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Monday, September 25, 2006

Detroit: Just When They Thought It Was Safe To Go Back In The Water

Stocks: (F)(GM)(TM)

Investors in Ford and GM may have believed that almost all the bad news was out. Both companies are cutting production for the second half of 2006. GM says it has taken out $9 million in annual costs through worker buy-outs and plant closings. Ford is targeting $5 billion in annual savings. Ford has also indicated that its market share could drop to 14% in North America.

But, it appears that the relentless march of Japanese car companies to improve products will not end.

Honda claims that it has developed a clean burning diesel engine, according to Reuters. Diesel's get fuel economy that is about a third better than gas cars, making them attractive in periods of high gas prices. But, their emissions have been worse for the atmosphere than gas-powered cars. Honda says it has remedied that. These new cars should hit the US market in about three years. And, they are yet another product aimed at taking share from GM and Ford.

Not wanting to be out-done, Nissan will begin to deliver its own hybrid cars according to Japanese daily Yomiuri Shimbun. These should be in the US by 2010. Previously, Nissan licensed its hybrid technology from Toyota.

As Detroit products have narrowed the quality gap with Japanese models, according to surveys from companies like JD Power, some hope has emerged that Ford and GM could stabalize arket share. That is unless the Japanese keep building more innovative and fuel-efficent products.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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