This past week, financial news and opinion media outlet 24/7 Wall Street released its annual list of companies that would be kicking the bucket before the end of the year. Among names like J.C. Penny and Nook were, surprisingly, two major automakers. According to this prediction, both Volvo and Mitsubishi will have departed American shores by 2014. While this may seem like shocking news to some, given that these brands are household names, the potential departures make quite a bit of sense.
On December 19, 2011, Saab officially declared bankruptcy. On the surface of things, this made sense. The company had been plagued by decreasing market shares for years and also suffered from a lack of consumer identification, as well as pricing and quantity issues. This was a failure that people saw coming, and yet, for many, it still stung. Various magazines and programs delivered impassioned eulogies, in which they discussed the company’s heritage and many of its most influential models. Many were stunned that an automotive mainstay, however unpopular, could simply disappear.
This brings us neatly to the case of Volvo and Mitsubishi. Volvo, in particular, is much bigger than Saab, even if it is no General Motors. The company has a reputation for safety and increasing refinement, neither of which has allowed it to retain any more than a 0.3% market share. Many of the company’s offerings are seen as competing directly with luxury offerings from major automakers like GM and Toyota, as well as lower-end models from luxury titans like BMW and Audi. These brands have traditionally commanded a strong market majority and have been able to parlay that into increased profits, whereas Volvo has found itself left out in the cold.
Despite these economic facts, many will still be surprised, as previously stated, given the generally superb nature of Volvo’s vehicles.
Certainly less surprising is the collapse of Mitsubishi’s U.S. branch. Not only has the brand only maintained a minimal U.S. presence over the last several years, but it has not advertised particularly well, nor has it produced any offerings, save cult classics like the Lancer, that have wowed U.S. car buyers. In fact, the latest J.D. Power & Associates reliability surveys have Mitsubishi ranked third to last out of the 33 major brands in the U.S. In this sense, Mitsubishi is something of a typical bankruptcy case. It isn’t making products that consumers adore, it hasn’t produced any memorable advertising and it has always occupied a market niche.
This is why the news of Volvo’s potential exit is surprising to so many. While the accounting figures make sense, the reality is that Volvo is doing almost everything right, for the most part. It’s even planning a lineup expansion to refresh its aging U.S. line later this year. Despite the falling market share and dipping profits, people are generally pleased with Volvo’s offerings.
These two automakers present different faces of the same coin. Mitsubishi is a poster child for collapse. Many would argue that if it isn’t planning on withdrawing from the American market this year, it should heed the advice of 24/7 Wall Street and start packing its bags. Volvo, on the other hand, presents a case quite similar to that of Saab. If Volvo does indeed go under, and that’s still a big “if”, it will be in a way much more similar to Saab than Mitsubishi.
While these predictions are only based on guesswork and are just as likely to prove incorrect as they are to predict the future, they raise interesting questions regarding major automakers and remind motoring enthusiasts that the automotive industry is often more turbulent than it seems.