toledoblade.com -- The Blade ~ Toledo Ohio Article published April 24, 2010
Detroit 3's opportunity
IT WOULD be wildly premature to declare that the Detroit 3 automakers are back, or even that their eventual recovery is assured. But almost a year after General Motors Co. and Chrysler Group LLC had to rely on unpopular taxpayer bailouts and humiliating bankruptcy filings to stay in business, both companies are showing signs of turning a difficult corner.
That's good news for northwest Ohio, where Chrysler and GM have large presences. Optimism is growing - and seemingly credible - that Chrysler soon will announce a major expansion of its manufacturing operations in Toledo, especially at its Toledo North plant.
Last week, GM said it had repaid $8.1 billion in loans to the U.S. and Canadian governments five years early. Chrysler made an operating profit in the first three months of 2010 and raised its cash reserves, enhancing the prospect that it can break even this year.
Most startling of all, a new poll reports that American consumers now say cars and trucks built by the Detroit 3 are of higher quality than vehicles made by Asian automakers.
These positive findings must be tempered by realism. The $6.7 billion GM repaid the U.S. treasury is a fraction of the nearly $52 billion in bailout money it has gotten from Washington. Only when the company can sell shares to the public and the government can shed its 61-percent stake will GM be in a position to return that much larger taxpayer investment.
Despite its improved finances, Chrysler still had a net loss of $197 million in the first quarter, after taxes, interest, and other charges. It lost $3.8 billion last year after it emerged from bankruptcy. Its new partner, the Italian automaker Fiat, continues to struggle with challenges in its European market.
And Americans' assessment of the relative quality of U.S.- and Asian-built vehicles may have as much to do with Toyota's recent, well-publicized safety issues as with consumer appreciation of the improvement in Detroit 3 cars and trucks, substantial as it is.
But if you're determined to look for good news, you'll find it. Vehicle sales are up, despite automakers' reduced reliance on expensive incentives. The U.S. auto industry is hiring again, largely among parts suppliers that had to shrink during the recession. GM is investing in its North American plants even as it continues to cut costs.
Chrysler can boast of green shoots as well. The automaker has elevated its manufacturing efficiency. Its new Ram Heavy Duty pickup is a hit. It could begin selling a version of the Dodge Nitro sport utility vehicle, built in Toledo, as a Fiat model in Europe. Last week, a 2011 Jeep Grand Cherokee with an Overland badge - a major future launch for Chrysler - mysteriously appeared on a street in downtown Toledo.
Don't forget Ford Motor Co., which borrowed heavily to avoid following GM and Chrysler into bankruptcy. Eighteen percent of respondents in the poll on vehicle quality said Ford now builds the best cars and trucks, compared with 15 percent who favored Toyota.
Such signs of resurgence give the Detroit 3 a tremendous opportunity to boost their shares of the U.S. and global markets. Domestic automakers have had such opportunities before, but squandered them by focusing on short-term profits at the expense of long-term growth. They don't have that luxury this time.
As the economy slowly recovers, domestic automakers are leaner, more efficient, and better led. They evidently no longer need to worry about an industry meltdown.
But their aspirations must be higher than that. They must build high-quality, fuel-efficient, attractive cars and trucks that consumers will choose to buy. If they do that, bankruptcy and bailouts will be relegated to the rear-view mirror.
Linear Mode
