There has been much ballyhoo written in the press lately about the success both Ford and GM have been experiencing as a result of their recent turnaround efforts. Ford posted an approximate $100 million profit last quarter while GM has greatly managed to boost sales of non-truck models with vehicles like the Chevy Malibu and Cadillac CTS.
While these strides are definitely something to be lauded, these victories are actually kind of small in context of how bad things used to be. It is sort of the equivalent of your “kind of slow” little brother finally learning to tie his shoes at 11 years old and having your parents applaud him as if he was Mozart reincarnated.
For one thing, GM has lost a staggering $50 billion (with a big fat B) in the last three years alone. While many of that was attributed to various one-time costs, that has to have eaten into a substantial portion of their corporate liquid assets. Assets that are necessary to feed the voracious appetite the buying public has for new models, drivetrains and designs.
On the other side of the coin, GM has managed to cut back its over-salaried union workforce so that by 2011 it may be spending less per car on employees than even arch rival Toyota. In addition to that, GM has also managed to be very successful with its model lineups in Europe, as well as developing markets like India, China and Russia. If GM can continue to fuel growth in other markets, it should be fine financially as its market share in the United States finally begins to stabilize.
Way over in Dearborn, Ford Motor Company has managed in just the last six weeks to have its share price soar by over 60%. This was due in no small part to a huge investment by zillionaire/robber-baron Kirk Kerkorian. He no doubt saw that the stock price had fallen to its lowest possible level and that with Ford’s upcoming product offensive he would no doubt recoup his investment many times over.
The future at Ford, though, is far from secure. Every one of its upcoming product launches, from the Flex to the new Fiesta has to be a big hit to keep the cash flow coming in and investors seeing true progress. The situation at Ford was so dire a few years back, they even had to put a lien on their own logo to get extra cash to keep the lights on.
While there is plenty of room for concern at both companies, there is no doubt both are in far better situations than they were just a couple of years ago. They are also in far better situations that the basket case that is Chrysler.
One of the most important challenges both automakers have to face is to get Americans excited about owning an American car again. It shouldn’t be considered a patriotic duty like was implied in the whole “Buy American” campaign. We should want to buy a Ford or a GM product. We should desire them.
Only then will the tide truly turn for both of these integral and storied institutions of automotive Americana.