“The Detroit domestics are getting back in the game of getting their product financed,” said Tammy Darvish, vice president of Silver Spring-based Darcars, which has seven domestic dealerships. “There is consumer interest in the product. And everybody is building better cars.”
Ford, for one, has cut into the small-car market that has traditionally been dominated by Japanese manufacturers, said Jessica Caldwell of Edmunds.com. And it’s not just small cars. The company is doing well selling lighter crossover SUVs, such as the latest Ford Explorer, that are built like cars instead of trucks and get better mileage. According to an analysis by TrueCar, Ford has improved the fuel economy of its fleet by five miles per gallon in the past year, far more than any other manufacturer.
And the reputation of American cars appears to be improving. Domestic manufacturers no longer have to offer deep discounts to lure consumers.
“Those roles have reversed,” Krebs said. “It used to be that Toyota and Honda could charge a premium for their vehicles, but that’s not the case anymore. GM is making more money on the Cruze than the vehicle it replaced [the Chevy Cobalt], and that’s because it’s considered more premium. It’s getting more looks from consumers.”
Three years after GM and Chrysler filed for bankruptcy and received $25 billion in government loans, all of the U.S. automakers have restructured their labor contracts and pension costs, putting the Big Three on the road to recovery.
“Probably the most important part of federal assistance [that GM and Chrysler received] was the ability to maintain their product programs,” said Sean McAlinden, chief economist at the Center for Automotive Research. “Detroit had been criticized for years for not making smaller, fuel-efficient cars, and they’d finally gotten around to it by the time of the crisis. But these cars take about four or five years to develop.”
The Big Three have also managed to trim costs by seeking concessions from unions. The UAW has allowed GM, Chrysler and Ford to hire new workers at lower wages to compete with foreign manufacturers. In factories around Detroit, starting employees make $14 per hour, half of what more experienced union workers can make. And the automakers managed to close many of their unprofitable factories.
As result, McAlinden said, Ford, GM and Chrysler now have a far lower “break-even point” for each car they sell.
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