Stephen Foley: Detroit looks to hit the gas again as confidence rises
Thursday 05 November 2009
The General Motors board performed what amounts to a handbrake turn over the sale of Vauxhall and Opel. It is an audacious piece of driving from a team that has not proved itself particularly adept behind the wheel, but spirits are intoxicatingly high in Detroit at the moment.
Both GM and Chrysler came through their state-sponsored bankruptcies in record time, and Ford – which never went bust – is even back in the black. The industry enjoyed bumper car sales over the summer, as the US Government pumped $3bn into "cash-for-clunkers" subsidies and the taxpayers of other countries chipped in to support their local markets, too.
Meanwhile, financing for new car purchases is getting easier to come by, and the return of consumer confidence led to decent vehicle sales figures in October, even without government subsidy. At the current run rate, the US is on course for 10.5 million vehicle sales a year, which is a squeak above the 10 million rate at which restructured GM is supposed to break even.
Sergio Marchionne, the Fiat boss now also in charge at Chrysler, was looking to the future in an upbeat strategy presentation yesterday, unveiling new models and technologies, but he was also counting the pennies, saying Chrysler was being "parsimonious" in its cost-cutting.
Parsimony is harder for GM's entrenched and emotional management, whose optimism is less often the result of hard-headed analysis than it is the result of a longing to avoid hard choices. When it cited the improving business environment as a reason for keeping hold of Vauxhall and Opel, alarm bells rang in many quarters. Its switch of strategy has so upset the Germans that it could trigger strikes, a consumer backlash and a tougher line on state aid. Opel's new/old owners are going to have to start planning for the worst, not hoping for the best.
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