The auto industry is a heavy contributor to ripples in the US economic landscape. When the auto industry gets a cold, the US economy suffers. Despite many critics eager to ring its death knell, the US auto industry has taken flight with impressive phoenix-like zeal in recent months.
BACKGROUND OF THE DOWNTREND
In addition to the housing collapse in 2008, the US auto industry was a key component in the much-publicized financial crisis. By 2009, the US auto industry had gone into a deep depression, with sales plummeting 44% in the first 4 months of that year. GM and Daimler/Chrysler filed for bankruptcy and were assisted in their restructuring efforts by the US Federal government; all in all, it was a very tough time for the industry, essentially the culmination of a 5 year string of losses amounting to well over $100 billion between GM, Ford and Chrysler.
Despite record high industry sales of 16.3 million units in 2007, by December 2008, GM, Ford and Chrysler needed to go to the US government and plead for a bailout. GM would be insolvent within a few weeks. Ford did not take a bailout since they had refinanced long term debt 18 months earlier and had the reserve to manage the storm.
THE SIGNS OF LIFE
After much restructuring and a wave of new offerings, GM posted a 2012 net profit of $7.6 billion, the most ever reported by the firm. Chrysler announced a profit of $183 million, its first net profit since its bankruptcy. Apparently, the U.S. government's bailout of the auto industry proved effective; GM and Chrysler paid back billions of dollars in government loans ahead of schedule. The website investopedia.com (accessed 10/29/13) claims the comeback by 2012 was miraculous, and while that may seem a tad far-fetched, it is true that “Help Wanted” signs are ubiquitous in Detroit right now. They cannot seem to hire quickly enough, and the comeback is indeed impressive.
Here are the details for sales of cars and light trucks by the millions:
Americans love and need their motor vehicles…for work, business and pleasure…and the US automakers were given a valuable chance to restructure and learn many lessons. As of fall 2013, the US automakers seem to have “leaned-out” their operations, while simultaneously offering appealing new products. The US auto market is extremely competitive, which in turn is very good for consumers, making it a very good time to buy a car or light truck. The level of competitiveness in the market is unlikely to diminish, as forecasts are for the industry to reach a peak of about 16 million before leveling out.
LOOKING FORWARD TO THE FUTURE
Let us hope that the US auto industry decision-makers keep their eye on two critical goals:
1. Factor consumer needs and wants into the vehicle design from the very beginning of its development, and
2. Skillfully manage both capital and labor productivity for the long term without succumbing to “irrational exuberance”
Ideally, by keeping these goals in mind and a firm grip on the bottom line, the US auto industry will continue its impressive growth into 2014 and beyond.
About the Author
Offering a true insider’s perspective, John has provided automotive-related insight to the corporate conference rooms of General Motors Corporation, Isuzu Motors, Mitsubishi Motors, J.D. Power and Associates and others, covering a wide range of topics involving product policy and strategy, product development, quality, manufacturing and customer satisfaction.
A member of the Society of Automotive Engineers boasting degrees in both mechanical engineering and business, John is additionally recognized as an automotive industry expert by the US Department of Energy. When not providing valuable expert content to Auto.com, he enjoys traveling with his wife around the globe.