As the auto industry gathers for the annual Detroit Auto Show, the outlook is for strong sales gains ahead, both domestically and globally. In 2010, U.S. sales rose 11%, and they're expected to be up at least that much in 2011...
A few years ago, Detroit automakers spent an extra several thousand dollars per vehicle on production compared to import brands. But that disadvantage has largely vanished, mostly due to the closing of 19 auto plants in recent years, and new labor contracts that trimmed costs.
"Certainly in terms of getting their footprint of production to match the market, they're probably in the best position we've seen in 20 or 30 years," said William Strauss, senior economist for the Federal Reserve Bank of Chicago. "That bodes well in terms of profitability."
In the sales boom years, the Big Three took losses on many of their car models due to weak demand. But experts say that new cost structures and more attractive offerings in car models position them to weather changes in the market.
Rebecca Lindland, director of strategic review for IHS Automotive, said even conservative estimates of sales growth to 15 million vehicles a year in 2015, should be enough to drive significantly higher profits.
"It's been decades since they made money on something other than trucks and SUV's," she said. "But they're structured well now."
The same kind of radical alteration of cost structure is exactly what we now need to do to the federal government.