JUDY WOODRUFF: Next, how the U.S. auto industry picked up speed in its ongoing recovery.
Margaret Warner has the story.
MARGARET WARNER: 2011 turned out to be the strongest year for Detroit’s major automakers since the financial crisis hit in 2008. Nearly 13 million vehicles were sold here last year, 10 percent more than the 11.5 million in 2010 and far more than the 10.4 million sold in 2009, which had marked a quarter-century low.
What’s more, the three major U.S. automakers captured 47 percent of the total market in 2011, up from 45 percent in 2010. The two automakers bailed out in 2009 showed a healthy jump in sales, Chrysler up 26 percent and GM up 13 percent. Ford’s sales were up 11 percent.
For more on Detroit’s steps toward recovery, we turn to David Shepardson. He covers the auto business for Detroit News.
And welcome back, David.
So, how significant — in the big scheme of things, how significant a rebound is this for the U.S. automakers?
DAVID SHEPARDSON, The Detroit News: It is a very big step forward for the industry.
This is an industry that, you know, was on the brink of death, basically, in late 2008, before President Bush stepped in and bailed out the two companies. And the three companies have gone through a really big restructuring. And now they’re making gains across the boards, not just in the SUV/pickup truck sector, where they have been strong traditionally, but in small cars.
Both GM and Chrysler had some success with new small cars. And next week at the Detroit Auto Show, they are going to bring out a couple of new small cars. So I think you have to give them a lot of credit.
MARGARET WARNER: What do people you talk to in the industry say about the correlation between car-buying and the overall health of the economy?
DAVID SHEPARDSON: There’s a big one, because there is the second biggest purchase that most Americans buy after a house.
And people, in order to buy a car, have to be confident, one, about the overall economy, but the stability of their own job. I mean, you are not going to buy a car — and, today, it averages about $30,000 for a new vehicle bought last year — unless you do feel confident that you are going to be able to make those payments.
And that’s why — it is one of the reasons that the average age of the fleet today is about 10.7 years. It’s the oldest it has ever been. I mean, most people don’t drive their cars until they drop over and die in their driveways. They have some option. And if they don’t have to buy a new car when times are bad, they try to get another six months out of that old, that old clunker.
MARGARET WARNER: So you are saying, though, that last year, some of the pent-up demand got released. So, in December, for example, the sales were really high compared to the year before.
DAVID SHEPARDSON: That’s right.
The last seven months of the year, sales were going up. We’re now at a sales rate more like 13.5 million vehicles. We could be another — up to as high at 14 million vehicles sold next year. But because of the last three years where people haven’t bought as many cars, there may be 10 million fewer used cars in the market. And that’s driven up the price of used cars and made the difference between a used and new car smaller. Therefore, more people are considering a new car, rather than a used car.
MARGARET WARNER: Now, we also, of course, have to look at the competition. In other words, if the U.S. automakers increase their total market share to 47 percent, that means 53 percent are…
DAVID SHEPARDSON: Right.
MARGARET WARNER: … foreign automakers. Now, some of them, especially Japan, had its only problems last year.
DAVID SHEPARDSON: Right.
Let’s put that in context. In 1997, Detroit still had 70 percent market share. So it’s still — yes, it’s an increase, but it’s still down from where they were. And they were at 90 percent in 1965. So, Japan…
MARGARET WARNER: Never to be seen again.
DAVID SHEPARDSON: Not in the new hyper…
MARGARET WARNER: Given all the manufacturing that is going on by foreign automakers.
DAVID SHEPARDSON: Sure, all the new competitors, absolutely. Never happen again.
So Japan’s struggled with two issues. The tsunami, earthquakes in March pushed back a lot of production. And then there was flooding in Thailand, where they have a lot of plants as well. So both Toyota and Honda were down about 7 percent. They struggled to get enough inventory to the U.S. They say they have basically resolved those issues.
Nissan, however, the third largest Japanese automaker, resolved those issues faster and were able to actually be up last year.
MARGARET WARNER: Now, we referred to the bailout, the problems back in ’08 and ’09. How much of the increase in sales — and I know this is a hard correlation to make — but could be attributed in part to the restructuring and the changes that were made in these auto companies?
DAVID SHEPARDSON: There is certainly a big part of that, in the sense that these are companies that don’t have to produce as many vehicles. They don’t have to keep all those plants running, as they did pre-bailout.
These companies got smaller. They reduced their labor cost. They reduced their debt and, therefore, are able to be profitable at a smaller overall sales rate. In fact, the Obama administration sized the companies to be profitable at as little as 10 million to 11 million vehicles sold.
So that’s where you’re seeing the companies making billions of dollars of profits, as opposed to pre-2007, when the industry was at, you know, 16 million units. General Motors and Ford were still losing billions of dollars.
MARGARET WARNER: Did it also, though, make them change the kind of products they offered?
DAVID SHEPARDSON: There is a new focus on small cars. And a good example is GM and the Chevy Cruze. It actually was the bestselling compact. It outsold the Toyota Corolla, which is a big shift for these companies, that companies have relied on SUVs, essentially abandoned the car market to Toyota and Honda. And they are ready for that segment when gas prices go back up.
MARGARET WARNER: Now, finally, how hard is it going to be, though, for the three U.S. automakers to hold on to even that 47 percent market share in 2012? In other words, are there advantages they had in 2011 that they are not going to have in 2012 or new challenges?
DAVID SHEPARDSON: Oh, it’s going to be a huge dogfight.
The big issue is, Japan is back. There’s lots of new models. Hyundai-Kia, the Korean auto group, had a huge increase in auto sales. Volkswagen, BMW, Mercedes, the European companies have a big focus on the U.S. V.W. sales are up 26 percent. They opened a new plant in the U.S.
So it is going to be a real battle for every sale. And these companies know that, yes, things are looking good now, but they can’t take anything for granted. And every day, it is a battle for the hearts and minds.
MARGARET WARNER: And does the slowdown in Europe in terms of the recession there make the foreign automakers focus all the more on the healthier U.S. market of consumers?
DAVID SHEPARDSON: Absolutely.
This is the most profitable auto market. We’re second to China today. But this is where the companies are making a lot of money. Europe is very uncertain. So that’s why you are seeing a lot more focus, a lot of new models coming from Europe.
MARGARET WARNER: Well, David Shepardson of The Detroit News, thank you.
DAVID SHEPARDSON: Thanks, Margaret.