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To say that 2009 was a tough year for the United States automobile industry is quite the understatement.  Many questions arise about the future of the U.S. auto industry.  Will the U.S. auto makers make a comeback in 2010?  What kind of changes will the companies make?  How will they be able to compete globally with their international competitors?

Looking at GM and Ford, one would have to say Ford has a healthier and more positive outlook.  GM stood in line for a government bailout last year, and the U.S. government has an approximate 60% stake in GM.  On the contrary, Ford has not had to ask for any government bail out money.  Ford has been able to ride the performance of some solid vehicles (e.g. Ford Fusion) to keep them going steady.  A concern, though, is since the government does have such a big stake in GM and is assisting them financially, will this hinder equal and fair competition in the market, and, as a result, put Ford at a disadvantage.  In other words, if GM continues to struggle, will the government continue to pump money into their company and enable them to have promotions and make investments, they otherwise would not have been able to.  Will this result in Ford feeling like they should receive a bailout too in order to equal the playing fields? 

In the past few years, there has been much analysis and research conducted on U.S. labor unions and how they have impacted U.S. manufacturing industries.  Henry Payne wrote an article in 2005 discussing Delphi’s bankruptcy, and the company’s restructuring specialist Steve Miller said, “We cannot continue to pay $65 an hour for someone to cut grass and remain competitive.” (source: National Review article) 

The article goes on to discuss how unions have been able to classify the grass cutting job the same as an assembly line worker, resulting in the employee receiving lucrative benefits.  The U.S. auto industry has had to deal with these high labor and overhead costs negotiated by the labor unions and has created obstacles and hardships when competing in the global marketplace.  These U.S. companies are not able to invest this money into technological advancements or new innovative concepts like a foreign competitor who does not have to pay anywhere near the same wage costs. Outsourcing becomes a tempting avenue in order to help drive down the rising average costs of their units sold. 

Additionally, with oil prices continuing to rise, this has required U.S. auto manufacturers to look at their car lineups and determine what types of vehicles they need to develop and enhance for the current market demands.  Consumers are looking for more fuel-efficient cars.  U.S. auto companies, for a long time, did not accept the fact that the rising gas prices would impact their demand for large SUV’s and trucks.   Walter McManus, University of Michigan economist and former sales forecaster for GM, stated “he and other GM analysts tweaked projection model when they didn’t believe the results”, while devaluing the impact of fuel economy in their forecasts (source: LA Times article). Listening to the consumers and creating automobiles with specifications they want seems like a no-brainer, but has unfortunately been overlooked by many U.S. auto manufacturers. 

It will be interesting to see how Ford and GM perform in 2010.  So far in January, all major U.S. auto makers performed better than expected sales.  And according to the Wall Street Journal, Ford obtained second place, falling only to Toyota, in a consumer poll measuring “overall auto brand perception”.  GM has said that it will focus on four core brands in 2010 and is looking to release an electric vehicle.  Ford is continuing to increase its market share in the last few months, while GM’s continues to decline.  In addition, Ford analysts are making projections to break-even in the 2011 timeframe, and GM is saying 2011 as well.   Analysts are predicting a slow recovery in 2010, and the companies are making fixed costs reductions as much as possible to enhance their profitability. 

Hopefully, the U.S. auto industry will be able to make a turnaround and regain their strength.  They have been a foundation to the American culture and lifestyle.  The U.S. auto makers need to continue making quality products and staying ahead of the game on innovation and technology.  They used to be the leaders of the pack and will hopefully soon be there once again.  It would be a shame to see them go away.   

Web sources: http://articles.latimes.com/2009/apr/09/nation/na-green-cars9?pg=2

http://www.nationalreview.com/comment/payne200511290819.asp