General Motors' first-quarter earnings miss hints at a broader problem for US automakers. The results raise a few company-specific issues for boss Mary Barra and her team to explain. The effect of the strong dollar, though, is more worrying. It hurt the carmaker only in Latin America and Russia in the first three months of the year. But the bigger concern is the foreign exchange advantage Japanese and European rivals are gaining over Detroit's Big Three in the US market.
Abenomics has given the likes of Toyota, Honda and Nissan a $4,000 per car price advantage in America over the past two years, according to Morgan Stanley. The good news for the industry is that those automakers haven't yet passed the savings on to buyers, eschewing a debilitating price war.
Instead, they are starting to stuff their vehicles with more goodies at no additional cost. That's a powerful incentive for drivers, given the increasing popularity of adaptive cruise control, self-parking and other semi-autonomous features. In a recent Boston Consulting Group survey, 24 per cent of respondents said they would pay more than $4,000 extra for an autonomous feature.
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Barra has other, perhaps more pressing, matters to deal with. The one-off $400 million hit from closing plants in Russia is manageable. The company's global market share is still falling, though at 11 per cent, it's only slightly lower than last year's 11.1 per cent. The automaker could also communicate better with shareholders, who seemed surprised by its higher tax rate for the first quarter.
The good news is that GM, Ford and Chrysler are far better positioned to deal with problems now than a decade ago. Pre-tax US margins at the first two, for example, are routinely at or close to an impressive 10 per cent. As more foreign rivals take advantage of favorable forex, though, that may change quickly.
