American Auto Industry on the Path to Better Times

Though car manufacturers were among the hardest hit in the American economic crisis, it is they who are furthest on the path to recovery. Drivers have returned to showrooms, and auto factories are hiring.

The future is certainly looking bright for the American auto industry. In 2011, Americans bought over 12.7 million new cars, an increase of over 10%, according to Ward’s Auto. Americans spent around $206 billion on new cars in 2011, which accounts for 1.3% of American GNP, according to the Department of Commerce. This is an increase of over $40 billion compared to 2010 and a major contributor to the American economy.

Most importantly, however, American auto companies are expecting the trend to continue in 2012, with a projected forecast of 13.8 million new cars being sold. The analysts at TrueCar.com are expecting 14 million sales.

The crisis in the auto industry began in 2007 and reached catastrophic proportions in 2009, with only 10.6 million new cars sold, the lowest amount since 1982 and 30% less than the previous ten year average. However, it can be said that all these troubles have been left in the rear-view mirror.

The crisis resulted in the shut down of several factories and the layoffs of thousands of workers, both in factories and in dealerships.

The automotive industry, however, is part of the foundation for a modern economy. When the economy began to slowly recover, customers once again poured into dealerships. This resurgence was helped along by new financing plans designed to attract customers.

“I never before was able to buy a car for $300 a month,” one Pennsylvania retiree told AP, explaining why he decided to trade in his 7 year old Chrysler 300 for a new model. The rates were low and came with a generous rebate from Chrysler.

Three years ago, Chrysler was teetering on the verge of bankruptcy. However, it managed to escape certain death with the help of the U.S. and Canadian governments, who gave nearly $14 billion in taxpayer money to help seal the deal with Fiat, Chrysler’s new partner.

The efforts paid off. Last year, Chrysler sold 1.36 million cars, 26% more than in 2010. Thanks to string sales, Chrysler remained the fourth largest player on the market, surpassing Honda for the first time in years. In 2011, Chrysler paid off the rest of its debt to the American and Canadian governments and reported an overall profit of $600 million, according to Sergio Marchionne, the head of Fiat and Chrysler.

The Torino-based company also announced that it currently holds a 58.5% stake in Chrysler. It got an additional 5% after developing a new greener car model. This was one of the stipulations put forth by Barack Obama on the acquisition deal with Fiat.

The rest of the American auto companies also have reasons to celebrate. For the first time since 2007, Ford sold over 2 million cars in a year. General Motors, which in 2009 received $50 billion in taxpayer money, increased their sales by 13% and remain the market leaders.

In 2011, 46% of all cars sold in the United States were made in America. European companies increased their share of the market to nearly 10%.

In the past year, Volkswagen opened up their first U.S. factory, and American consumers once again began to buy German luxury cars. BMW snatched the top spot for luxury car sales in the U.S., beating out arch-rival Mercedes and the Japanese Lexus.

Japanese auto makers had few successes on the American market, save for Nissan, which sold 1 million cars last year for the first time. Honda and Toyota fared worse, having suffered losses at the hand of the earthquake/tsunami that hit the islands in March. In addition, crippling floods in Thailand disabled Toyota and Honda factories there just as their Japanese plants were coming back on line.

Toyota and Honda will be looking to make up the losses of 2011, which will help keep up the competition in the American market.

Ford is very optimistic about 2012 as well. According to their calculations, 20% of the cars on the roads are between 11 and 15 years old, which means that there are about 50 million cars that will soon be replaced. Jeff Schuster of LMC Automotive, a consulting firm, envisions that in six years, Americans will once again be buying cars at 17 million a year. This will be on account of the 70 million new drivers of the millennium generation.

Car manufacturers are already gearing up to meet future demand.

On Friday, Chrysler announced that they will hire 1,250 new workers in their Detroit plant. Ford announced last year their plans to create 7,000 new jobs, and GM intended to hire 5,000 additional workers.

By 2015, the auto industry is expected to create 167,000 new jobs, according to the Center for Automotive Research in Michigan. This will help improve the American economy and also fuel the sale of more cars.