Is Detroit Back on the Road Again?
If the near-death experience of the auto industry was the iconic expression of America's economic woes three years back, then that industry's present rebirth might be the smiley face of our recovery.
In 2000, when auto sales in the U.S. peaked at around 17 million units, the unemployment rate in Michigan was only 3.3%. When sales fell to 10.4 million in 2009, unemployment rose to 14.1%. Michigan's jobless rate last month was down to 10.9%.
This employment recovery was led by Ford (NYS: F) , General Motors (NYS: GM) , and Chrysler as the industry added close to 90,000 jobs. Cars are moving off the lots strongly now, and industry watchers see a quite possible 13 million units sold by the end of 2011 as a sign of a strengthening economy.
In the driver's seat
New management teams not made up of the usual Detroit suspects may have helped this renaissance. Ford CEO Alan Mulally was at Boeing previously. GM Chairman and CEO Daniel Akerson came from the telecom business. These outsiders' perspectives perhaps helped their companies not repeat the mistakes of the past.
One smart thing GM is doing to achieve greater economies of scale is sharing vehicle and engine platforms among models, essentially cutting the number of platforms in half. It is also planning to add a plug-in hybrid to its Cadillac line. This car would share the same basic drivetrain as the Chevy Volt.
Ford has justannounced a partnership with Toyota (NYS: TM) to jointly develop a hybrid drivetrain for pickup trucks and SUVs. With stricter automotive fuel mileage standards coming in to play soon, these kinds of development deals will become more commonplace among automakers.
Another factor in burgeoning car sales may be that the economic downturn caused many people to hold on to their cars longer than they might have otherwise. Now they find they can't put off that new car purchase any longer.
The road to recovery?
Michigan's bit of good news bodes well for the whole country. The automakers not only employ 1.7 million workers who make and sell their cars, but the industry as a whole employs another 6.3 million. That accounts for $500 billion in compensation. That's quite a powerful engine for recovery.
It may be time to consider getting back behind the wheel and consider the automakers as sound investments once again. These aren't your parents' automakers anymore.
At the time this article was published Fool contributor Dan Radovsky does not own shares of stocks mentioned in this article. The Motley Fool owns shares of Ford Motor.Motley Fool newsletter serviceshave recommended buying shares of Ford Motor and General Motors. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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