Ford Motor Co. of Canada Ltd. will drop out of third spot in vehicle production in Canada this year and be supplanted by Honda of Canada Mfg., in another illustration that the changes rippling through the North American industry are ending a century of Big Three domination.
Ford is also unlikely to reverse that trend any time soon, because its Oakville Assembly Plant is expected to slash production dramatically from year-earlier levels in the first half of 2005, industry and union officials said.
The rise of Honda as No. 3 is "a very significant signpost of where the industry is going," said analyst Felix Pilorusso, head of Toronto-based Pilorusso Consulting Inc.
With two weeks left before auto makers shut their plants for the annual Christmas break, Honda's operations in Alliston, Ont., have cranked out 369,807 cars, sport utility vehicles and minivans. Ford has produced 352,192 cars, minivans and pickup trucks, and one of its two remaining assembly plants is operating at half its usual output this month, so Honda is certain to remain ahead.
That will put the Japan-based auto maker in third place in the rankings behind General Motors of Canada Ltd. and the Chrysler division of DaimlerChrysler AG, and mark the first time the Big Three have not been the Big Three.
Ford's production decline this year is related in part to woeful sales of the Ford Freestar and Monterey minivans assembled in Oakville, Ont. Those sales have left inventories in the range of 100 days, compared with the industry's preferred number of about 60 days' supply, and led the auto maker to eliminate one daily shift of operations this month. Normal production comprises two shifts a day.
Industry sources and union officials said the production cutback is scheduled to continue in the first six months of 2005, with one shift producing minivans two weeks a month and the other shift working the other two weeks, said Gary Beck, president of local 707 of the Canadian Auto Workers union, which represents about 3,800 workers at the plant.
Another 212 are on temporary layoff.
"Obviously there's not enough demand for minivans," Mr. Beck said.
Ford won't reveal details of its 2005 production plans yet, spokeswoman Lauren More said yesterday.
The permanent shutdown earlier this year of Ford's Ontario Truck Plant, also in Oakville, and periodic shutdowns of its St. Thomas, Ont., assembly plant, which turns out full-sized sedans, have also contributed to the decline in the auto maker's production.
It all stems from a steady slide in the company's market share that began in the mid-1990s and has continued through the first half of this decade.
Ford's share has tumbled to 13.9 per cent in Canada this year from 18.2 per cent in 2000, and to 18.5 per cent in the United States from 22.8 per cent.
The Big Three's share of the passenger car market has fallen to less than 50 per cent in both the U.S. and Canadian markets. Honda and its Japanese-based rivals, as well as European-based auto makers are also taking dead aim at the Big Three's remaining profitable segments, trucks and sport utility vehicles.
Honda now holds 9.4 per cent of Canadian sales and 8.2 per cent of the U.S. market. That compares with 8.7 per cent in 2000 in Canada and 6.7 per cent in the United States.
The steady increases in production at Honda -- and also at Toyota Motor Manufacturing Canada Inc. in Cambridge, Ont. -- are part of the reason Ontario will supplant Michigan this year as the largest auto-producing jurisdiction in North America, said Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. of Richmond Hill, Ont.
Mr. DesRosiers traces that back to smart policy decisions made in the 1980s that led to Honda and Toyota building assembly plants in the province.
"Many of the American states viewed the import nameplates as bad guys -- certainly Michigan did," he said.
But because Canada's auto manufacturing was already dominated by foreign-based companies -- Detroit-based Chrysler, Ford and GM -- policy makers had no reason to fear Honda and Toyota.
"We viewed them as equal to everybody in the marketplace," Mr. DesRosiers said.
Ford will soon start a $1-billion redevelopment of its Oakville site to turn it into a leading-edge, flexible assembly operation, but the new plant won't begin turning out two new SUVs until 2006.
Both Joe Hinrichs, who takes over as Ford Canada president on Jan. 1, and current president Alain Batty have pointed to the loss of market share as something that needs to be addressed.
They say new products such as the Ford Mustang sports car, Freestyle crossover utility vehicle, Five Hundred full-size sedan and others to come next year will help reverse the trend.
But analysts aren't convinced, given that sales of the Freestyle and Five Hundred haven't met their expectations in the first few months.
"Our concern is that Ford's new products may be cannibalizing existing vehicles, rather than helping the company regain market share," analyst Rod Lache, who follows the industry for Deutsche Bank AG in New York, said in a note to clients last week.
Meanwhile, Honda and other offshore-based companies aren't standing still.
Industry sources said Honda has already increased planned production next year of a new sport utility truck to 80,000 from an original 65,000. The truck will be produced in Alliston.
Ford versus Honda
As Ford's market share is declining, Honda's is on the rise
| FORD | Share in U.S. | Share in Canada |
| 2000 | 22.8% | 18.2% |
| 2004 | 18.5% | 13.9% |
| HONDA | ||
| 2000 | 6.7% | 8.7% |
| 2004 | 8.2% | 9.4% |
Note: Ford includes Lincoln and Mercury divisions; Honda includes Acura division.
SOURCES: DESROSIERS AUTOMOTIVE CONSULTANTS INC. AND AUTOMOTIVE NEWS
