7 Things That Could Crush Motown's Comeback
Chrysler owned the airwaves after the Superbowl, Ford (F) didn't take the government bailout money, and General Motors (GM) just notched its most profitable year since 1999. Everything is coming up roses in the long-beleaguered Motor City -- at the moment. But how long will Detroit's luck hold?
1. Ford's debt burden
Ford negotiated the downturn far better than its rivals, but mainly because it mortgaged the company lock, stock, and barrel to the credit markets before the meltdown began. General Motors and Chrysler had their debt rinsed away by bankruptcy. Now Ford has to manage its debt by turning in steadily profitable quarters -- no easy task in the hyper-competitive car business.
2. General Motors' endless management shuffle
GM has had three CEOs in the past three years. Rick Wagoner was fired by President Obama. Ed Whitacre stepped in post-bankruptcy. And now Dan Akerson is cracking the whip and shaking up the executive suite at the Renaissance Center. But does knowing that it's perform or perish really support GM's long-term goals? And how long does Akerson really think he has?
3. Chrysler's weirdness
It's now a mashup of Fiat and the tattered remains of what was once a design leader. Chrysler vanished into a black hole after Cerberus Capital Management took over in 2007. Will it emerge from the darkness as legitimate rival to Ford and GM -- or will it become a schizophrenic carmaker that can't decide whether it wants to sell sexy Italian rides or feature-laden minivans?
4. OIL!
As the (formerly) Big Three learned the hard way in 2008, when gas prices go through the roof, people either quit driving or look to drive something small and fuel efficient. Since then, the domestics have invested in gas-sipping technology, but they really need those hefty truck and SUV profits to thrive. Unfortunately, turmoil in the Middle East is driving oil prices up again. Can you say "bad timing?"
5. CHINA!
Chinese cars have been something of running gag since they began showing up at auto shows a few years back. But we've seen this movie: the Japanese were initially jeered when they tackled the U.S. market in the 1960s and '70s. Now they employ vast swaths of the American South at non-union wages. China doesn't even have to think that far ahead -- it can build cars at home for peanuts and export them to the U.S., stealing market share from the established players.
6. Incentives
This is GM's problem. It's expected to offer chunkier incentives in 2011 than anyone else, mainly to force its market share back above 20 percent. This is a great short-term move, if you've just staged an IPO and need to bolster your share price. But -- as GM should have learned by now -- it costs you down the road.
7. Infrastructure
The U.S. is falling apart. The vaunted interstate highway system in particular is crumbling. The whole point of America is that you can get in your American car and drive long distances on American roads. If those roads decay further, it won't matter how well Detroit does, because Americans will all start buying 40-mile-per-charge EVs from companies like Nissan.
So there you have it. Detroit is definitely on a roll. But the domestic car business hasn't yet earned the right to return to its old swagger. And it better be careful if it starts talking the talk before it can truly walk the walk.
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Photo: Wikimedia Commons