GM, Ford stalling despite good sales

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Like many other Michigan residents, I know or am related to a lot of people who are a part of the struggling automotive industry. So, like many other Michigan residents, I was excited when I heard that the two leading American automakers — Ford Motor Co. and General Motors Corp. — had increased their sales in the month of January, compared to the same month a year earlier.

Who wouldn’t be happy to hear that our state’s most important industry is showing signs of improvement after being down in the dumps for years? It’s a clear-cut sign that the state of Michigan and the auto industry are close to digging themselves out of the very deep hole in which they have found themselves, right?

That would be nice, but as encouraging as this news might seem to some, I think this is far from being the light at the end of the tunnel.

Yes, overall sales throughout the entire auto industry did rise by 6 percent compared to last January. And yes, GM and Ford both saw individual increases of 14 percent and 24 percent, respectively. But to just look at those numbers and decide that there are greener pastures ahead in the near future might be a little naive.

Obviously, any type of improvement is more than welcomed at this time, but let’s not forget to what last month’s sales numbers are being compared. January 2009 was a month when car sales were the worst they had been in 26 years. Sure, the numbers were better this year, but it was nearly impossible for them to be much worse.

Think of it as being the second-to-last kid on the playground picked for a kickball game — it’s better than being picked last, but still nothing to write home about.

Regardless of what they are being compared to, the numbers hide something that we might not normally see. Not only do the sales figures include those cars sold off the lot to regular buyers, but also the cars that are bought by the government and other businesses. Those sales, referred to as fleet sales, were huge for Ford and GM last month, when they were at least doubled for both companies. However, retail sales actually went down 5 percent for Ford and 10 percent for GM. The overwhelming increase in fleet sales masks the fact that consumers still are not ready to start spending money on new cars.

In fact, it does not appear that U.S. citizens are going to be overly inclined to spend money on a new car any time soon. According to the U.S. Department of Labor, unemployment rose in 306 of our country’s 372 metro areas in December. Nineteen cities and suburban areas have an unemployment rate of more than 15 percent, and national unemployment still is at a very high 10 percent.

As long as so many Americans are without jobs, they will not buy cars. Fleet sales might temporarily help automakers, but retail consumers eventually have to start buying cars for the industry to fully recover.

The problems that Toyota Motor Sales faces are another reason to hold off declaring that the auto industry is back. After the Japanese automaker had to recall about 2.3 million cars after an issue with sticky gas pedals was discovered, one would think that other companies would see a significant boost. Unfortunately, that was not the case.

Although Toyota’s sales have gone down 16 percent, companies like GM and Ford did not exactly reap the benefits of its struggles. Instead of buying GM or Ford in favor of Toyota, consumers didn’t buy anything. Even offering incentives for Toyota owners to turn in their cars for deals on American-made cars did not help.

I know that this column has been filled with skepticism and a generally pessimistic attitude. Despite that, I do think any type of improvement in sales that car companies can report is good, and there are other indications that the industry is moving forward.

Although the U.S. Department of Labor reported unemployment went up in most cities, it also reported that it went down in areas around Detroit because of the hiring or rehiring of more auto plant workers. Whether that trend continues is yet to be seen, but it might be a sign of better things to come.

Maybe I’m wrong about the slowly moving progress in the business of making cars. As a matter of fact, I hope I’m wrong, and the auto industry is booming again before we know it. But I’ve always preferred to be pleasantly surprised rather than painfully disappointed.

So for now, I’m going to stick with my gut and assume that it will be some time before news like this means that auto industry is back on top.

Jeremy Warnemuende is a State News intern and journalism sophomore. Reach him at warnem3@msu.edu.

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