2004: Year of Reckoning

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too many new vehicles, not enough buyers. Experts have talked about overcapacity in the auto industry for years. But in 2004, carmakers are adding even more to this product traffic jam. Asian transplants, including Nissan

North America and Toyota Motor Sales USA, have just added production capacity at U.S. plants. Hyundai Motor America is readying its first U.S. plant. Detroit's carmakers have been reluctant to

trim production at their plants.

The auto industry is facing hotter competition this year as virtually every player seems to want to compete in every area. Detroit is even battling to retain leadership in the full-size pickup market, which it always dominated. Toyota and Nissan finally have serious contenders in the segment.

All the carmakers want to increase vehicle sales while trying to maintain decent profit margins. But some companies haven't done as well as others in the early months of 2004, traditionally the slowest selling period for the industry. Not all the automakers enjoyed increased sales-a continuation of their nagging problems from 2003. Still, total sales in the first quarter rose nearly 4%, to 3.9 million vehicles, vs. a year ago, according to the Automotive News Data Center.

Detroit carmakers are finally reacting beyond crosstown rivals. General Motors Corp., Ford Motor Co. and DaimlerChrysler's Chrysler Group all have a slew of new models in a big offensive against the imports.

still buyer's market

It's still generally a buyer's market since the car companies continue reluctantly playing the incentives game, which they would like to see disappear.

The pain of squeezed profit margins isn't just being felt in Detroit. Several importers are battling back from big sales drops in the past year and must do it without new product, the industry's golden goose.

The big question is whether consumers will keep buying new vehicles even with the sluggish economy and lingering questions over the job market.

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