US auto sales down, but optimism rising

But US automakers did better than expected while Japanese brands did worse.

By , Staff writer of The Christian Science Monitor

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    A couple looks over a new car on the lot of Rose Chevrolet in Hamilton, Ohio. General Motors' sales fell by a third from a year ago but did better than last month, buoying hopes.
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This says something about the low expectations surrounding Detroit: Chrysler reports sales down by nearly half from a year ago, GM's fall almost a third, Ford's drop a quarter -- and yet people are cheering.

"Battered auto sales show improvement," ran the headline from CNN Money.com.

"There’s no doubt; it’s progress,” Gary Dilts of J.D. Power & Associates told Bloomberg.

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Those declines in May weren't as bad as analysts had expected and did represent a decided rise from awful numbers in April. So maybe one-month sales results are more important than the year-over-year results. Or maybe down is the new flat. Or maybe it's that Toyota and Honda did worse than Ford and GM.

In any case, part of the answer lies in the deep pessimism with which many Americans view the Big Three – and US manufacturing more generally. Outside of union and company circles, there's been little enthusiasm for the Obama administration's bailout of GM and the help it has afforded Chrysler.

But with all the woes surrounding American factories, some perspective is necessary. The US as of 2007 was still the world's biggest manufacturer. It exported $1.1 trillion worth of goods last year – four times its trade deficit with China. Its factories employed 12.3 million people as of this March and paid them, on average, $70,766 a year including benefits.

Problems? Mistakes? Manufacturers – and the Big Three in particular – have had more than their share of them. But American manufacturing is not some dinosaur, headed for a 21st century dustbin.

Yes, the picture's a little more cloudy for automakers, given the scale of the government's intervention. But Tuesday's annualized sales figures showed that if May's numbers hold for the rest of the year, the auto industry would sell 10 million units in 2009.

That's higher than most analysts expected. GM's restructuring plan indicates it can break even at that level.

While declaring bankruptcy was a drastic move for GM, it caused optimism to blossom among investors and analysts in recent days.

"Most people see the immediate economic impacts [of the government's $30 billion bailout] as positive, despite the pounding criticism from the punditry," concludes Tuesday's A Dash of Insight blog. "Perhaps it will all play out badly in a year or so. We will have time to adjust our positions as the story plays out. If Obama and Barney Frank start dictating the details of auto production, there will be time to react."

For the moment, though, there's a buzz of better feeling around the Big Three.

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