JAPAN: Nissan and Mitsubishi chide Detroit Big Three over profit-eroding incentives - report
The chief executives of Nissan Motor and Mitsubishi Motors criticised the US "Big Three" car makers on Thursday for leading a race to offer incentives to buyers, saying it was eroding profitability in the world's biggest car market, according to Reuters.
"The current situation in the US is crazy. Somebody is driving a brutal incentive race -- you read about $US10,000, $6,000 discounts all over the place -- and how could that work? It's crazy," Mitsubishi Motors CEO and President Rolf Eckrodt said at the Economist Automotive Roundtable in Tokyo, according to Reuters. Eckrodt reportedly added: "And all participants in this race are losers."
Reuters said that, hurt by soft personal spending, Detroit's Big Three have been offering huge discounts in the form of rebates and interest-free loans so as to lift sales, at the expense of profits. While incentive levels at Japanese automakers are also rising somewhat, they are nowhere near the average $3,000-plus that the Big Three are dishing out, Reuters said, adding that, nevertheless, Japanese car makers are still enjoying a rise in market share.
"When you are obsessed with market share, you end up buying market share," Nissan CEO Carlos Ghosn said, according to Reuters, adding that that was the problem with Nissan when he took charge of it in 1999. "Accepting the loss of market share is a very hard thing - in front of your shareholders, the media, and competitors - but that's what you need to do."
Reuters noted that the comments came a day after Ford reported a 27% fall in second-quarter earnings [and before GM's announcement on Thursday of a 30.7% drop in profit for the same period]. Reuters noted that Ford said its US prices weakened as it used incentives to prop up sales through an economic slump and a dearth of new models.
DaimlerChrysler also surprised the market last month when it disclosed that its Chrysler unit would post an operating loss of one billion euros ($1.12 billion) in the second quarter due to the cost of incentives, Reuters added.
According to the Reuters report, Mitsubishi's Eckrodt added that as long as the "crazy" situation in the US market continued, Japanese car makers would continue to march ahead of their local rivals.
"Obviously, the (Japanese makers) do better," he reportedly said.