Detroit recently filed for bankruptcy. That’s “Detroit,” the Michigan city that’s hopelessly in debt, not “Detroit,” the U.S. auto industry that’s actually doing pretty well — especially compared to four years ago.
Of course, “Detroit” has increasingly been a misnomer for the Big Three American automakers (General Motors, Ford and Chrysler). Over the last few decades, they’ve significantly shifted their manufacturing operations by closing many factories in Michigan and other “Rust Belt” states while building them in the American South, where skilled, efficient and non-union workforces offer lower costs.
For that same reason, foreign competitors also are making a lot of cars in our region — including BMWs in Greer.
And Ford made a lot of money in the second quarter, reporting last week that its profits rose 18.5 percent during that period. The winning statistic prompted the company to project that this year’s annual operating profit will eclipse last year’s $8 billion.
While increased sales in China and decreased losses in Europe were major factors in the second-quarter surge, Ford also reported a 16 percent jump in its North American operating profit.
That’s particularly impressive considering that Ford, unlike GM and Chrysler, didn’t take federal bailout money in 2008 and 2009.
GM reported a 23 percent second-quarter profit drop last week. But that was better than most analysts expected.
Still, the optimistic notion that taxpayers’ investment in GM has paid off was dispelled anew by this Associated Press dispatch last week: “General Motors stock would have to sell for $95.51 per share for taxpayers to break even on bailing out the company, according to a government watchdog’s report released Wednesday. That price is about three times what GM shares are selling for now, even after a 25 percent increase in the price so far this year.”
At least GM’s on much firmer footing than it was when it filed for bankruptcy in 2009. And Chrysler reported a 16 percent rise in second-quarter profits Tuesday.
Thus, the Big Three are faring much better than what once was the much bigger city of Detroit, which has suffered not just from the automakers’ southern shift but from recklessly mismanaged municipal government.
So don’t assume that the fiscal downfall of Detroit signals the financial collapse of the U.S. auto industry.
And don’t underrate America’s ability to compete in the global automotive marketplace.
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