US auto industry marks monumental turnaround

“The reports of my death have been greatly exaggerated.”

Mark Twain said it, but his quote could easily apply to the American automotive industry. Going into 2011, Ford, G.M. and Chrysler have notched huge gains in financial health, sales and quality. Considering that all three were considered close to death’s door two short years ago, especially General Motors and Chrysler, it is a remarkable – even stunning – economic recovery story.

Hammered by high gasoline prices and the recession, Chrysler and G.M. sought and received government loans amounting into billions of dollars, followed six months later by forced marches through bankruptcy. Ford managed without help, but struggled.
Former President George W. Bush, in his recent memoir Decision Points, said that “decades of poor management” was responsible for the auto industry collapse; management had allowed huge healthcare and pensions costs and had been “…slow to recognize changes in the market,” and failed to compete with foreign carmakers on both product and price.

Once America’s largest and most influential company, General Motors’ stock fell to 75 cents a share just before it declared bankruptcy on June 1, 2009, following the path Chrysler had walked a month earlier. Chrysler got out of bankruptcy by selling to Fiat in June of 2009. G.M. was reborn in July as a totally new company with only four lines – Buick, Chevrolet, GMC and Cadillac – and the U.S. Treasury as its major stockholder.

In a controversial move made in the name of efficiency, G.M. and Chrysler together axed more than 2,000 dealers. A majority of them appealed to Congress, saying decisions were politically motivated. Colorado lawmakers responded with a law requiring automakers to reinstate terminated dealers when making future dealer expansions.

The industry collapse made it clear that American automakers would have to change in several ways to survive: improve product quality, safety and sales. They are making a major rebound that has been both quick and succinct.

Finances

By May 2010 G.M. tentatively forecast a profit for the first time since 2004. In mid-August, the company filed papers for a stock offering. By late October, the government announced a $2.1 billion G.M. buy-back of Treasury-held preferred stock, fruits of the 2008 Troubled Asset Relief Program.

G.M.’s November IPO raised $23.1 billion, the largest stock sale ever. Investors liked its third quarter profits of about $2 billion. Recently, G.M. executives announced a plan to drastically cut the company’s debt and pay off pension obligations while ramping up development.

Chrysler is also doing much better, reporting a third quarter loss of $84 million – it’s smallest since exiting bankruptcy. Additionally, Chrysler with its new affiliation with Italy’s Fiat, has been cranking out new models, interior upgrades and redefining its brands.

Ford, the sole US auto manufacturing to avert bankruptcy in 2009, has created worldwide recognition with significant financial solidification and strength, new innovative technologies and impressive debt reductions. Ford is rising.

Sales

November U.S. car and truck sales were up about 17 percent over a year ago. Ford led American makers with a gain of 24.3 percent, followed by Chrysler’s 16.7 percent gain and G.M.’s 12.2 percent gain. In Colorado, Detroit automakers sold 2.3 percent more vehicles than last November. American manufacturers claimed 11 of 20 spots among November’s best-selling cars and trucks.

More fuel-efficient vehicles are gaining ground. The Chevrolet Volt, Motor Trend’s 2011 Car of the Year, with an electric motor that has a 25-50 mile range, is creating tremendous buzz. It’s expensive ($41k) but reviewers have raved: “…a great car” according to the Detroit News. The New York Times said, “G.M. has nailed it,” with the Volt.

Quality

America’s automakers finally are heeding consumers who defected to Japanese and European vehicles that offered both good price and quality. In June, Detroit outscored foreign makers in the J.D. Power & Associates quality survey for the first time in the survey’s 24 years. Power cited “Substantial improvements by many domestic models.” American-made vehicles also improved their showing in the annual Insurance Institute crash tests, placing 20 American models among 66 “Top Safety Picks.”

American automakers also are in the forefront of technological developments, pledging to plow more money into R & D and stay ahead of foreign makers.

The lessons of the American automobile industry’s collapse were hard, but clearly taken to heart. Detroit automakers led the automotive world for most of the last century, and now it’s fair to claim, “We’re baaaaaaack!”

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About timwjackson

Working every day for a better Colorado.
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2 Responses to US auto industry marks monumental turnaround

  1. Jim Czupor says:

    Tim,
    Good article and good news for us all. Let’s hope the momentum continues. — Jim

  2. Pingback: US auto industry marks monumental turnaround | Tim W Jackson's Blog | Michigan Not Mexico

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