Chrysler, GM Are Much Better Off, But It's Too Soon to Declare Victory

(MoneyWatch)  Things really are looking up for Chrysler and General Motors, but it's premature to declare victory.

That seems to be happening more often on the heels of better July sales numbers, and since President Obama's recent photo-op trip to Detroit. In late July, the president visited a Chrysler plant; saw the Chevrolet Volt plug-in hybrid car at GM; and generally took credit for the success of last year's U.S. government bailout for the two automakers.

Not that there's anything wrong with that. Richard Levick, president and CEO of Washington-based Levick Strategic Communications LLC and an expert in crisis communications agreed in a recent interview that the government bailout has been "a huge success." Levick said the bailout refutes "the myth that government can't do anything right."

Sales and market share are up for the domestic automakers in 2010 for the first time in years, which is quite a turnaround from the uncertainty of 2008 and 2009. Ford (F) has been the biggest success in that regard, but Chrysler and GM are positioned to pick up the pace, too, as more new cars and trucks come on line. July auto sales numbers underscored the sense that Chrysler, Ford and GM are turning themselves around.

However, Levick pointed out in a phone interview that the crisis in Detroit was decades in the making and far from over. After all, it's only been a year since Chrysler and GM emerged from bankruptcy.

"To think the crisis is behind you is whistling past the graveyard," he said. "The crisis didn't begin with the recession, it began 25 years ago."

Levick said the Detroit automakers have been bested by a succession of competitors who could create cars, "better, faster, cheaper." That started with the Japanese brands, then the Koreans, and now potentially Chinese car companies, he said.

All that makes it premature to declare that Chrysler, Ford and GM have demonstrated they can stick to their new diet, so to speak, of lower production, fewer brands and lower incentives. A recent headline in The New York Times said, "Detroit Goes From Gloom to Economic Bright Spot."
Well, maybe, but only in relative terms. President Obama said in a speech during his Detroit visit that in the year before GM and Chrysler emerged from bankruptcy, the auto industry shed 334,000 jobs. In the year since, auto industry employment has increased by 55,000 jobs.

Now, I'm no math whiz, but the net effect on jobs is still overwhelmingly negative. It's hard to imagine the industry and the region have really come to grips with that much change in such a short time. "Detroit Less Gloomy Than It Was," would have been closer to the mark.

Related:

• On a Roll: Ford, GM, Chrysler Gaining Market Share
• Obama Touts Industry Recovery in Detroit Speech
• Detroit Goes From Gloom to Economic Bright Spot

Photo: Chrysler