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January 09, 2012

Detroit Auto Show Hints at US Auto Industry Recovery

by Kane Farabaugh

The 2012 North American International Auto Show has opened in Detroit, Michigan.  The annual showcase is the auto industry's premier event to showcase new cars and technology. This year's show comes amid stronger sales for Ford, Chrysler and General Motors. But despite new growth, analysts say business is not entirely back to normal as high unemployment nationwide continues to weigh on potential customers.

Ford CEO Alan Mulally's message at a launch event for the newly redesigned Ford Fusion sedan was direct: His company is profitable and growing.

"We are committed to 12,000 new jobs in our U.S. manufacturing facilities and we are on plan to have them filled by year end," said Mulally.  "We are also adding 3,000 new jobs in Asia-Pacific."

Ford's expansion comes after several years of profitability and marks a dramatic change in an industry that shed tens of thousands of jobs in the last decade. But, under new contracts ratified in 2011 with the United Auto Workers union (UAW), the "Big Three" Detroit manufacturers - Ford, General Motors, and Chrysler - are all bringing more people back to U.S. assembly lines.

"The fact that we were able to bargain to have all these jobs and investment here in this country I think is positive overall for all the manufacturing," said Bob King, President of the UAW.

King says some shuttered facilities in the U.S. will re-open under the new agreements and more cars will leave the U.S. for foreign buyers.

"For many years, there was not much export of vehicles to other parts of the world. All three of the companies will be doing major exporting of vehicles from the U.S.," added King.

Although it seems like good news for the American auto industry, in the wake of several government-sponsored bankruptcies, University of Michigan Economics Professor Bruce Pietrykowski says the turnaround is incomplete and that auto economics are in danger of faltering once again.

"Most Americans don't have the kind of disposable income that they had in 2000," said Pietrykowski.  "Most Americans are either unemployed or have seen their wages actually fall from when the auto industry was reaching its peak sales year."

Pietrykowski says what is fueling recent sales in the United States is pent-up demand by customers who delayed buying a new vehicle during the recession. He adds another barrier to further progress for the U.S. auto industry is directly linked to Wall Street and the housing market decline.

"Access to credit is severely constrained now, so Americans are less likely able to afford credit to buy the automobiles and are much less willing to extend themselves financially in order to purchase automobiles," added Pietrykowski.

Which is why at this year's Detroit Auto Show, automobile manufacturers are marketing new, smaller, more affordable and more fuel-efficient vehicles. They are trying to reach out to potential customers still waiting to buy a new vehicle, as they continue to weather an uncertain economic climate.