I want to thank Automotive News for writing my column this week. The July 25th issue of AN published a group of special reports entitled "Downfall". It's pretty easy to guess what this ominous title refers to. It's the downfall of the American automotive industry. Specifically, it talks about GM, Ford and Chrysler. And it's the Asian manufacturers -- Toyota, Honda and Nissan -- that the "Big 2½" are worried about.

[Note: No one in the automotive press seems to know whether or not Chrysler should be included as an American car company since it's owned and controlled directly by the German parent, DaimlerChrysler AG. I'm going to count it as half American because so far, while Chrysler seems to be on the right path out of mediocre products, there is much work ahead. Time will tell if Chrysler turns into a German car company with an American face or if it goes back to the very dark times a couple years ago when Chrysler, Dodge and Jeep didn't have any new product people wanted.]

The AN reports gave a rare look at some statistics for sales in California, something that the auto makers don't publish. In fact, the report went as far as to have a complete second report detailing how GM and Ford are "clueless in California"! We have been saying this all along, but we have to draw our own conclusions from what we see on a daily basis.

Here are some interesting statistics that compare the Texas market to the one in California:

In 1999, the Big 2½ commanded about 68% of the total market in Texas. For the same year in California, they only commanded 44.6%. In 2004, the Big 2½ had slipped a bit in Texas to around 61%, the difference being almost entirely attributable to Asian manufacturers. For California in 2004, The Big 2½ are down to a 36.6% market share. The Asian Big 3 -- Toyota, Honda and Nissan - grabbed the additional market share here too. Even in California, the European manufacturers only gained a fraction in market share during the same five year period. By 2004, the Big 3 Asians control 50.6% of the California market. That's stunning.

Compared to the national picture, the Big 2½ held 62% of the market share in 1999. In five years, that market share is down to 53.6%, a slide of 8.4 market share points. In the same period, the Asian Big 3 picked up 7.7 share points to go from 30.9% of the US market to 38.6%. The remaining points lost by the big 2½ went to the European manufacturers. However, for the European manufacturers, it's an increase in market share of almost 10%. For the Big 3 Asians, it's a whopping 25% increase in sales.

The last bastion of sales for the Big 2½ are termed the "heartland" and "rust belt" states. News isn't good there either. Populations in those states are declining, but not nearly as fast as the Big ½'s sales. The Asian Big 3 picked up more than 25% in those areas in the past five years. After all, they are just beginning to catch up to the progressive markets in California. Over the same five years, the Big 2½ went from a market share of 74.1% to 66.6% -- a drop of 7.5 share points. With dwindling populations and market share plummeting, it's hard to see how GM and Ford will be able to stop the erosion.

So California is not only different from another huge state like Texas, our car buying habits are totally disconnected from those of he heartland and rust belt states -- but not for long. In 1999, the difference was a whopping 29.5 share points. In 2004, the difference was nearly the same at 30 share points. You may think there isn't much difference in that number, but there is. In that five years, the Big 2½ lost 8 share points in California, all of which was picked up by the Asians and Europeans. In other words, the Big 2½ lost as much in market share as the Big 3 Asians picked up in market share.

The Best Quote goes to GM North America Marketing VP, the genius behind the most recent Employee Discount for Everyone program, Mark LaNeve: " When you're [in California], it feels like an import dominated market. And it is." Thanks, Mark, that's certainly stating the obvious! So what are you going to do about it? I've just seen my first HHR -- and it was an Avis rental car.

Here's another interesting factoid. The article says that "nearly one in three domestic vehicles sold last year [2004] in California sported a stodgy rental car sticker." So what I've been saying all along is true. The Big 2½ passenger vehicles I see on a daily basis are rental cars. I believe the other two-thirds are privately-owned full-size pickup trucks and big SUVs.

We all are aware here in LA that the SUVs are on their way out -- unless it's a prestigious luxury brand like Land Rover or Porsche. The Big 3 Asians already own the small pickup market. They also are selling boatloads of luxury SUVs, crossover SUVs and even a few sports wagons. It's like the Big 2½ gave up on the small pickup truck market. I mean, really, who wants to buy a Chevy Colorado or Ford Ranger over a Nissan Frontier or Toyota Tacoma?

But with Toyota and Nissan making full-sized pickup trucks, it's only a matter of another product cycle (usually around five years) before the Asians are a major players and competitors in the last market dominated by the Big 2½ . Ford is riding high today on its record sales of its flagship pickup truck, the F-150. Last month, Ford racked up sales of 126,905 F-150s, its best month ever. But if Ford has to give away its flagship truck, then what hope is left for its non-flagship products like the Five Hundred, Freestyle and Focus? And GM is finding out that even with the big discounts, sales only increased 15.2% in July. But the real news was that Toyota had its best sales month in its 48 years of business in the United States market. And Toyota wasn't having an Employee Discount sale. In fact, Toyota had some modest price increases.

The last stunning factoid I'll close with is that in California, in 2004, there were more Toyota-badged cars sold at retail than all Big 2½ combined. We are talking about passenger cars, not trucks, minivans or other trucks that masquerade as cars like the Chrysler PT Cruiser. The market is shifting away from truck-based SUVs to sporty wagons and passenger cars with better gas mileage. And those are the areas in which the Big 2½ are the weakest.

California has been leading the nation since we imposed strict emission control standards, mandated low- and zero-emission cars and pushed for cleaner-burning fuels. Los Angeles has led the way in consuming the latest and greatest in automotive design and engineering. It's no coincidence that all the major Asian and European auto manufacturers have design studios here.

We are the test market for new product, cutting-edge designs, high-end exotics, and the latest technology because we are what we drive. And LA's car culture is considered an extension of the driver's personality, ambition, success or lack thereof. Attention Bill Ford, Mark LaNeve and all the other top executives cloistered in Michigan -- Los Angeles, California is the future. It doesn't have to be your downfall; but with the sheer momentum of product cycles and relentless competition, you need to change now so that in five years, there can be talk of increased market share, not bankruptcy.