As the year comes to a close, the U.S. auto industry continues to be a source of good cheer, even as the overall economy slouches toward recovery.
The Big Three U.S. automakers -- General Motors, Ford and Chrysler -- had been in a death spiral, with sales falling in 2008 and plunging to 10.4 million in 2009, the lowest levels in 30 years. Auto sales in the early 2000s had been 16 million to 17 million a year.
A controversial and courageous U.S. government bailout -- not so controversial now -- and major restructuring turned the U.S. auto industry around. The industry expects to close out this year with sales of 14.3 million and respectable profits.
Sales still haven't returned to pre-recession levels, but as President Barack Obama made clear in forcing General Motors and Chrysler to restructure as a condition of government aid, his vision was of smaller, retooled, profitable auto companies with lower sales volumes.
And that is exactly what has happened. The restructuring lowered the break-even level for automakers to annual sales of 11 million to 12 million. In 2013, analysts expect car sales to reach 15 million, leaving lots of room for profitability.
General Motors and Chrysler have paid back their loans to the U.S. government ahead of schedule.
Instead of bleeding 120,000 jobs a month, they have added shifts.
Even Ford, which never got cash assistance from the government, benefited from aid to its competitors. A collapse would have hurt the entire auto supply chain.
The 2009 restructuring plan gave the U.S. government a 60 percent share in General Motors. The United Auto Workers union gave up a health and savings plan worth $20 billion in exchange for a 17.5 percent share in the company and more than $8 billion in debt and preferred stock. New union workers at the Big Three agreed to paychecks about half the size workers hired before 2007 got, without traditional pensions and retiree health care.
The U.S. Treasury sold much of its stake in November 2010 and announced last week that it would sell another 200 million shares back to the company for $5.5 billion. The Treasury will sell its last 300 million shares by early 2014. That would be the end of the auto bailout. No more "Government Motors."
In the end, the bailout saved an estimated 1 million jobs, not just at General Motors and Chrysler but throughout the auto supply chain. Depending on stock price, the U.S. government expects to lose $12 billion to $20 billion -- $12,000 to $20,000 a job. With the bailout of insurance giant AIG making a profit of $22 billion for the U.S. government, that would offset the GM loss.
Most analysts believe the restructuring -- removing excess capacity and reducing costs -- has indeed allowed the auto companies to lower their break-even point and turn a profit on lower sales.
The auto companies now are poised to benefit from pent-up demand (with the average U.S. car today older than 10 years), easy credit (very low interest rates), greater consumer confidence and demand for better fuel efficiency.
The online management magazine www.strategy-business. com predicts that if the auto industry can "stay disciplined and preserve the efficiencies it fought so hard to implement, it will remain cost competitive with the most efficient car markets in the world."
Yes, the U.S. auto industry still has to worry about the still slow economy in Europe and slowing economy in China. But the U.S auto industry is back, a bright spot in 2012. Even a grinch should smile about that.