Plenty of United States senators opposed bailing General Motors and Chrysler out, saying that would be a futile waste of taxpayer money. But Presidents Bush and Obama disagreed.
They funneled taxpayer billions to both firms, which then went through a form of cushioned bankruptcy last year, and emerged leaner, meaner, and still making cars. Chrysler was more or less required by the government to merge with Fiat.
General Motors buried Pontiac and dumped Hummer and Saab, and all sorts of other negative assets. Now, to virtually everyone’s surprise, GM is hanging in and making money.
And so is Ford, the only automaker not to go through bankruptcy. But how are these companies really doing?
Is this a brief and government-manufactured rally, the industry’s last hurrah before the Chinese cars arrive?
Or is our domestic auto industry really on the mend? To get some answers, I spent some time recently with two automotive experts: David E. Davis, a former race car driver, founder of Automobile Magazine and perhaps the best-known automotive journalist, and Dr. Sean McAlinden, chief economist at the Ann Arbor-based CAR, the Center for Automotive Research.
They were both fairly bullish on the future. McAlinden told me he never thought General Motors would return to profitability so quickly. He believes that while the legendary car maker still has problems, they are aware of them. They think they have now built some equity and credibility with the buying public.
Davis offered a caveat. He thinks the Cadillac division is “moving off in the wrong direction,” by designing too-edgy vehicles, that he says “look like something out of Jules Verne.”
Sean McAlinden didn’t fully agree. But both men were in perfect agreement that there are times when one man can make a difference, and right now, that man is Al Mulally at Ford.
Both agreed the former Boeing executive was the man who had turned Ford around - and that both the company and the Ford family itself need and want Mulally, who turned 65 this summer, to stay around at least for a couple more years.
Ford did manage to escape the stigma of bankruptcy, but has a problem Chrysler and GM do not: $24 billion dollars in debt.
The good news, McAlinden says, is that this should prove manageable as long as the market stays relatively good.
The better news is that thanks to the streamlining all these companies have gone through, they have to sell far fewer cars than they used to in order to break even.
As for Chrysler, both men assured me that Jeep was a world brand that is going to be healthy for the foreseeable future.
And David E. Davis said that Fiat, now essentially Chrysler’s parent company, has a lot of exciting new models in the pipeline.
Finally, I asked about China. While Chinese cars will be coming to the North American market, they still may be five years away.
There should be limits to our optimism about our domestic auto industry, economist McAlinden told me. “As an economic driver it is never going to be the force it was in the past.” But on the other hand, it is still here. Which is far better than it could have been.