General Motors, Chrysler and Ford are the main players in the North American automotive industry. A road to ruin was narrowly averted — in part due to government intervention. How will the car makers maintain renewed profitability?
A 2009 Congressional Research Service report outlined that motor vehicle manufacturing accounted for 880,000 jobs, which translated into an estimated 6.6 percent of the manufacturing jobs nationwide. Economy-driven declines in new car sales — figures dropped by 18 percent between 2007 and 2008 — jeopardized these jobs and brought Chrysler and General Motors to their knees.
Recognizing the watershed moment in the automotive industry, President Barack Obama made the controversial decision to financially support Chrysler and General Motors. In so doing, the government enabled the automakers to restructure and avoid going out of business. The White House released a July 2010 report that details the success of the bailout. If highlights that — without government intervention — in excess of one million jobs would have been lost. Instead, the industry managed to add 55,000 jobs.
Ford did not ask for government help but took appropriate measures in 2006 to secure its bottom line. Forbes reported that Bill Ford Jr. liquidated enough assets to secure a high line of credit that would see the company through the worst of the economic downturn.
Road to Renewed Solvency and Market Share
Although for a while the SUV and pickup truck defined the parking lot landscape in front of suburbia’s big box malls, these models must go by the wayside like the tail fins on a 1959 Dodge Custom Royal. Ford has seen the writing on the wall and already it is positioning itself to diversify its vehicle offerings to embrace electric cars. “In 10 years, 12 years, you are going to see a major portion of our portfolio move to electric vehicles,” said Ford’s CEO Alan T. Mulally in 2009.
The White House concurs with this course of action. Government investments in the automotive industry highlight that business as usual is on its way out. Administration investments in battery technology, green vehicles and electrification showcase the new direction that tomorrow’s successful car-makers must travel today. Alternative fuel vehicles, plug-in hybrids, E85 fueling stations and secondary education funding for hybrid technology mechanics serve as road markers.
Even so, manufacturers should beware: there is competition coming out of left field. Tesla Motors has already been in negotiations with a variety of California cities to situate a manufacturing plant for its electric vehicles. With a competitive price tag — Tesla Motors’ Model S retails for $49,900 — the company might just give Ford and others a run for the money.
Congressional Research Service: “The U.S. Automotive Industry – National and State Trends in Manufacturing Employment”
The White House: “Rebuilding the American Auto Industry”
Forbes: “Ford CEO – ‘Honesty’ Best Weapon Against Bankruptcy”
Auto Blog: “Ford CEO Mullaly expects ‘major portion’ of Fords will be electric within a decade”
White House: “The American Auto Industry – A Comeback Story”
Associated Content: “Tesla Motors to Bring Electric Car Manufacturing to Downey, CA?”