It's been one of the few political and economic stories that was a pleasure to watch unfold. During the financial crisis just a few years ago, it was posed that three of the most iconic companies in U.S. history should be led to the slaughterhouse. It was a fierce political debate and became much more than a typical corporate rescue mission. But since the capital injections, the refurbished business models and vehicle lines, and a new group of managers, the American auto companies are showing strength not seen in decades. The latest sales numbers during August only confirm: Detroit is back.
Summer of love
The economic recovery, if it's happening or not, has been hotly debated all summer. With a presidential election on the horizon, we are shown more and more numbers that are supposed to tell us how we are doing as a nation and as a people. It's all very confusing, and in the real world it's hard to tell what any of it means. But while all of the bickering on the news has been taking place, the auto companies have been chugging along at a canter.
Ford saw U.S. sales rise 19% during August. Small and midsized SUV sales were as strong as they have been since pre-recession times, and in some cases in the vehicle type's history. Chrysler showed tremendous gains as well, with sales up 14% during August. Even truck sales were up 12%, while cars were even more impressive at 21%.
GM's Chevrolet and Cadillac sales were up 11% apiece, with Buicks up 12%. Since the company emerged out of bankruptcy, it slimmed down its redundant brands and streamlined back into its core autos. This has helped lead the company back into the spotlight along with its American counterparts. Ford was the only company not to enter bankruptcy during the financial crisis four years ago.
It's not that Ford, GM, and now Italian-owned Chrysler blew away the competition -- they didn't. But the numbers look favorable for the American car companies. They seem to yet again be competitive with Japanese and European automakers, which had taken over as the quality and sales leaders.
Back to the future
If the legacy automakers can stay on top of their game and not fall into their old habits of doing things like designing cars that look like toasters and creating financing divisions that seemingly exist for no other reason than to drain the coffers, then these guys might just be the best turnaround story from the recession. GM trades a hair cheaper than Ford, at only 5 times forward earnings (versus Ford's 6 times forward earnings ratio), but the company has struggled more than its competitor in its recovery. Ford may be a safer investment, but you have to pay up for the option of added security.
For more information regarding the quickly improving Ford, take a look at this premium report. In it, you will read the hurdles and opportunities that lie ahead for the legacy of one of America's most famous businessmen, Henry Ford.