Editor’s Note: The following is an excerpt from a Wall Street Journal piece on the revitalization of the auto industry. To view the entire article click here.
Sergio Marchionne strode around the cavernous design studio at Chrysler Group LLC last month inspecting a soon-to-launch new compact car, the Dodge Dart, and offered a bold idea. “We are going to try to grab some share” in the small-car segment, he said, puffing on a Marlboro.
Not so long ago, a Chrysler chief saying that might have been laughed out of the room. For a generation, the company and its two Detroit rivals, Ford Motor Co. and General Motors Co., all but conceded leadership of the passenger car business to Japanese rivals. While making pickups and sport-utility vehicles that Americans liked, Detroit produced cars that were often uninspiring and sometimes years behind on technology and quality.
Meanwhile, Toyota Motor Corp. and Honda Motor Co. built huge followings for their family-size cars and compacts—Camry, Accord, Corolla and Civic—and used that base to sustain a 30-year expansion in market share, pushing Detroit to the brink of collapse.
But today, there are renewed signs that Motown is back. The latest evidence of its revival will be on full display this week at the North American International Auto Show in Detroit.
After gut-wrenching restructurings—GM and Chrysler in government-backed bankruptcies, and Ford on its own—the Detroit Three are all making money. Instead of having to spend a lot on labor costs and retiree benefits, they are pouring money into engineering and designing cars that can go head to head with the best in the industry.
Armed with good-looking, fuel-efficient and technology-packed cars, Detroit’s revived auto makers insist they have a historic opportunity to strike back at their Japanese rivals and regain the upper hand in the North American auto industry.
Investors, however, aren’t fully convinced this time is different. Ford shares, which fell below $2 each in the dark days of 2009, closed Friday at $11.71, below the about $18.50 price it traded a year ago. GM shares, now trading at about $22.92, remain below its November 2010 $33 initial public offering price.
Worries that another economic slowdown could cut into global sales and concern that last year’s profits mostly were generated by SUVs and pickups continue to spook investors. SUVs and pickups are more profitable but an overreliance helped sink their business four years ago as fuel prices skyrocketed.
But within the auto industry, a new optimism is taking hold. “The resurgence of Detroit is real,” said Mike Jackson, chief executive of AutoNation Inc., a large dealership chain closely aligned with both Detroit and foreign auto makers. “The foundation is exciting new cars and the viable, sustainable business models these companies have put in place. It’s absolutely revolutionary for this town.”