Bright prospects for carmakers

Bright prospects for carmakers

January 8th, 2012 in Opinion Times

Auto sales in the United states continue to improve, a sign that the economy continues to rebound from the doldrums. Need proof? All three U.S. automakers are on track to report a profitable 2011. If that proves to be the case, it will be the first time since 2004 that has occurred. Positive growth in the auto industry is not limited to U.S. manufacturers. Some foreign automakers -- including Volkswagen -- also report strong sales in 2011 and bright prospects for 2012.

Steady U.S. demand for new vehicles has produced seven consecutive months of sales growth. December sales, for example, rose 8.7 percent. Total sales -- about 12.8 million vehicles -- in 2011 increased by 10 percent over 2010. GM,, Ford and Chrysler were the biggest beneficiaries of the surge. Each reported increases in market share in the same year for the first time in about 20 years. Those gains translate into significant profits for the companies.

General Motors is expected to earn about $6.1 billion, an increase of 26 percent. Ford's profit is expected to be about $7 billion, up from $6.6 billion. Chrysler, which posted a 2010 loss, is expected to return to profitably in 2011. Given the importance of the auto industry and its extended supply and sales networks to the United States, a good year for carmakers is a positive indicator for the overall U.S. economy.

Significant improvement is not limited to the U.S. trio. Some foreign manufacturers had robust sales figures, too. Volkswagen reported that its monthly sales rose a whopping 31.4 percent, a figure that is certain to bring smiles and pride to the company's growing work force in Chattanooga. Hyundai and Nissan also reported gains, but both Toyota and Honda, their manufacturing and parts supply system battered by the tsunami in Japan and flooding in Thailand, reported either flat or falling sales. Both, however, say they are moving quickly to resolve those issues and expect brisk sales in 2012.

The manufacturer's' rosy outlook is seconded by those familiar with the industry. and, for example, predict U.S. sales of all vehicles to rise again in 2012 to between 13.6 and 14 million units, with Volkswagen expected to do especially well among foreign manufacturers.

Increases do more than pump money into the economy. They prompt job growth. To meet expected demand, automakers will increase capacity. Forecasters say that could result in a gain of about 170,000 jobs by 2014. That won't end U.S. unemployment woes, but it should help ameliorate them.

The auto industry still remains vulnerable to outside influences, but seems well positioned to grow. Streamlined U.S. manufacturers, especially, have become attentive to consumer demands for quality and are starting, finally, to provide products that also are a bit more friendly to the environment. Those steps and an improving economy translate into a more stable auto industry and to a stronger U.S. economy.