GM’s complaint that the weakness of the yen gives Japan’s automakers an unfair advantage over European and US rivals is the latest salvo in an increasingly heated battle. Unless GM can radically improve its own products, however, its long-standing dominance of western markets could come under serious threat.

Although General Motors enjoyed a 6% increase in US sales in February, it is the battle to retain market share against its Japanese rivals that will shape the company’s future performance. The record discounts offered by the largest domestic manufacturer, 53% more than those at Toyota, have not stopped Asian manufacturers gaining further ground.

GM chief executive Rick Wagoner has this week complained that intervention from the Japanese central bank has helped to perpetuate the fluctuations of the dollar and the euro on the currency markets. This in turn keeps the yen artificially weak, hurting European and US manufacturers already struggling against moderate demand. As Japanese brands go from strength to strength in Europe, US and European manufacturers are finding it difficult to gain a foothold in Japan where domestically built cars still account for more than 90% of the market.

GM Europe is determined to improve its performance in 2004 after it lost $286 million in 2003. Europe is crucial to GM as it accounts for approximately 20% of global sales. A management restructuring is taking place, with president Michael Burns to be replaced by GM Asia Pacific region manager Fritz Henderson.

GM has faced problems with its European brand strategy and product line-up. Thanks to a range of new models, including an updated Astra, the company is expected to improve its results. However, despite the improved product pipeline, GM will struggle to significantly bolster its standing in the longer term as the market becomes increasingly saturated. The European market has also become extremely important to the Japanese manufacturers, led by Toyota, which has aspirations to control 15% of the global market in the next ten years.

GM’s travails are symptomatic of the struggle that the large US and European automakers face in coming years as they fight to protect their long-established hegemony in the automotive sector.

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