Optimistic outlook for auto industry?
If the economy cooperates, car buyers will see more variety
Mar 30, 2009
Yes, the current situation doesn't look good. Two of the Big Three are flirting with bankruptcy and the weak economy doesn't bode well for a quick resolution. But looking beyond the immediate situation, it's not hard to see that seeds of change are being planted.
Start with Ford Motor Co. The firm put itself into total hock nearly two years ahead of the start of the economic slump and sold off Aston Martin, Land Rover and Jaguar, giving it access to cash flow that General Motors and Chrysler can only look upon with envy now.
Ford had let its car line fall behind during the craze for big trucks and SUVs, as did GM and Chrysler, but it now is putting cars first. The 2010 Fusion is hitting the market early, complete with a hybrid model, new Mustangs and Tauruses are on the way, and the European Fiesta subcompact leads Ford's campaign to leverage its worldwide resources and eliminate duplication of effort.
GM's plans to spin off Opel, Hummer, Saab and Saturn may not bode well in the short term, but it will be a stronger firm once it is focused on Chevrolet, Buick, Pontiac, Cadillac and GMC. As for the spun-off brands, they may come into the possession of such Eastern Asia auto corporations as Mahindra, Tata, Geely or Chery, giving those firms a smoother entry into the American market. Or a spun-off Opel may forge a relationship with Saturn, keeping its dealers supplied with the mostly Opel-based vehicles Saturn currently sells.
Chrysler's proposed strategic alliance with Fiat, should it go through as described, will throw that company a lifeline. When Chrysler was abandoned by Daimler a couple of years ago, it was left without necessary management and engineering resources. This prevented it from forming the kind of new product strategy that Ford and GM are currently following.
Chrysler is promising new versions of the Chrysler 300, Dodge Charger, Jeep Grand Cherokee and Dodge Durango, but its midsize sedans need major upgrades to remain competitive and its small vehicle programs are moribund - problems the firm does not have the resources to address. This is where Fiat comes in, with an existing line of compact cars that can be easily reformulated to fit into the Chrysler line.
Additionally, Fiat can use Chrysler's excess manufacturing capacity on its own behalf to re-establish the Fiat and Alfa Romeo brands in the U.S. market. Over time, Fiat can also adopt Chrysler's vehicles for its own uses, giving it entrée to the market for luxury sedans and SUVs overseas.
This optimistic scenario depends on a number of variables, of course. The economic slump needs to bottom out, for starters. February's increase in housing starts and durable goods demand are good indicators, as is the recent upward trend in the Dow Jones average. Unemployment is a lagging indicator, however, and this good economic news will have to persist in order to get companies hiring again and consumers confident enough to resume spending.
More importantly, the updated strategies of Ford and Chrysler will depend upon buyers embracing new cars designed to European tastes in size and design. Past rebounds in the U.S. auto market found buyers racing to large sedans, pickups and SUVs rather than compacts, however.
But a confluence of positive economic trends, combined with Americans' newfound emphasis on energy independence, could result in a more vibrant market for new cars over the long term.
