US Auto IndustryShuts Door On Another Strong Year- By Tony Pugh - Re-Post from McClatchy - Tribune http://www.dealersynergy.com
WASHINGTON – After a near collapse at the height of the Great Recession, the streamlined U.S. auto industry defied the odds and outperformed the greater economy this year with solid sales increases, job growth and product innovations that signal that a full industry recovery no longer is just possible, but probable.
Credit better quality and pent-up consumer demand for the industry’s slow, steady improvement. Customers who were unwilling to gamble on automobile purchases during the recession are coming back to showrooms because the average age of vehicles on U.S. roads is more than 10 years – the highest ever.
U.S. car buyers also are getting comfortable with making large purchases in the volatile economy, experts say.
“And that’s a big behavioral change from what we saw in ’08 and ’09. That’s good for the industry,” said Jesse Toprak, the chief industry analyst for TrueCar.com, an auto-pricing Web site.
After selling roughly 11.8 million cars and trucks last year, U.S. vehicle sales to businesses and consumers are expected to hit nearly 12.8 million in 2011, Toprak said. That’s up from 10.6 million at the height of the Great Recession in 2009.
Through November, new-vehicle sales had logged six straight months of year-over-year gains. That should continue in December, when 1.2 million vehicles are likely to be sold, Toprak said.
Those numbers are well off their pre-recession levels, which topped 16 million vehicles a year. But the industry’s plodding recovery in the past two years has helped stabilize the greater U.S. economy and power a regional recovery in the Great Lakes and Rust Belt regions, where auto production is king. Both areas have seen some of the sharpest declines in unemployment in the country in the past two years as automakers regain their financial footing.
U.S. and foreign automakers are poised to add nearly 167,000 U.S. jobs by the end of 2015, according to the nonprofit Center for Automotive Research in Ann Arbor, Mich. That breaks down to 30,000 hourly and salaried workers at the Big Three U.S. automakers, 17,000 jobs at foreign automakers and about 120,000 auto-supply sector jobs.
“The industry has pretty much hired back just about everybody from the automotive side that had been laid off. And now they’re hiring fresh, so they’re actually adding to their rosters,” said Aaron Bragman, senior analyst at IHS Automotive in Northville, Mich.
Most analysts say the industry’s growing stability is sweet vindication for the federal government’s $80 billion bailout, which allowed General Motors and Chrysler to reorganize. The Center for Automotive Research estimates that the bailouts saved more than 1.1 million jobs in 2009 and another 314,000 in 2010, while avoiding personal income losses of more than $96 billion.
Today, all three major U.S. automakers are on the comeback trail with increased investment in U.S. manufacturing plants, improved new models, greater profitability and thousands of new hires.
Chrysler’s rebound has been dramatic. In its best November since 2007, the beleaguered automaker sold more than 107,000 vehicles in the U.S., up 45 percent from November 2010. It was the 20th consecutive month of year-over-year sales gains for Chrysler and the best November for Jeep brand sales since 2003.
Foreign automakers also are expanding their U.S. operations. In May, Volkswagen opened a new plant in Chattanooga, Tenn., that now employs 2,000 people. The Mercedes-Benz factory in Vance, Ala., will add 1,000 jobs when it begins producing the C-Class in 2014.
Toyota just opened a new $800 million plant outside Tupelo, Miss., where about 2,000 workers will assemble the popular Corolla. The plant is Toyota’s 14th in North America.
Korean automakers Hyundai and Kia saw their U.S. vehicle sales explode this year. But U.S. sales of Japanese autos faltered after a tsunami in northern Japan disrupted production in March and caused worldwide inventory shortages during the summer months, when car sales are hottest.
“They didn’t have full strength of inventory because they weren’t able to make enough cars,” Bragman said.
U.S. automakers were prepared to capitalize with new designs and models. Chevrolet’s new Cruze became the second-best-selling car in its class this year, behind the traditional industry leader, Toyota’s Corolla.
Improved quality among all automakers also helped drive sales.
“You’ve got to give the automakers some credit here,” Toprak said. “The new products that have come out of virtually every single automaker in the last year or two have been the best that consumers were ever offered. When you have great product, it fuels buying.”
Ford’s redesigned Explorer has continued strong sales even as the U.S. market has moved away from SUVs. This year, the Explorer moved from a truck-style, body-on-frame design to a lighter, more fuel-efficient one-piece body architecture, which most cars have.
“It has been a big success and is selling very well,” said Bernard Swiecki, senior project manager at the Center for Automotive Research.
After recently inking four-year agreements with the United Auto Workers union, Ford, Chrysler and General Motors plan to add more jobs. The UAW agreements call for 20,000 new jobs over the life of the contracts: 6,400 at GM, 2,100 at Chrysler and more than 12,000 with Ford.
The new pact reduces labor costs for the automakers because new workers will earn lower wages than longtime employees, who will get profit-sharing and inflation-adjustment payments rather than annual raises.
In exchange, the companies agreed to bring back more foreign manufacturing jobs to the U.S. Last month, General Motors said it would begin assembling its Chevrolet Equinox next year at the old Saturn assembly factory in Spring Hill, Tenn., along with a midsized vehicle for the 2015 model year.
Earlier this month, Ford announced that production of its F-650 and F-750 trucks will move from Mexico to its Avon Lake, Ohio, assembly plant in 2014. The move retains about 1,400 jobs at the plant, which is slated for a $128 million upgrade.
New labor agreements and cuts in retiree health benefits also have helped the automakers become more profitable. Before a 2007 UAW labor agreement, Ford and GM’s wage and benefit costs were about $78 per hour. They’re now $58 an hour for Ford and $56 for GM, said Kristin Dziczek, director of the labor and industry group at the automotive research center.
While Chrysler’s sales have increased the most from last year, its per-vehicle profit margin is only $1,066, according to the center. General Motors clears an average of $3,327 per vehicle, while Ford earns $2,819.
Barring a European debt crisis next year or a double-dip domestic recession, most analysts think that 2012 will be another strong year, with vehicle sales approaching 13.8 million.
“The industry is ready, when the economy recovers, to make a lot of money,” Dziczek said. “If we get back to moderate economic growth of about 3 percent a year, we could be talking about there not being enough (manufacturing) capacity” to keep up with demand. “That’s a good problem to have.”
The vast reach of the auto industry, through its parts and supply chain, helps drive the economy in times of expansion. The industry typically accounts for up to 3.5 percent of the gross domestic product and fuels about 10 percent of U.S. retail sales.
When automakers were cutting jobs in 2008 and 2009 at the height of the recession, the industry’s economic ripple effect worked in reverse, causing millions of additional jobs to disappear.
“Now that huge economic multiplier is once again on our side. It’s working as an engine of growth. But we paid a dear price in ‘08 and ‘09, when the hit was really enormous,” Swiecki said.