General Motors, Ford and Chrysler are often referred to as the "Big Three" or, more recently the "Detroit Three", being the largest automakers in North America. They were for a while the largest in the world and two of them are still a mainstay in the top five. Ford has held the position of second-ranked automaker for the previous 56 years, being relegated to third in North American sales, after being overtaken by Toyota in 2007. That year, Toyota produced more vehicles than GM, though GM still outsold Toyota that year, giving GM 77 consecutive calendar years of top sales. For the first quarter of 2008, however, Toyota overtook GM in sales as well. In the North American market, the Detroit automakers retained the top three spots, though their market share is dwindling. Honda passed Chrysler for the fourth spot in 2008 US sales.
The Big Three are also distinguished not just by their size and geography, but also by their business model. The majority of their operations are unionized (United Auto Workers and Canadian Auto Workers), resulting in higher labor costs than other multinational automakers, including those with plants in North America. The 2005 Harbour Report estimated that Toyota's lead in labour productivity amounted to a cost advantage of $350 US to $500 US per vehicle over American manufacturers. The UAW agreed to a two-tier wage in recent 2007 negotiations, something which the CAW has so far refused.[8] Delphi, which was spun off from GM in 1999, filed for Chapter 11 bankruptcy after the UAW refused to cut their wages and GM is expected to be liable for a $7 billion shortfall.
In order to improve profits, the Detroit automakers made deals with unions to reduce wages while making pension and health care commitments. GM, for instance, at one time picked up the entire cost of funding health insurance premiums of its employees, their survivors and GM retirees, as the US did not have a universal health care system. With most of these plans chronically underfunded in the late 1990s, the companies have tried to provide retirement packages to older workers, and made agreements with the UAW to transfer pension obligations to an independent trust. In 2009, the CBC reported that the non-unionized Japanese automakers, with their younger American workforces and fewer retirees will continue to enjoy a cost advantage over the Big Three.
Despite the history of their marques, many long running cars have been discontinued or relegated to fleet sales, as the Big Three shifted away resources from midsize and compact cars to lead the "SUV Craze". Since the late 1990s, over half of their profits have come from light trucks and SUVs, while they often could not break even on compact cars unless the buyer chose options. Ron Harbour, in releasing the Oliver Wyman’s 2008 Harbour Report, stated that many small “econoboxes” of the past acted as loss leaders, but were designed to bring customers to the brand in the hopes they would stay loyal and move up to more profitable models. The report estimated that an automaker needed to sell ten small cars to make the same profit as one big vehicle, and that they had to produce small and mid-size cars profitably to succeed, something that the Detroit three have not yet done.
SUV sales peaked in 1999 but have not returned to that level ever since, due to high gas prices. The Big Three have suffered from perceived inferior initial quality and reliability compared to their Japanese counterparts, which has been difficult to overcome. They have also been slow to bring new vehicles to the market, while the Japanese are also considered the leader at producing smaller, fuel-efficient cars.
Falling sales and market share have resulted in the Big Three's plants operating below capacity (GM's plants were at 85% in November 2005, well below the plants of its Asian competitors), leading to production cuts, plant closures and layoffs. They have been relying heavily on considerable incentives and subsidized leases to sell vehicles. which was crucial to keeping the plants running, which in turn drove a significant portion of the Michigan economy. These promotional strategies, including rebates, employee pricing and 0% financing, have boosted sales but have also cut into profits. More importantly such promotions drain the automaker's cash reserves in the near term while in the long run the company suffers the stigma of selling vehicles because of low price instead of technical merit. Automakers have since been trying to scale back on incentives and raise prices, while cutting production. The subprime mortgage crisis and high oil prices in 2008 resulting in the plummeting popularity of best-selling trucks and SUVs, perhaps forcing automakers to continue offering heavy incentives to help clear excess inventory.
The Big Three sued California Governor Arnold Schwarzenegger to prevent a tailpipe emissions requirement. In response, Governor Schwarzenegger told the Big Three to "get off their butt".
In 2008, with high oil prices and a declining US economy due to the subprime mortgage crisis, the Big Three are rethinking their strategy, idling or converting light truck plants to make small cars. Due to the declining residual value of their vehicles, Chrysler has stopped offering leases on its vehicles.
It was revealed on October 10, 2008 that GM may exchange its remaining 49% stake in GMAC to Cerberus for Chrysler, potentially merging two of the Big Three automakers.
On June 1st, 2009 under pressure from a mounting debt of tens of billions of dollars, and President Barack Obama's auto task force, General Motors filed for Chapter 11 Bankruptcy in the United States and will undergo restructuring. General Motors of Canada has not yet filed for bankruptcy. The result will mean a cost of 50 billion dollars in addition to 15 billion in bailout relief already paid by the United States government for a 60 percent ownership. The Canadian and Ontario governments owns 12.5 percent. The United States and Canadian government control are reported as temporary.
