late 1990's. American companies started buying foreign manufacturers created some of the
largest foreign takeovers. In 19998 Daimler-Benz A.G. merged with Chrysler Cooperation to form DaimlerChryler A.G
(Gale, 2004). Some other big mergers were Ford with Volvo, and General Motors and Saab (Gale, 2004).

# 


Today's society judges people on the type of car you drive. Society does not like to admit to this but it is very true.
Manufactures know this happens and targets their markets by these thoughts. For example, anyone who drives a mini van
is perceived as a soccer mom. This is because the manufactures target mini vans to mothers. Anyone who drives a nice
vehicle is thought to be wealthy. No one wants to be seen driving an unattractive piece of junk because of what other
people will think of him or her. Consumers also just feel better when they are driving a nice or new car, if makes them feel
better about themselves.

Another aspect of the sociocultural is the environmental concerns for the need of fuel-efficient vehicles. Many
environmentalists are worried about the impact that the gas cars have on the environment. There is even legislation that
requires cars to average a certain miles per gallon.

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The threat of new entrants is very low in the automobile industry. The industry is very mature and it has successfully
reached economies of scale. In order to compete in this industry a manufacture must be able to achieve economies of
scale. For this to occur, manufacturers must mass-produce the automobiles so that they are affordable to the consumer.
Another barrier to entry is that it takes an incredible amount of capital to manufacture the automobiles. It takes an
extreme amount of capital not only to be able to manufacture the products but also to keep up with the research and
development that is necessary for the innovation requirements. Access to distribution channels is another high barrier to
entry. A company must find a dealership to sell their automobiles or have their own dealership. Space in the dealerships
lots is very limited making it difficult to have a wider variety of inventory.


 



The bargaining power of suppliers is very low in the automobile industry. There are so many parts that are used to produce
an automobile, that it takes many suppliers to accomplish this. When there are many suppliers in an industry, they do not
have much power. There are so many suppliers to this industry; manufactures can easily switch to another supplier if it is
necessary.


 
 


The bargaining power of the buyers is moderately high. The buyers being consumers purchase almost all of the industries
output. The manufacturers depend on them to stay in business. The buyers also are a significant portion of the industries
revenue. If they can not keep their buyers happy then they risk losing them to their competitors. The buyers have low
switching cost if they are not happy. All the buyer has to do is sell the car they own and purchase a new one. The reasons
why the power is not completely high is that the buyers are not large and few in number. The buyers do not have the
ability to integrate backwards into the industry. If they want a car then they have to purchase it from a dealership.

á


There are not many substitute products for automobiles. Some of the substitutes are walking, riding bike or taking a train.
Substitutes products all depend on the geographic location of the consumer. In some cities such as New York or Chicago, a
car is not as necessary. In cities such as those, the subway is the most effective means of transportation. However, in
most places a person must have access to an automobile in order to get around.

V



Rivalry among the competitors is very strong is this industry. The major competitors are so closely balanced that it
increases the rivalry. In order to gain market share in the automobile must gain market share by taking it from their
competitors. One of the other reasons there is such high rivalry is that there is a lack of differentiation opportunities. All
the companies make cars, trucks or SUV's. The competitors are compared to one another constantly. The price, quality,
durability, and many other aspects of different manufacturers are greatly taken into consideration when deciding what type
of vehicle to purchase. When the different manufacturers advertise they even compare their products to their competitors.
For example, the commercials will focus on areas where the company outperforms its competitors.
 
#$c  

The strengths, weaknesses, opportunities, and threats, are quite dynamic for General Motors and each can be integrated
into another. For example, what might be a threat in one category for General Motors, can turn into an opportunity or
become a new strategy for General Motors in the future. One of the major strengths that General Motors possess is the
global awareness and presence it holds in today's market. General Motors today has manufacturing operations in 32
countries and its vehicles are sold in 192 countries (www.gm.com). To gain a better idea of General Motors position in
today's market, refer to table 1. By having such a strong presence globally, General Motors can integrate its operations so
each manufacturer can concentrate on its core competencies. For example, automakers are trying to drive down costs by
sharing costs through their own global alliances, or in joint ventures or partnerships with other companies (Harbour,
2001). This has become one of Europe's strategies for the problem where small vehicle continue to dominate the market
and provide only small profit margins for General Motors. Through global alliances, General Motors can stay in business in
Europe and continue to satisfy its' customers.

Another strength for General Motors is having the largest amount of annual sales at $185,524.00 million, reaching about
15 percent of the global market (Company Press Release). Leading the industry in sales enables General Motors to spend
time and money in its' R&D department. One of General Motors' current projects is releasing two Hybrid cars in China and
hopefully more in the United States in the year 2007 (Stein, 2004). Troy Clarke, president of Asian-Pacific, claims that
developing Hybrid cars is the new strategy for General Motors (Stein, 2004). One reason that General Motors is sitting at
the top of the industry could be due to the fact that it also lead the industry in ad spending. Last year, General Motors
spent close to $2.12 billion on advertising in the United States alone. This large amount of spending has reached
customers through the first internet coupons worth $500 towards a Buick Regal (Halliday, 1999), and is another method of
how General Motors' innovation strategies enables them to remain at the top of the industry.

The opportunities for General Motors globally are almost endless and the ways in which General Motors turns threats into
opportunities proves why they are number one in the industry. With sales growing at 60 percent in the Middle East last
year, General Motors would like to institute a dealership network in Iraq (Ridder, 2004), which would help Iraq's economy
recover from the war. Another threat of losing "safety professionals" due to retirement at General Motors has been turned
into an opportunity of developing the recruiting and training program at General Motors (Minter, 2002).

In terms of taking a threat, such as losing any global market share, General Motors has made advances in the E-Business
strategy and technology for the Asian automotive industry, and turned this threat into an opportunity. It is crucial for
every company to try and turn threats into opportunities for improvement and development.

However, not all threats can be turned into a positive. General Motors CEO never thought that the price war he launched
three years ago would still be going on. This has caused General Motor's market share to fall in the past year (Welch,
2004). The main problem with General Motor's plants in the United States is that they have too much capacity, which in
turns causes them to make bad long-term business decisions. Other major threats have to deal with worker dissatisfaction.
The dissatisfaction of the workers is not only in America, but is occurring globally. A strike in Germany has squeezed some
of European production due to lack of two essential parts that are usually provided by the German plants (Three, 2004). As
one can see, a strike at one plant or factory can have a domino affect on other plants or factories. In this particular case,
the strikes of one plant in Germany, causes other plants in Europe to lay-off close to 12,000 jobs across the continent. This
demonstrates the importance of keeping each plant happy. Nationally, General Motors has plans to make 10,000
temporary layoffs (G.M., 2004). What General Motors needs to do is make sure that the people who are laid off are treated
with respect. This entails helping them find other jobs, or promising them the opportunity to come back work when it is
available, and keeping this promise. This is crucial to keep employee morale high for those workers who still have a job.

The main weakness that General Motors has been battling for the last century is employee satisfaction which leads to
constant strikes throughout the corporation. Managers have been battling with employees and unions on keeping wages,
hours, and retirement plans fair. General Motors is currently spending a large proportion of their earnings on health care
for their retirees as compared with newer automakers. In the past, General Motors has offered generous plans to attract
workers to its plants (Hakim, 2004), but no one thought about what would happen when these workers got to the age of
retirement. Well, that time has arrived and General Motors is facing a difficult future as these costs of retirement continue
to rise.

Critics have been criticizing General Motors for waiting so long to develop what is now the new wave of vehicles, the Hybrid
cars. However, General Motors is first in line when it comes to the HydroGen3 fuel cell prototype. Recently, General Motors
has sped up the pace of innovation with the successful completion of a trans-Europe endurance run for its HydroGen3 fuel
cell prototype (Kisiel, 2004). Although General Motors is just now releasing a Hybrid car in China, it hopes to be the leader
in the future with hydrogen fuel.

As dynamic as General Motors is, it must have multiple strategies being implemented at the same time to keep up with the
fast, changing pace of the industry. One of the major strategies which General Motors is changing is the switch from
producing seventy percent light trucks to producing seventy percent cars. General Motors does not plan on letting the
production of light trucks slip away however. Gary Cowger, president of GM North America, still believes there is a strong
market for trucks, but America is switching to a more economic commercial car (Guilford, 2003). General Motors also plans
on implementing a line of compact pickups which include more car-like creature comforts and style. This change has come
about to match what the customers want with one of General Motors' slogans: 'A car for every purse and purpose'
(Greensberg, 2003). General Motors has realized that it can make the add-ons, such as CD and DVD players, affordable for
those who desire them. Another add-on which has become the most popular add-on and almost a standard for General
Motors vehicles is the OnStar feature. OnStar has expanded its premium services to let the customer check his or her E-
mail as well as trade stock via different voice commands (Galvin, 2001). General Motors has started licensing the
technology of OnStar to other companies which might erode its brand name.

With everything that General Motors is doing right and with what little it is doing wrong, there is still room for
improvement. Recommendations can be given in the fields of employee satisfaction, innovation, and new markets. Being
one of General Motors' main weaknesses, it is imperative that the managers and executives review the policies and
procedures which the lower employees must abide by and determine if these rules are fair or not. With every strike that
General Motors goes through, the competition gains a little bit of ground on the leading corporation. Open communication
and open minds between the managers and the unions' needs to become a must in the General Motors Corporation. If the
money to pay for the rising health care costs cannot be found by cutting costs, then management needs to find other ways
to give benefits and incentives to the employee staff that will keep everyone happy. Implementing the process of
improving customer satisfaction is a timely and excruciating process. The major advantages of improving employee
satisfaction are higher worker morale, higher productivity, and an overall sense of corporate loyalty both internally and
externally. Employee satisfaction has a domino effect on the corporation. As the morale of the worker increases, workers
tend to be more efficient and profit margins rise, which increases stakeholders' satisfaction and everyone, becomes more
loyal to General Motors. The disadvantages of trying to improve employee satisfaction are that it cost a lot of money to
have external consultants work with the corporation to figure out what exactly is wrong, and it takes a lot of time.
However, in the long run scheme of things, increasing worker satisfaction will have an overall positive effect on the
corporation.

Innovation is the backbone for any corporation these days, and it is crucial that General Motors stays a leader in
innovation as well as sales. Although General Motors might be the leader in hydrogen fuel in the future, currently the
competition is way behind the rest if its competitors in Hybrid automobiles. It has been recommended by critics across the
globe that General Motors should pick up the pace and not let the competition gain an edge in the next few years with the
Hybrid cars. General Motors needs to be extremely careful on how far in the future it is looking ahead. It would only seem
wise to be at the same level, if not ahead of the competition with what is going to be the new fad in the years to come. If
General Motors does not see the customers adapting to Hybrid cars then it might be making a good decision on jumping
ahead to the next level of fuel efficiency. It would be extremely difficult for General Motors to catch up with Honda, Toyota,
and Accura, and their manufacturing of Hybrid cars. The advantage of doing so however is that in case Hybrid cars are the
future of the automobile industry and not hydrogen fuel, General Motors will still be able to contend with the rest of the
industry. Hopefully, the technology on how to produce Hybrid cars with economy of scale will be shared throughout the
industry, enabling General Motors to compete at the same level as its competitors. The disadvantage of waiting for the
improvement of technology and for it to be shared is of course the waste of time not improving the corporation. And as has
been discussed before, time is money, and no one can compete with out money.

General Motors has recently entered into the retail industry with its first ever General Motors Collection store in Detroit's
McNamara Terminal. General Motors Collection store was the third highest in net sales at the McNamara Terminal in
August, 2002 (Geist, 2002). The retail stores sells merchandise from miniature models of General Motors manufactured
cars and racing cars, to hats and t-shirts with its most popular automobiles on them. With sales on average of $2,000 a
day, this retail store is a perfect template for General Motors to use in other cities where General Motors manufacturing is
a large part of the community. By targeting cities that have large manufacturing plants, General Motors will continue to sell
to its employees who take pride in where they work. Also, large cities with high tourist rates will have more flow in the
shops and will in turn have higher sales. It would also be interesting to see if such retail stores could do as well in foreign
markets who might not as ego-savvy as Americans and their possessions. Before General Motors starts putting these
collection stores all over the world, it is essential that much research be put into the location selection. If a store enters
into a market place and fails miserably, the consumers in the market may in turn form a negative view about General
Motors. This would come about through the association of the store failing to survive and the lack of quality decision
General Motors produces. The opposite effects however is what General Motors would like to see. General Motors already
leads the industry in advertising and by offering the public the choice of supporting their favorite sports car or any General
Motors product, General Motors gains free advertising. Not only will free advertising be gained, but customer's brand
loyalty will be increased and more cash flow will be available for General Motors.

 #$c  

As the number two auto manufacturer in total revenues DaimlerChrysler has positioned itself as an industry leader, with
this come many strengths. The DaimlerChrysler umbrella covers many well-known brands such as Dodge, Chrysler,
Mercedes Benz, and Jeep. This means DaimlerChrysler has strong brands that are recognizable in almost every part of the
world. Within these brands DaimlerChrysler also has wide variety of automobile products that span all price ranges and
model types, from economy cars to luxury models. Brands such as Jeep are recognized worldwide for off-road and SUV
vehicles, while Mercedes Benz is one of the highest quality luxury car makers in the industry. DaimlerChrysler is even
represented in the realm of ultra luxury with its Maybach brand which competes directly with manufacturers such as
Bentley and Rolls Royce.

In the arena of American car makers the Chrysler brand stands out as a leading innovator in vehicle design. Chrysler is
well known for category breaking models such as the PT Cruiser and Plymouth Prowler. The Dodge Viper is a vehicle that
broke away from the mold of other American sports cars to drive the imagination of car buyers, and increase the
connection of style and image with DaimlerChrysler vehicles.

The merger of Chrysler and Daimler Benz which created DaimlerChrysler gave the company a large worldwide presence.
This presence is a quality one because DaimlerChrysler is considered to be one of most respected companies worldwide
according to a Financial Times survey of world corporate leaders. This presence is further increased by DaimlerChrysler's
strategic partnership with Japanese car maker Mitsubishi. This partnership gives DaimlerChrysler presence in the Asian
regions which is does not currently enjoy with its current stable of brands. This partnership will not only allow for greater
product visibility for DaimlerChrysler in one of the largest automobile markets, but will also allow for sharing of technology
between DaimlerChrysler and Mitsubishi.

DaimlerChrysler is currently a leader in hydrogen fuel cell technology. Hydrogen, considered to be the next big
breakthrough in automobile engines, has the ability to revolutionize the industry. If or when this is the case
DaimlerChrysler's commitment to research and development of the technology will help ensure the company remains on
the top of the automotive world.

With all of the strengths that come with being a top auto manufacturer every company must also face weaknesses that can
arise from the current business landscape and DaimlerChrysler is not immune to these shortcomings. As the automotive
industry continues to move in the direction of globalization it is important for manufacturers to be strongly represented in
all large and emerging world markets. Although DaimlerChrysler is well represented in the American and European
markets they are not strongly represented in the Asian markets. DaimlerChrysler has no brands of its own that command
significant market share in either the Japanese or emerging Chinese markets. DaimlerChrysler's partial stake in Mitsubishi
was supposed to be an answer to this problem but current drops in Mitsubishi's market share accompanied by other
problems has left DaimlerChrysler's future investments in Mitsubishi uncertain, and more importantly with no strong plan
to compete in Asian markets.

Related to the problem of Asian representation is the reality that none of DaimlerChrysler's brands are truly marketable to
worldwide consumers. Brands such as Dodge and Chrysler are strong in the US, but have had limited success in other
markets. The Mercedes Benz brand is the most recognizable world wide, but as a luxury car maker it is harder to market to
a majority of consumers in different markets. The Jeep brand is well known and respected throughout most markets, but
its appeal is limited to the specialized group of SUV and off-road buyers.

The growing use of hybrid engines could also cause problems for DaimlerChrysler. There strategy to focus on the entirely
new hydrogen technology has left them behind many other major manufacturers in the development of hybrid technology.
As other major car companies are preparing to roll out hybrid options for many of there most popular models
DaimlerChrysler does not plan to do the same anytime soon. By hitching there wagon to hydrogen power and not trying to
capitalize on rising hybrid trends DaimlerChrysler could be missing out.

What has been billed as a merger between America's Chrysler and Germany's Daimler Benz has turned out to be more of
an acquisition of Chrysler by Daimler Benz. The result is that most top managers of DaimlerChrysler are from Daimler Benz
and many of the leaders of Chrysler choose to leave or retire. Many have speculated this "brain-drain" of Chrysler
executives could hurt the innovative reputation of the American brands in DaimlerChrysler's portfolio of manufacturers.
Much of the operations of DaimlerChrysler have also been moved to Germany where current wage rates and labor laws
have made it hard for DaimlerChrysler to cut costs and bolster its bottom line.

With the evolution and changing environment of the Automotive industry DaimlerChrysler has many opportunities to
increase its strengths and fix some weaknesses. With DaimlerChrysler's current shortage of Asian market share there Jeep
brand could be a bright spot. With the growing trend of consumerism in China it is currently the fastest growing auto
market in the world, and the Chinese desire for all things American could provide DaimlerChrysler with a golden
opportunity. In Chinese surveys of the most sought after American brands in China, Jeep is in the top 5. DaimlerChrysler
has also recently inked deals to build manufacturing plants for Mercedes Benz in Beijing, China. These recent
developments provide DaimlerChrysler with more chances to push its products into a hugely coveted consumer market.

The decision to focus on hydrogen power research and development could also bode well for DaimlerChrysler if the current
prices of oil and gas become a future standard. The high prices will help to put more focus and energy into viable fuel
alternatives which could push the demand for hydrogen powered vehicles, as well as provide opportunities for government
subsidies for continuing advancement of the technology. As a leader in hydrogen power DaimlerChrysler is poised to be a
large benefactor of any of these scenarios.

Along with new opportunities come the inevitable threats and opportunity costs associated with any course of action which
have the ability to affect DaimlerChrysler.

A current major threat is the shaky alliance between DaimlerChrysler and Mitsubishi. The current downturn of Mitsubishi
has left DaimlerChrysler in a very vulnerable condition. If they continue in the partnership and hope Mitsubishi can pull out
of its slump DaimlerChrysler could still face the consequences of not finding other ways to bolster presence in Asian
markets even is Mitsubishi does right the ship. Even worse if Mitsubishi continues to flounder DaimlerChrysler may have to
cut its losses and find itself even further behind other manufacturers in the race to sure up some of the largest auto
markets in the world.

Another great threat is due to DaimlerChrysler's decision to put all its eggs into the hydrogen fuel basket. If the current
trend of hybrid engines continues to catch on and grow throughout world markets DaimlerChrysler's reluctance to follow
suit could cause loss of market share to rivals who offer better hybrid engines in more vehicle models. Even worse, if
hydrogen proves not to be a viable energy source in the near future than DaimlerChrysler would not be able to profit from
recent heavy investments in the technology and be faced with huge sunk and opportunity costs.

DaimlerChrysler has embarked upon a strategy of becoming a world wide leader in the automobile industry, representing
all vehicle types across all world markets. This is summed up by DaimlerChrysler's four-pillar strategy. The four pillars
include: Global presence, Strong Brands, Broad product range, and Technology leadership.

DaimlerChrysler, formed by a merger of the American Company Chrysler and the German Daimler Benz in 1998, was
instrumental in the achievement of many of these pillars. DaimlerChrysler currently sells products in over 200 countries
and manufacturing plants in 17. DaimlerChrysler also has headquarters covering all major geographic regions on every
continent except Antarctica. After the merger DaimlerChrysler had ownership of several major car manufacturers with
certain geographic presence. Daimler Benz was one of Europe's largest car manufacturers, while Chrysler was a leading
American country. This gives DaimlerChrysler a large presence in two of the largest auto markets in the world. They also
choose to purchase a 30 percent stake in the Japanese Mitsubishi Motors as a way to penetrate the Japanese markets.
These three markets are the largest in the world and gives DaimlerChrysler a strong global presence.

DaimlerChrysler also wished to produce strong brands of automobiles with broad product ranges to be offered in these
markets. DaimlerChrysler currently lays claim to passenger vehicle brands such as Chrysler, Dodge, Jeep, Mercedes,
Maybach, and Smart. They also have ownership of Freightliner, which is one of the largest commercial truck producers in
the world.

These brand names represent all vehicle types currently offered to consumers. From Dodge and Chryslers cars and trucks
covering all price ranges and styles to Mercedes' and Maybach's representation in the luxury market. Even specialized
vehicles are represented; Jeep is a top producer of off-road and SUV vehicles, while the smaller Smart brand produces
economical urban vehicles for sale in Europe and the Freightliner brand gives DaimlerChrysler a strong share of the market
in the commercial shipping and transportation.

In the arena of Technology leadership DaimlerChrysler boasts that it is a world leader in the development of hydrogen fuel
cell powered automobiles. DaimlerChrysler hopes that its research into the new power technology will result in affordable
vehicles powered by the alternative fuel source in the neat future. This Technology has the potential to be the next
industry standard for engines and DaimlerChrysler is heavily invested in assuring that if or when it is they will be
positioned to offer the best hydrogen engines available. They are also looking in the direction of cleaner, more efficient
diesel engines as an alternative to hybrid technology. DaimlerChrysler believes that advances in diesel engines are superior
to the improvements made by gas/electric hybrids currently offered by many competitors. DaimlerChrysler that strong
research into these alternative power sources will facilitate their desire to be a technological leader in innovation among
other companies in the automobile manufacturing industry.

Not all strategies are implemented seamlessly and DaimlerChryser is no exception to this. One of DaimlerChrysler's biggest
current problems is its weak market penetration in Asia. While they do have a strategic partnership with Mitsubishi motors
it is apparent that Mitsubishi isn't fulfilling the high expectations DaimlerChrysler expected. DaimlerChrysler is already on
the right track with its plans to open manufacturing facilities in China, but a more immediate impact might be needed to
ensure DaimlerChrysler doesn't fall behind in the region. A more immediate presence could be achieved through another
strategic partner, specifically with one of the Korean builders Daewoo or Hyundai. Both companies have successful small
car divisions, which are a need for DaimlerChrysler, and more importantly they come with distribution centers throughout
the Asian market. Both companies have been recently seeking a large partner which provides an opportunity for
DaimlerChrysler. The addition of a new Asian partner to the DaimlerChrysler stable can prove to be a great advantage
through the immediate presence DaimlerChrysler could gain presence in the underrepresented Asian market, but it could
also turn out to be a drawback. By taking on another acquisition or strategic partner DaimlerChrysler could face the same
problems it is currently experiencing with Mitsubishi. By only being partners with another Asian firm DaimlerChrysler would
not have ultimate control of the partner firm leaving more of a liability than if DaimlerChrysler opted to simply acquire of
the company.

DaimlerChrysler could also hedge its bets on hydrogen engines by investing more in hybrid technology to provide more
immediate returns. DaimlerChrysler's resistance to go ahead with full scale implementation of hybrid engines has come
from a number of sources, most notably their focus on hydrogen and a belief that other fuels, such as diesel, may hold
greater promise than hybrids. DaimlerChrysler believes that hybrid power is only an interim step until the before
mentioned technologies are realized. Nevertheless, if DaimlerChrysler's assertions about the future of hydrogen power are
incorrect they could face large consequences of not embracing hybrid engines. To fill this gap DaimlerChrysler could
purchase plans for hybrid engines to hedge their bets of the upcoming market for more efficient fuels. Many manufacturers
have begun licensing their hybrid technologies to other manufacturers, and while this isn't as good as DaimlerChrysler
producing there own technology, it will allow them to introduce hybrid engines in there own models quicker and not lose
precious market share to rivals. This would be an advantage for DaimlerChrysler because the promises of hydrogen power,
while great, are still many years away and the use of hybrid engines and technology is growing exponentially in the
present. However, DaimlerChrysler believes that more efficient Diesel technology is the better near-term solution t
increase fuel economy. If Daimler were to follow the crowd into hybrid technology they could face a loss of investment in
new diesel technologies that may well be a better answer than current hybrid technologies.

 

 
 #$c  

The Toyota Motor Corporation was incorporated in 1937 and has many strengths being one of the industry leaders in the
automotive industry. Toyota has three major brands underneath the company umbrella; Toyota, Lexus, and Scion. By
having these three distinct brands, it lets the company reach many sectors of the globe in a choice of vehicle for
customers. They produce their vehicles and target specific global regions, such as the Carina E for the European segment
(Amherst). Toyota has traditionally also been the leader in Total Quality Management or TQM. The belief that no process
could ever be declared perfect, and that therefore there was always room for improvement was introduced by Toyota
Sakichi (Financial Times). This brought about the Japanese word, Kaizen meaning continuous improvement (Financial
Times). By using the Kaizen theory of continuous improvement, Japan caught up the U.S. auto makers during the 1980's
(Financial Times). Toyota has also introduced it's newest hybrid power car, Toyota Pirus, at the 2003 New York Auto Show
and hit the dealerships in the fall of 2004 (Toyota). In September of 2003, orders for the new and improved Pirus totaled
17,500 which is five times more then the company target of 3000 (MSNBC). With the price of gasoline and oil ever rising,
this is a great market for Toyota to exploit.

Toyota does have some company traits that are portrayed as a weakness in the industry. The brand Toyota is not
perceived as many to be prestigious (Amherst). Another perceived weakness is that it is in the top five of sales but not in
the top five in dividend payouts or stock performance (Yahoo Finance). This may put up a red flag to investors around the
globe that Toyota is not paying dividends as frequent or as efficiently as they should to their shareholder of the company.
In Europe, the Lexus brand sold 18,206 vehicles last year compared with 509,720 BMW's. The reason for this is the Lexus
brand lacks the diesel V-8 engine (Bloomberg). In certain European countries such as Belgium and Greece, diesels make
up 90 percent of BMW sales in part to the tax subsidies the consumer receives (Bloomberg).

The opportunities for the Toyota Motor Company seem to be endless. Today, Toyota has passed the Ford Motor Company
to become the world's second largest automaker in the world trailing only GM (Forbes). Toyota has also rounded out it's
product line to suit the U.S. market with the redesigned passenger trucks and SUV, but they have also hit the market hard
with eco-crazed society with the introduction of the second generation hybrid car, the Prius (Business week). The company
is also being pushed in the right direction for opportunity with the strengthening of the Japanese Yen (Bloomberg). With
the yen gaining strength and shifts in other world currency, the operating profits dropped during the April-June quarter by
fifteen percent or seventy billion yen (Bloomberg). Because of the saving the company acquired in currency shifts, Toyota
has extra money on hand to use possibly in R&D to improve on their vehicles or in several other areas causing great
opportunities for the company. Toyota has doubled its market share in Europe in the past four years to 5.1 percent due to
import restrictions being dropped in the 1990's (Bloomberg). The opening up of imports in the European market is a great
opportunity for Toyota because that enables them to put their luxury line of automobiles Lexus, up against the European
BMW and Mercedes Benz. Toyota is considering the idea of introducing a beefy three-quarter-ton pickup truck into the U.S.
Market (Big News). This model would combat the Ford F-250 and the heavy-duty Chevy Silverado and these two pickups
typically sell for more than $30,000 (Big News). If Toyota will decide to enter the heavy-duty truck market now it could be
very profitable with construction, where the use of heavy-duty trucks are needed, booming all over the United States.

Threats to the Toyota Motor Company are an everyday occurrence. A major threat to Toyota is the Hyundai motor
company. On average, Hyundai usually has thirty more horsepower in their vehicles, and costs around 3000 dollars less
than a comparably segmented Toyota vehicle (Amherst). In the luxury line of Lexus, they are still losing ground to BMW in
sedan sales and in SUV sales (Business week). Technology increases in cars today is a major driving force in the
automobile industry, and if Toyota can't keep up with its other competitors, they could quickly lose market share in sectors
they are involved in. The latest trend in the U.S. market is the eco-friendly vehicle that uses less gas and even more use of
electronic power (MSNBC). Toyota has introduced the Prius hybrid vehicle, but Honda also is selling a hybrid car right now
and Ford, GM and DaimlerChrlsyer have all announced plans for a soon release of their hybrid vehicles (MSNBC). If the
Toyota Company can gain market share before the other big three release their hybrid, this won't become much of a
threat, but if the Pirus does not fit consumer's needs in the hybrid sector, they will quickly switch and try the other
products on the market.

The Toyota Motor Company has a slogan that is plastered across one of its assembly plant; Yoi kangae, yoi shina (Business
week). That slogan translates to "Good thinking means good products", and that sums up what Toyota is all about as a
company (Business week). There combination of speed and flexibility is world class with the 30 plants they have worldwide
with some of them able to produce up to eight models of on the same line (Business week). Toyota also lives by the word
Kaizen which translate into continuous improvement (Financial Times). Toyota introduced TQM and Kaizen to the world
with the help of Edwards Demming to take the world by surprise and focus on quality and improvement constantly instead
of just the bottom line and this focus has helped the Japanese company to become one of the leaders in the auto
manufacturing industry (Financial Times).

Toyota, to be as profitable in the future as they are right now needs to keep their focus on the hybrid sector when selling
in the U.S. market. Toyota has also launched a joint program with it's suppliers to drastically cut the number of steps it
needs to make cars and car parts. Over the past year, the company chopped out 2.6 billion dollars out of its 113 billion
dollar manufacturing costs without any plant closure of layoffs (Business week). They are also putting the finishing touches
on a plan to create a more flexible manufacturing system. In this new plan, plants Indonesia to Argentina will be designed
to make more customized cars that fit the demand in the local markets and Toyota believes that by doing this at their
plants the can save 1 billion dollars normally needed to build a new factory (Business week). These are the
recommendations that the Toyota Motor Company needs to take into consideration to keep their company moving in the
right direction globally.

The advantage that Toyota would have by being the leader in the hybrid car sector is unknown right now. Nobody knows
for a certain fact if the "green trend" will be a large factor in the future. In the U.S. market, it appears that having a
marketable hybrid car in their line up of automobiles will be a good plan for Toyota in the future. The advantage of
producing automobiles customized to a certain market is a good plan to keep a competitive advantage over the
competitors in the same geographic region.

The hybrid car market could be a failure in the U.S. market and others in better technology increases before Toyota's Pirus
begins to turn profits for the company. If this happens, Toyota could have a huge failure with all of the R&D and
advertisement they have put into their new hybrid vehicle. Toyota also has an advantage over their customers today using
the TQM model of operations. If the rest of the industry begins to implement this also, and Toyota fails to keep improving,
this could prove to become a disadvantage for the company.



  #$c  

"Ford Motor Company is a global company with two core businesses: Automotive and Financial Services. The Automotive
business consists of the design, development, manufacture, sale and service of cars, trucks and service parts. In 2003, the
Company organized its Automotive business as two primary segments, Americas and International. The Americas segment
includes primarily the sale of Ford, Lincoln and Mercury brand vehicles and related service parts in North America and
Ford-brand vehicles and related service parts in South America. The International segment includes the sale of Ford-brand
vehicles and related service parts outside of North and South America and the sale of Premier Automotive Group brand
vehicles and related service parts throughout the world" (Yahoo Finance).

Ford's chairman and CEO, Bill Ford has a simple strategy, "Our vision for the future is simple: We want to build great
products, a strong business, and a better world." Ford's vision is, "To become the world's leading consumer company for
automotive products and services" (Ford.com).

Ford has been focusing on cutting costs to increase margins more than its competitors. In 1997, Ford cut $1 billion in costs
as a result of work suggestions and using standardized parts for different Ford models. As a result of using standardized
parts, Ford was able to decrease the number of inventory parts, which decreased the chance of inventory parts not in
stock. This meant the assembly plant would be shut down less for out of stock parts, saving Ford money (Stevenson 548).

Ford has used reverse engineering in the development of their products. The Taurus is one example of this tactic. Ford
examined the close competitors of the Taurus to see which parts on each car were the best of the group. Ford then
designed the same parts as well or even better than the competitions. Since the Taurus had the best parts when compared
with its competitors, the Taurus was viewed as the best-in-class car. This tactic allowed Ford to "leapfrog" ahead of the
competition in the family sedan category (Stevenson 130).

Ford has been an innovator in the auto industry when it comes to technology. "Ford Motor Company has aggressively
adopted videoconferencing and computer-assisted design and manufacturing technologies." These innovations have led
Ford to staying successful and efficient in the auto industry. Another technology innovation is the "use an online computer
network to share ideas, create the actual designs, integrate the designs for the various parts and components, and build
and test prototypes via computer simulations" (Thompson and Strickland 157). Ford has recently added Voice over IP
phones to help control costs. Ford paid SBC $100 million to install and manage a network of 50,000 VoIP phones. "The
immediate benefit is going to be efficiencies in cost and operations related to moves, adds and changes" (Pappalardo 14).
Ford is hoping that VoIP phones will become a long term cost saver and help the company save their profit margins. "Ford
Motor Co's state-of-the-art F-150 truck-assembly facility, expected to be operational by summer and running at full
capacity by year's end, is a body shop and final staging area where trucks are assembled and prepped before being
shipped to dealers. It's also Ford's first completely wireless assembly factory." The factory utilizes a flexible body shop,
automated-materials-replenishment system, "self-adjusting platforms at each bay station, and software-driven systems
that monitor maintenance for tooling, conveyers, robots, and other machines. The wireless infrastructure Ford is deploying
for parts replenishment and vehicle tracking comes from WhereNet Corp Inventory replenishment is driven by Ford's Auto
Call, part of its synchronous material-replenishment trigger system, with assistance from about 58 antennas around the
compound" (InformationWeek 26). This wireless technology will allow Ford to be more effective and efficient in all
operations of manufacturing vehicles at this facility.

Bill Ford said, "We've made solid progress in the last two and a half years and we're building momentum. We're not going
to let up on our efforts to raise our quality, lower our costs, or improve on the fundamentals of our business, and we'll
continue the biggest product roll-out in our company's history" (Company News). Ford has been introducing new products
to the market which include the all-new Ford Mustang, Ford GT, Ford Five Hundred, Ford Freestyle, and the redesigned F-
Series Super Duty; the all-new Mercury Montego and Mercury Mariner; the all-new Ford Escape Hybrid - the world's only
hybrid SUV; the redesigned Ford Focus in Europe and Asia; the Land Rover LR3; the Volvo S40 and V50; and the long
wheelbase Jaguar XJ" (Company News).

The first quarter of 2004 was a great quarter for Ford Motor Company. Ford reported earning of $1.9 billion. This was
"twice as much as the company had told Wall Street to expect and far more than historical rival General Motors, which
made only $ 1.3 billion." Ford's management says that "Rather than relying on windfall profits from a couple of hot-selling
models that might cool off later, the company showed a mastery of the myriad small but important details that bolster the
bottom line. It reduced overheads, cut product expenditures and slashed warranty costs. At the same time, it boosted
revenues by targeting incentives and increasing the mix of high-profit vehicles, such as sports utility vehicles (SUVs) with
four-wheel-drive packages" (Taylor 10).
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s (Taylor 10).

Bill Ford is taking a very new outlook on the automobile industry. While economies of scale always determined if an
automobile was successful or not, Bill Ford wants to make money by selling fewer cars. This viewpoint is an unbelievable
stance from the CEO of an automobile manufacturer.

Ford has been struggling to maintain consistent sales numbers. Its first quarter numbers were twice what was expected,
but the rest of the quarters have been lagging. Ford hopes that the release of the many different new vehicles will
revitalize Ford. The financial numbers will turn out decent for the year due to the money made on the financing side. Some
critics say that the financing side of Ford is what makes the money. Ford counters with saying that they must sell vehicles
before the financing side can make the money.

Some recommendations are needed for Ford to maximize profits. Ford needs to capitalize on all the new vehicles coming
on to the market. Aggressive advertising campaigns might entice consumers to go to a Ford dealer and look at the new
products. The only way Ford can make money from theses new vehicles is to sell a lot of them. Costs need to be
reasonable for the appropriate class of vehicles.

Along with selling all the new vehicles, Ford must make sure that the new vehicles are what the consumer wants. The
consumer won't buy the car if he or she doesn't like its appearance, performance, and price. If Ford can meet these three
needs better than its competitors can, Ford will gain market share. Extensive testing is needed before a new vehicle is
launched onto the market. If Ford has not done enough testing and surveys of potential customers, sales might lag causing
Ford not to get much return on its investment.

Ford needs to stop using reverse engineering on the development of their automobiles. If reverse engineering is used, then
Ford is behind its competitors. Ford must stay on the cutting edge for developing new ideas. Stealing its competitor's ideas
does not make Ford first to the market with a new concept. Ford appears that it wants to be seen as an innovator. This is
seen with the first wireless truck manufacturer facility and using VoIP phones. Ford needs to find ways to cut costs while
maintaining or improving efficiency. To be viewed as an innovator, Ford must continue to be the pacesetter for anything
new related to the auto manufacturer sector.

An advantage for releasing new products by Ford would be the potential profit making opportunity. Humans have a natural
tendency to be competitive. This competitive nature carries over to automobiles. One person will usually want a better car
or truck than his or her neighbor. If a new car or truck is released on the market, the neighbor with the new car or truck
that very few others have will have bragging rights. This explains why brand new vehicle sales are very large immediately
after the release date. People want what others don't have. Ford is playing this game. Releasing several new cars and
trucks will hopefully entice the masses to purchase a new automobile. The down side of this is the cost to create the new
vehicle. Millions and even billions of dollars are put into designing, developing, testing, and producing a new vehicle. In
order to make a profit on the specific car or truck, thousands of that type of vehicle must be sold in order to cover the
development costs. If that number of sales is not met, the car or truck was not a success. Ford would not make a profit on
it and would end up losing money on the project.

There are many advantages for Ford to be an innovator in its industry. Costs can usually be saved in the long run. The
publicity of the new innovation will help sales. Newer efficient ways of running the company can be found. The major
disadvantage of innovation is the initial cost of the innovation. Savings in the long run might be large, but the costs to
switch from the old way of doing something to a new way are usually a sizeable amount. If the innovation doesn't work,
the company will lose lots of money. They would lose the initial investment to switch and create new costs to switch back
to the old way of doing something.



  #$c  

Honda motor company is not your average Japanese car manufacturer. Originally know for motorcycles, Honda has
managed to elude the dominate keiretsu system in Japan and become one of the dominant automobile manufactures in the
world.
There are many strengths to Honda. Honda has a reputation for producing high quality products from cars to motorcycles
to lawn mowers. In fact they are the largest manufacturer of motorcycles in the world. Honda has won many awards for
initial quality and customer satisfaction. Their automobiles are reliable and generally fuel efficient. Their research has
afforded them competitiveness in innovative products. The cutting edge Asimo robot and a successful motor sports
programs provide innovations that are passed to consumers as well as press recognition. Honda won the MotoGP
manufacturers title and came in second in the F1 constructors' championship. While these race cars and motorcycles are
much different than production vehicles, the lessons learned on the track transfer to better performance and engineering
of future consumer vehicles. They were a pioneer in engineering low emissions internal combustion and hybrid technology.
Honda is the only other manufacturer outside of Mitsubishi to branch out into many other areas outside of automobiles.

However there are weaknesses, Hondas products are fairly bland and inoffensive in terms of styling. Their prices are higher
for non-luxury vehicles than comparable modes by other manufactures. They do not have a strong offering in a truck line.
Their vehicles also have a reputation for being underpowered or pokey econo-boxes. Even for a broadly diversified
company like Honda, there exist opportunities. An offering in a pickup type truck would be profitable, even if priced under
competitors. These are types of vehicles have among the highest profit margins. Another opportunity would be to continue
progressing low emission vehicles and alternative power sources. While they have made progress in this area, the
technology is still overpriced for the consumer, and the infrastructure does not exist. Another area of opportunity would be
developing nations like china and India. These are large markets, and cheap dependable transportation would be a hot
seller.

Honda's success has not gone unnoticed by its competitors. Like racing, if you don't come up with something new this
year, competitors will beat you with last year's technology. Not that other companies are taking Honda's technology, but
for others to catch up is for Honda to fall behind. While once upon a time Honda cut the low emissions trail, now they are
no longer at the vanguard.

Honda's strategy is to create value through expanded sales via innovation in research and manufacturing. Instead of
having one large manufacturing plant Honda uses an idea of "manufacturing products where they are sold". In this way
manufacture is increased in areas where sales increase. This practice has led to over one hundred manufacturing plants in
over thirty countries, a process they call "globalization". They also are guided by a commitment to the future. This ideal is
reflected in several ways. Low emissions vehicles are one example, anther are manufacturing plants that are focused on
environmental friendliness as well as efficiency and quality.

Honda needs to come out with a truck, which evidently is in the making (the "Ridgeline" coming spring 2005) and progress
with efficient low emissions vehicles. It also wouldn't hurt if they were to come up with some sort of distinctive styling.
Research should be continued because that has provided the innovative and competitive products, and Honda's
diversification into areas other than automobiles should also be continued as this has been historically and asset by
providing synergies in technology and distribution as well as name recognition. Also as mentioned earlier, a simplified
inexpensive transportation is it motorcycle or car would sell like hotcakes in China and India.

After further review Honda's extensive web site, it appears that they are expanding into India and China. China expansion
includes a new plan that will quadruple production by 2006. Meanwhile in India production has started on a motorcycle
that will cost less than two thousand US dollars. This appears to be the right move and is in line with Honda's production in
the location of sales. These actions should put Honda in a position for much more sales.

As far as new low emissions vehicles, they need to put something on the market soon to recapture their image as the
green leader. The new hybrid Accord looks to fill that gap on paper. However even higher performance than the regular
Accord; the hybrid is well just uninspiring. Yes is quicker and gets better mileage and has more power, but it looks the
same, a car your parents would drive.

The expansion into China an India will provide increased sales and spread the image of Honda. However caution should be
taken. If Honda can put a affordable transportation in the hands of the masses then great, but if instead of affordable they
opt for cheap, then the two largest concentrations of people on the planet will know Honda as crap.

Regaining the lead of low emissions is a risky proposition. If Honda goes fuel cell and every one else goes electric, then
they just rolled craps. But to be the leader, they need to put something out to be recognized. Even though the Accord
hybrid has better performance, it still looks the same to the guy on the street.

    % 



Our competitors' financial ratios from three areas were compared. Ratios in liquidity, asset management, debt
management, and profitability were compared. Data for the years 1999 through 2003 was obtained from research insight.
While data for the year 2004 is available from various sources, it was not used in comparison because the methods of
computation would have been various as well, thus rendering the comparison meaningless.

The first area of comparison is liquidity. Historical data for Ford and GM was not available as well as two years of data for
Daimler Chrysler. DCX had the highest current ratios and managed to raise them by over thirty percent over 5 years.
Likewise DCX also improved their quick ratios to lead the comparison group, but not by a decisive margin. Toyota had the
highest cash to current liabilities, and with all 3 companies with marginal change in this area, TM decreased by almost
twenty percent. And lastly DCX led net working capital to total assets, doubling this ratio over 5 years. Generally DCX had
the most liquidity of the three firms that were compared in this area, and for the most part their ratios changed in a scale
larger than the group (caveat n=3).

The second area of comparison is asset management. All companies had data for asset management ratios, so the whole
group can be compared in this area. Ford strongly led the group in days to sell inventory in the high teens. After the
closest rival TM, other competitors had numbers around the forties. Poor GM had increased its days to sell inventory by
nearly eighty percent over five years to seventy one days while Honda had the only improvement decreasing by nearly ten
percent. Honda led fixed asset turnover, while Toyota was most improved. DCX made negative progress in this area. None
of the companies manage an improvement in total asset turnover with GM doing the worst over all and in change, while
HMC kept their turnover higher than competitors. So while Ford had the lowest days to sell inventory, HMC pulled better
turnovers to be the winning asset manager.

The third area is debt management. GM and Ford lead total debt to total assets by a wide margin. They also lead long term
debt to total capital decisively by a wide margin. Toyota and Honda had interest coverage, while the big three had interest
coverage between one and one and a half, the two Japanese companies had almost doubled their already high interest
coverage to 56 for Honda and 43 for Toyota. So GM and Ford use much more debt. This could be good or bad. They
assume more business risk, while the Japanese companies could in theory take more debt to exploit opportunities.

The last and arguable most important area of comparison is profitability. Data was incomplete for price to book
comparisons, so those will not be used. Toyota holds a whopping fourteen percent, while the big three barely have any
margin. The two Japanese companies also have very strong return on assets compared to domestics. Surprisingly GM has
double the ROE of Toyota or Honda, with the others in the middle, with all facing declines since 1999. Return on
investment has slid for all except GM, who nearly doubles the Japanese returns. Price to earnings run around 15 with the
exception of GM at 10 and Toyota at 17, this is the markets reward to Toyota for producing a superior product, and
punishment for GM for turning out unexceptional products.

Even though efforts were taken to keep these numbers accurate and meaningful, it should be understood that there are
several factors working against this effort. The two Japanese companies operate in a different business environment and
face different regulations than the domestic firms. Also the effects of Daimler's merger/takeover of Chrysler should have
affected numbers in ways that would make data not as suitable for comparison. With companies on three continents doing
business in dozens of countries, currency translation also becomes an issue. The five companies have different business
models and search out different parts of the market (even though they compete in areas). They have different regulations
to face and varied access to capital. These differences are reflected in the difference in the ratios, as much as management
effectiveness is shown.
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