Lessons from Detroit Three's surprise comeback
Car and truck sales surged in November for General Motors, Ford, and Chrysler. The reasons for their rebound from the gloom of 2009 provides lessons for other American industries.
Here’s a holiday surprise that may help put economic gloom in reverse: America’s Rust Belt suddenly has a new shine.Skip to next paragraph
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Both General Motors and Chrysler have rebounded since their 2009 bankruptcy and a government bailout. Ford, which weathered the Great Recession on its own, is doing so well that it plans to pay its first dividend since 2006.
Together, the Detroit Three’s share of the American market has been rising for two years. And over the next four years, the auto industry in general is expected to add 150,000 new jobs in the United States.
An upswing in car buying is one reason. With the average age of a car in America at a record 10.6 years, pent-up consumer demand exploded during the Thanksgiving shopping weekend. Interest rates are low. SUVs and pickup trucks, a Detroit specialty, are hot again.
But it’s also worth spreading the news that American industry can compete with foreign brands. New, forceful leaders of the Detroit Three have used this crisis to bring about radical reforms in stodgy, overconfident companies once considered to be American dinosaurs.
The United Auto Workers helped by making big concessions that have brought down labor costs closer to those in Asia and Europe. Ford and GM will soon be handing out bonuses to union workers based on company profits – far different from simply giving guaranteed pay hikes. Contract talks are now less about “who wins, who loses” and more about prospering together.
Not much credit for the turnaround is given to the 2009 government tax benefit to car buyers, or the $3 billion “cash for clunkers” program. But taxpayers can be proud of the federal government’s light but firm touch in using its partial ownership of GM to push reforms.
The Detroit Three were forced by their dire straits to improve quality, and they did. Now they account for nine of the top 20 bestselling cars. Their reputation for poorly made vehicles is disappearing – but not without some hiccups.
To be sure, car sales are still far below the 2005 peak of 17 million. But the Big Three are making profits far beyond expectations within a smaller market and doing very well in other countries.
The mix of solutions for what was once seen as a hopeless situation is something to celebrate – especially as the economic recovery chugs along in low gear.
Corporate resurrections are possible if leaders have vision and hold both managers and workers accountable. Progress isn’t always a linear path and often requires many stakeholders to change and bend.
Welcome back, Detroit.