Has US auto industry recovered from crisis?
- Source: Xinhua
- [08:28 December 01 2010]
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The US auto industry could have enjoyed a happy Thanksgiving in the wake of the glorious re-list of General Motors (GM) and rosy performances of its Detroit peers, namely Ford and Chrysler, which seemed to indicate an industry-wide recovery. But is that real?
On Nov. 18, the Wall Street hailed 2010's largest initial public offering (IPO) of GM, and even President Barack Obama cited the IPO as a major milestone in the turnaround of "not just an iconic company but the entire American auto industry."
However, the company paid a lot for that. It has suffered painful slash in its business. It got rid of several famous vehicle brands, such as Hummer and Saab, and closed plenty of factories around the world.
Nexteer Automotive is one of the business units sold out by GM in the tough period. In Saginaw on Sunday, GM concluded the sale of the steering business subsidiary at a price of $420 million.
Nexteer has over 8,300 employees at 42 facilities throughout the Americas, Europe and Asia. Affected by the financial crisis, Nexteer's revenue dropped to 1.6 billion dollars in 2009 from 2008's 2.1 billion dollars. It was sold to China's Pacific Century Motor Systems Co., Ltd. this year.
As for Chrysler, although it has been reshuffled and made significant improvement in sales, it still suffered 84 million dollars of loss in the third quarter this year, bringing the total loss for the first three quarters to 453 million dollars.
"The US auto industry has certainly come back a long way, but it is still under recovery now," Robert Stutz, managing director of Chicago's investment bank Kinsella Group, told Xinhua.
Steven Rattner, a former key member of the White House task force that guided the bankruptcy reorganizations of GM and Chrysler, has said a successful recovery is far from assured. He predicted that about 15 million cars need to be sold a year in the United States in order to "keep the fleet from aging."
Stutz forecast that the US auto market is likely to see an annual sale of 12-13 million cars in the next two years.
Market analysts say that rather than buying a new car, people are more willing to fix their current cars and continue to use them amid weak confidence in economy. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment decreased to 67.9 in October, the lowest since July.
Stutz said the traditional vehicle markets are withering, so automakers will have to make more efforts in the emerging markets, such as China, India and Brazil. The rapid growth of the emerging markets has played a crucial role in helping GM recover from the bankruptcy, he said.
Statistics indicate that GM has sold more than 2 million cars in China so far this year. Besides, Ford has also sold 419,000 vehicles in China this year, an increase of 40 percent from a year earlier.
