Earlier this year, Ford (F) announced $6.6 billion earnings in 2010, the most it's racked up in a decade. Interestingly, the profits were almost evenly split between U.S. and international businesses, which is indicative of an overall trend in the global auto industry. Something else is going on here, however. For the first time in years, General Motors (GM) and Ford are true rivals again.
Toyota's (TM) woes have led to a collapse of it hard-won North American market share -- at one point in 2009, Toyota was looking like it could surpass GM. Those days are gone, as Toyota has now dropped below Ford. The renewed Detroit Big Two are now developing their competitive strategies for both the homefront and the high-growth developing world.
Russia as the battleground
The conventional interpretation says that GM is stronger in Asia, while Ford is better in Europe. This is largely true, but GM is hardly uninterested in the Old World, hence its refusal to jettison its Opel brand in the aftermath of its 2009 bankruptcy. Ford, on the other hand, lags in Asia and is struggling to catch up. This had led to speculation that a third front needs to be opened -- and that front could be Russia.
Let's just say that this could be lively. It's a big question right now whether GM can afford to chase rapid growth and major profits in China and Latin America while simultaneously maintaining its dominant U.S. market share, fix Opel, and expand production and sales in Russia. As well as the company has done since emerging from bankruptcy and staging an IPO, a big chunk is still owned by the U.S. Treasury. Ford doesn't have that problem, but it is managing far more debt than GM.
Toyota is always in the background
Of course the idea that there's now a Detroit Big Two with the luxury of dividing up the developing world like a pair of industrial colonialists could only emerge if Toyota hadn't fallen so far off its game. This will not last. At some point in the not-too-distant future, Toyota will look to aggressively expand in China, which will divert GM's attention from its Russian engagement with Ford. (And let's not forget that the German carmaking giants, especially Volkswagen, are also aiming for growth in Russia -- and Russia itself wants to develop its own domestic auto industry.)
I don't think GM can pull this off. Which makes its commitment to Opel seem, in retrospect, misguided. But this is GM's Achilles Heel: It wants to be competitive everywhere. It might have made sense, in 2009, to focus on North American, Asia, and Latin America, leaving Europe to Ford and the European carmakers. But the General just couldn't do it. Europe was the gateway to Russia, and those Russian growth expectations were just too tempting.
There are no numbers ones on the global stage
It's somewhat reassuring to see GM and Ford and number one and number two in North American again. But these kinds of rankings are irrelevant when you look at the international auto industry. There are simply too many players now, with too may new ones -- from China and India -- entering the fray.
GM has a good plan for China, taking advantage of low-cost labor to set up an export regime to build cheap cars destined for Latin America. It doesn't matter, in this scheme, what GM's Chinese market share is. Europe is a different story, and while Russia is important, it could end up being a massive resource suck for GM. Ford has the opposite problem: Going up against GM in China might cost it in Europe and Russia. The bottom line is that the U.S. Big Two might not be able to afford to share their rivalry with the rest of the world.