More Bumps In The Road For GM, Chrysler And Ford

Guest

Micheline Maynard, senior editor, Changing Gears

America's Big Three automakers hope the long days of layoffs and losses are behind them. Sales are up dramatically over 2009 levels, but analysts point to a monthly drop in June sales to warn that in spite of their efforts, the American auto industry isn't out of the woods yet.

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NEAL CONAN, host:

And now, we're going to switch horses as it were. We're going to look at the auto industry, a year and some after the bailouts. Chrysler and GM emerged from government-funded bankruptcy as leaner, and they hope, meaner organizations. Ford, which did not take the bailout, posted its first profit since the downturn. Sales are up considerably over the last year's level, though that's not saying a lot. And what we used to call the Big Three pinned a lot of hope on new kinds of vehicles, and just talking about the same thing in the housing market, a rosier economy.

If you make cars or car parts, if you're in sales, call and tell us how your part of the industry is going. 800-989-8255. Email us: talk@npr.org. You can also join the conversation at our website. That's at npr.org. Click on TALK OF THE NATION.

Joining us now, from member station WUOM in Michigan, is Micheline Maynard. And she is the senior editor of Changing Gears, a new public radio project in Michigan that looks at the reinvention of the Rust Belt. She is formerly a senior business correspondent for The New York Times. And Micki, nice to have you back on the program.

Ms. MICHELINE MAYNARD (Senior Editor, Changing Gears): Thanks so much, Neal.

CONAN: And you couldn't help but overhear the news that GM sold more cars in China than it did in North America.

Ms. MAYNARD: You know, that's really a turning point. And getting back to your last guest, the thing that the auto industry looks at - really three things that they look at - are the strength of the housing market, the strength of jobs and consumer confidence when they go to predict how the industry is going to do. So until those three things together come back, it's probably going to be a little bit of a tough road for these auto companies.

CONAN: The turning point we mentioned, the significance of that statistic, more cars in China than in North America.

Ms. MAYNARD: It just goes to show you that the Chinese market, which really kind of dragged along for most of the last 20 years, has pretty much come into its own. I wouldn't say that it's mature by any stretch of the imagination because it's still growing. And that is the place that all the world's carmakers are competing for the Chinese consumer. It doesn't look like the Chinese market has hit anywhere near its peak yet.

CONAN: We're talking with Micki Maynard, senior editor at Changing Gears. You're listening TALK OF THE NATION from NPR News.

As you look at the domestic market, though, remind us of some of the damages that we've seen. How much smaller is - are the American car manufacturers than they were, what, two, three, four, five years ago?

Ms. MAYNARD: Okay. Well, if you think about the middle part of the last decade, the middle of the aughts, I guess you could say, the automakers were selling about 16 or 17 million cars a year. Last year, they sold about 10.5 million. And this year, they'll do about a million better than that. They're running at about 11.5 million. You know, the rule of thumb used to be that about a quarter of a million cars equaled an assembly line. So if you think about six million cars sales gone, that's an awful lot of people working on an awful lot of assembly lines.

CONAN: The industry - I'm just doing the math in my head, about two-thirds the size of what it used to be.

Ms. MAYNARD: That's right. Sales are down roughly 40 percent from the peak.

CONAN: And all of those assembly lines closing down, are the vast majority of them in the Rust Belt that you're covering now?

Ms. MAYNARD: Well, the Manufacturing Belt has taken really a difficult hit. What the Detroit companies in - specifically did, was kind of pull in their operations. You know, they used to be scattered everywhere from California to Virginia, down to Texas, up to Minneapolis. And a lot of those outlying plants of the Detroit companies have closed. And they have really pulled their operations in to focus on the Midwest, on Indiana, Ohio, Michigan, in particular.

CONAN: It's interesting. We have this email from Lisa(ph). Northeast Indiana, she wrote, profited from the GM loan, from the - both the Bush and Obama administrations. We have a large GM plant here. It has added many new employees to its already large base of employees. My guess, its affected close to 10,000 jobs, GM suppliers, retail, et cetera. This has also added to the local and state tax base. And that's nice news to hear. But those additions come from subtractions elsewhere.

Ms. MAYNARD: Yeah. The problem is that I think there's something like 90 General Motors plants that have to be shutdown across the country. And there's actual federal money to do that. Up in Flint, Michigan, the thinking is that shutting down the operations up there, cleaning them up essentially, might create 2,000 jobs, which is more jobs that General Motors has created in Flint in a long time.

CONAN: In general, Ford turning a profit. Is Ford the shining star of the Big Three?

Ms. MAYNARD: Yeah. I think it is right at the moment. One of the things about Ford - as you said, they didn't take the bailout money. And what they did a few years ago is they mortgaged everything they had, everything from the blue oval logo to their factories, to their parking lots, and they came up with a little bit over $30 billion. And they've been working off that money ever since. Now, they still owe a lot of money. They owe about $27 billion, and that's a lot of money to owe. But they're kind of working down that loan, paying it back. And once they can get freed up from that, the interest that they pay on the loan is like the interest you pay on your house. That will give them more money to invest in new products.

CONAN: And new products, well, the hybrids, of course, they're already rolling out. But all kinds of new products, that's really seen as the hope and promise?

Ms. MAYNARD: It's kind of an interesting time because we're seeing some really old brands like Pontiac, Mercury. Ford has just pulled the plug on Mercury.

CONAN: Mm-hmm.

Ms. MAYNARD: We saw Saturn, which is only 20 years old, but that's disappeared. Hummer has died and some of the brands have been sold. General Motors was able to sell Saab and Volvo is about to be sold by Ford. So they've essentially cleaned house and they've shrunk their operations to what they feel is worth putting money into.

CONAN: We're going to talk more with Micki Maynard about the new Detroit, the new Big Three, what's left of it.

We'd like to hear from you too. If you manufacture cars, if you manufacture car parts, if you sell any of those things, how are things going where you are? Give us a call: 800-989-8255. Email us: talk@npr. Stay with us.

I'm Neal Conan. It's the TALK OF THE NATION from NPR News.

(Soundbite of music)

CONAN: Right now, we're talking about the state of the U.S. auto industry. It's a business that Micki Maynard has followed for years. She's now senior editor at Changing Gears.

If you make cars or car parts, if you're in sales of those things, call and tell us how your part of the industry is going. 800-989-8255. Email us: talk@npr.org. Just click on TALK OF THE NATION.

And, Micki, we'll get to calls in just a minute. But I did want to ask, a lot of the questions about this had to do with how well the U.S. carmakers could survive their own labor agreements and the labor agreements, indeed, they've reached in the past and the generous pensions that they provided for car workers. How much of this getting out from under is on the backs of car workers?

Ms. MAYNARD: Well, that's a very good question. And when your listener emailed earlier, she said new jobs have been added, and I bet that's the Fort Wayne plant...

CONAN: Mm-hmm.

Ms. MAYNARD: ...in Indiana. But those jobs are coming in at significantly reduced benefits and lower pay than the UAW workers traditionally earned. And I think the UAW would say that our workers deserve every penny and every benefit that we got for them. But what had happened was there was a huge shortfall in the value of retiree health care benefits. The pensions weren't really the problem. It was more of the health care benefit issue. And so when the car makers went bankrupt, the new systems for the companies took that burden off of the carmakers and put it into a health care fund.

CONAN: Let's go to Todd(ph), and Todd's on the line with us from Grand Rapids.

TODD (Caller): Hi.

CONAN: Hi, Todd. You're on the air. How are things going there? What part of the business are you in?

TODD: I design automated assembly equipment for the automotive industry. We do a lot of robotic assembly, welding equipment. We'll do any part of a line. And we're seeing a little bit of a pick up. But what's been really interesting is, is we're not really seeing any GM stuff on the market anywhere. Generally, we'll get big packets to bid and we will bid tools, dies, welders. And what we're seeing is there's more Ford, Honda, and there was a lot of Toyota, up until they were - they had the recall issues. But what we're seeing is a lot of the GM stuff appears to be all offshore these days.

So, you know, the American public, I think, doesn't understand that Toyota, Honda, Ford are the domestic ones, and it appears as though Fiat, Chrysler and - which is now Chrysler...

CONAN: Yes.

TODD: ...and GM seemed to be China or elsewhere.

CONAN: That's interesting. Obviously, the American taxpayer still owns huge chunks of both Chrysler and General Motors, Micki.

Ms. MAYNARD: That's right.

TODD: Yeah. I mean, they seemed to be very heavy on the domestic tooling. They're not releasing tooling money anywhere at all.

Ms. MAYNARD: That's really interesting to hear, because I think in General Motors' case, there's so much that they had to close down, you know? In bankruptcy, they put it all into what's called old General Motors or Motors holding. And they're going to spend years, actually, shutting down all those factories and getting rid of those operations. It could be a while before GM is in the position to be placing orders.

But you bring up a good point. Half the American auto industry is foreign nameplates, and it's companies like Toyota and Honda and Hyundai and Nissan that are building cars in the United States. So, you know, hopefully, you can benefit from those investments.

TODD: Well, many of my customers are sitting on $2 million lines that the old GM purchased.

Ms. MAYNARD: Mm-hmm.

TODD: And even though they're still making the same parts for the same car, they renegotiated all their contracts under the new GM and they're telling my customers, sorry, the old GM owes you that money.

CONAN: Not the new GM, not the one that actually has any money.

TODD: Right. Now, they're sitting on these fully functional lines that are ready to run parts and nobody is buying them. They're not getting paid for them. It's really amazing to see what's happening.

CONAN: Well, Todd, we wish you the best of luck.

TODD: Yeah. Thank you very much.

CONAN: All right. Bye-bye. Let's go next to - this is Brian(ph), Brian with us from Belvidere in Illinois.

BRIAN (Caller): Yeah. Hi. How's it going? Thanks for having me on the show.

CONAN: What part of the business are you in?

BRIAN: I'm actually in manufacturing. We - at Chrysler, we make the Jeep Caliber - Dodge Caliber, I'm sorry, Jeep Compass and Jeep Patriot.

CONAN: Mm-hmm.

BRIAN: I was hired in there as a temporary employee and they told us that we'd be working, you know, five weeks to five months. And so far, I've been there eight months now and things are actually looking pretty good. We're actually hearing that they got a green light to do a 500,000-square-foot addition on the building. So...

Ms. MAYNARD: That's good. I've actually been to that plant, Brian. I was there when it was building the Neon and they were just switching over to do the Caliber. So one of the issues for Belvidere has been hiring of temporary workers because that has been a lot cheaper for Chrysler, which is now under Fiat's control, rather than hire people in full time. But at least you're getting some work out of the whole arrangement.

BRIAN: Yeah. Hopefully, you know, with the whole addition and everything, hopefully, you know, we're - it's pretty positive to see us get hired in, hopefully, you know. That's - the hopes that we have.

CONAN: On full-time basis. Do you know what they're going to use that addition to make?

BRIAN: Well, the rumors and speculations have led us to believe that it's going to be - 2012, all the models that we actually make are no longer going to be made.

Ms. MAYNARD: Hmm.

BRIAN: And there's actually been talk about bringing a Fiat model here. And, you know, since...

Ms. MAYNARD: That...

BRIAN: ...since we've been the ones that have been building, like, the Neon and the Caliber and everything, they're the smaller vehicles that Chrysler makes, we're actually pretty good contestants to get that vehicle at our plant.

Ms. MAYNARD: Mm-hmm.

BRIAN: So...

Ms. MAYNARD: And one of the things that Chrysler definitely needs are smaller vehicles because this was a company that was 75 percent pickup trucks and minivans and SUVs. So the more smaller vehicles, the more it'll be a little bit more adjusted to what demand is in the car market.

CONAN: Hmm.

BRIAN: Yeah, yeah. I'm actually - I'm looking really forward the whole Fiat thing. I just - I really hope that they can get their reputation back up, you know.

CONAN: Well...

BRIAN: That way, everyone realizes that, you know, they're a decent car and they can trust that they're being built here in America and everything. So...

CONAN: Well, Brian, good luck.

BRIAN: All right. Thank you very much.

CONAN: Thanks very much. And that raises questions about Chrysler, indeed bought by Fiat, generally regarded - I don't think generally regarded - I think I can say it as fact, the weakest of the three, and how is it surviving?

Ms. MAYNARD: Well, Fiat has 20 percent stake in Chrysler, so they dont actually own them, they actually just have management control of them. But the interesting thing about the Chrysler-Fiat relationship is that, you know, Fiat is a global success story. And their CEO, Sergio Marchionne, is considered to be, you know, the hot CEO right now in the auto industry.

One of the cars they're going to be bringing out is the Fiat 500, which is - if you know the BMW MINI, it's that kind of car. It's one of those iconic, little European cars. They call it the Cinquecento in Italy. And the new version came out in Europe a few years ago and was a huge hit. And now they're going to bring it over here itll be built in Mexico -and give it a try in the United States market. They're picking out the first 200 dealers that will get to sell it. And I think it goes on sale in about a year. And so there's now a competition among Chrysler dealers to see who will get to sell the Fiat 500.

CONAN: Chrysler is also bringing out a new version of the Jeep Grand Cherokee, the commercial that's just been seen on TV talks about, well, the things that made us American and the things we make.

(Soundbite of TV advertisement)

Unidentified Man: As a people, we do well when we make good things and not so well when we don't. The good news is this can be put right. We just have to do it. And so we did. This, our newest son, was imagined, drawn, carved, stamped, hewn and forged here in America. It is well-made and it is designed to work. This was once a country where people made things, beautiful things, and so it is again. The new Jeep Grand Cherokee.

CONAN: And it goes on, obviously, a little industrial nationalism there. And yet, as you say, they're also perfectly happy to make new cars in Mexico when that suits their plans, too.

Ms. MAYNARD: Well, it's a global auto industry. It's kind of interesting that the music under that commercial is, "Sooner or Later, God Will Strike You Down" by Johnny Cash.

(Soundbite of laughter)

Ms. MAYNARD: So I think you want to be a little careful when you get too, you know, too confident in things like that. Maybe a little humility isn't a bad idea sometimes.

CONAN: Here's an email from Ray(ph) in South Carolina. Since Mercedes took back control of the Sprinter division, these vehicles have been flying out of the factory here in Ladson, South Carolina. I am assuming sales are good. What's the Sprinter division?

Ms. MAYNARD: The Sprinter is a - sort of a Mercedes product. It's kind of a large van to transport people in - have a little bit of a funny shape. It's the kind of thing that if you're taking, you know, your family of 12 to a baseball game, they might rent a Sprinter to take them.

CONAN: So not a mass-market vehicle?

Ms. MAYNARD: No, not a mass-market vehicle. I think at one time Mercedes thought that they could sell quite a lot of them and it's still a little bit on the quirky side. But clearly, if they're - if the assembly line is going full bore, that's good news for Mercedes and Daimler.

CONAN: Jerry(ph) emails us: We make automotive seating at Fisher Dynamics at St. Clair Shores, Michigan.

Ms. MAYNARD: Mm-hmm.

CONAN: An article just ran on our local paper saying that we will be adding approximately a hundred jobs due to new business. Much of this is due to the Chevy Volt being made in Hamtramck. It's been a rough few years. Those of us who made it through are feeling a bit more secure.

Ms. MAYNARD: The Chevrolet Volt is the next big General Motors car. And it's a plug-in hybrid vehicle. It - they would like you to think it's an electric car. It does have a small motor because it will go for about 40 miles on the battery. It's been - they've been talking about it for about four years now. It's kind of the longest gestation of any car in recent history. It should be out by the end of the year and then more widely available next year.

They're going to start in three places which are Michigan and California and the District of Columbia. And then they'll add a few more states, New York, New Jersey, Texas, later on. And this is the one that, I think, General Motors is pinning at least its image hopes on.

CONAN: Mm-hmm.

Ms. MAYNARD: I don't think they can sell enough of them to make too much of a difference. They'll probably sell 10,000 next year and maybe 30,000 in 2012.

CONAN: We're talking with Mickey Maynard, who's the senior editor at "Changing Gears." That's a new public radio project that looks at reinvention of the Rust Belt. A former senior business correspondent at The New York Times, joining us from our member station WUOM in Ann Arbor, Michigan. And you're listening to TALK OF THE NATION coming to you from NPR News.

Let's go next to Brian(ph), Brian's with us from Lansing.

BRIAN (Caller): Hey, Neal. How you doing?

CONAN: Very well, thanks.

BRIAN: My comment is we're kind of a good news story here at Lansing at the Lansing Delta Township assembly plant. We build the Chevy Traverse, the GMC Arcadia and the Buick Enclave. Prior to the bankruptcy, we had one shift. Now we have three shifts running maximum overtime, and we're trying to keep everybody employed.

CONAN: Wow. So that's got to be good news.

BRIAN: Yeah, it's real good news because six months ago, nobody knew if their plant was going to be open. And now, you know, through a series of concessions, I mean, UAW - actually, I'm the UAW president at that location, I don't think we get enough credit for what we did. We get it now. If General Motors is the most profitable corporation on the planet, that ensures our job and income security. So it was a painful lesson but we've learned it.

Ms. MAYNARD: Yeah, Brian, that's a great plant. I think that's the newest plant in the General Motors system in North America, and it's very impressive. It has some of the most modern manufacturing technology and one the best work systems in the system in North America. So, congratulations to all of you, and I hope you stay running three shifts.

BRIAN: Well, thank you. We're proud of our product. Go out and buy one.

CONAN: All right, Brian. Thanks very much for the call.

BRIAN: Thank you.

CONAN: Bye-bye. And we've talked generally about Ford and about Chrysler. GM, how's the prospect - how are their prospects? You talk about their hopes for the Volt, but that's just one car.

Ms. MAYNARD: Well, GM is really going through a complete reinvention. They have - in a year's time, they have sort of booted all of their senior management. They're now being run by a gentleman named Edward Whitacre, who was the former CEO of AT&T. He's brought in an executive name Chris Liddell from Microsoft. Another one of their vice chairman is Steve Girsky, who's a longtime auto analyst. And you've got people with fresh eyes who are looking at what's left of General Motors and how do you reinvent it for the 21st century.

It's a kind of thing that all of us who watched the auto industry had been looking for for years and it never happened. And then finally there was a bankruptcy and finally this opportunity to remake the company.

CONAN: Let's go next to Scott(ph). And Scott's with us from Detroit.

SCOTT: (Caller): Yes.

CONAN: Hi, Scott. You're on the air. Go ahead, please.

SCOTT: Well, actually, I kind of had a funny comment. You mentioned the housing market before. And this past month I bought my first house just outside of Detroit. I work - I got a job - talk about a stable housing market, I got a job working for the Henry Ford Academy as a school teacher, and we actually work in an old General Motors design lab. And my comment had to do with reinventing the image, because actually my father works for the same plant, my brother does, too, that - your last caller, Brian, called in.

CONAN: Yeah?

SCOTT: So he works at the same plant. And I have the same comment about the Volt and just being more competitive. Yeah, it's not going to make a lot of money, but it definitely will help that image because so long they've relied on this image of like this masculine, truck-driving American, you know, person who buys, you know, buys American.

But I believe with the emerging market in China and the fact that you mentioned earlier, there's more cars sold in China than in all of North America that it really - they have to capture that new creative and innovative market.

CONAN: Well, Scott, good luck to you and thanks very much for the call.

SCOTT: Thank you.

CONAN: And he's talking about innovation and you were talking about that earlier, Mickey, and the Volt a transitionary vehicle, really, I think is a fair description of it. In terms of real innovation -transformation, are there plans down the road?

Ms. MAYNARD: Well, what we're looking at in the auto industry is finally the realization that what they call alternate fuel vehicles, hybrids, electric cars are finally going to be part of the auto industry, a good part of the auto industry. I dont know if people know the commercial that's running during the Tour de France but Lance Armstrong is now representing Nissan and the Nissan LEAF, which is their electric car.

And Nissan was never a company that really saw the need for hybrid electric cars. They're kind of a laggard in it. But their CEO decided to seize on electric cars and now they're getting a lot of attention for the LEAF. And so, the LEAF for Nissan, the Prius for Toyota, Ford with the hybrid Fusion, General Motors with the Volt, Chrysler when it gets its small cars.

I think we're going to see a whole new ball game in that sort of smaller, more fuel efficient part of the car market. And that's a big change for the American auto industry.

CONAN: And as you looked at those - you mentioned those three factors that the car industry looks at when they draw up their projections. Well, stretch it out. Do the American manufacturers hope to recapture any part of that six million cars that they've lost?

Ms. MAYNARD: I don't really think we'll get back to 17 million car sales a year for a long, long time. I wrote a story for The New York Times about a year ago where we looked at whether people were going to want cars at all. I mean, there are a lot of people moving from the suburbs back into big cities. There are people downsizing their fleets from three cars to two, people who were riding bikes to work, people who are taking the bus or the subway.

Now, of course, if you live in Montana, if you live in a place with no public transportation, if you just love cars, you're going to want a car or a truck. But people are thinking about cars probably for the first time since the beginning of the last century and what they need in their fleet, whether they want a car at all. So the auto industry has to keep that in mind as they develop vehicles for the future.

I do think we'll recapture some of it. I think we could get back to 14 million cars sold a year. But now there are other choices and now people are thinking about more than just what's in their driveway.

CONAN: Mickey Maynard, thanks as always for your time and good luck with your new project.

Ms. MAYNARD: Thanks so much, Neal. It's always a pleasure.

CONAN: Mickey Maynard joined us from WUOM in Ann Arbor. Again, the new project is "Changing Gears," a public radio project that looks at the reinvention of the Rust Belt.

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