After the worst economic downturn in the U.S. since the Great Depression, many economic indicators show signs of a recovery. The Dow recently eclipsed the 16,000 level when it was below 10,000 just five years ago.
What has also improved is the health of the U.S. auto industry. In 2009, the outlook was bleak, with some auto companies needing bailouts. Since then, sales numbers have been on the rise with a strong 2013 and the expectation of an even stronger 2014.
Industry Slump of Late 2000s
The domino effect of the financial market meltdown affected jobs, housing and the automobile industry. Both General Motors (GM) and Chrysler accepted government bailout money to avoid going out of business.
North American vehicle production dropped to 8.6 million units in 2009, the lowest number since 1961. The 2009 total is less than half the 2000 total of 17.7 million, when production reached its highest point. About 1,600 dealerships went out of business during this time.
Turnaround after 2010
Significantly improved numbers are evidence the industry is making a comeback. Over 15 million cars were sold in 2013 in the U.S., more than 50 percent higher than in 2009. The industry expects to do even better in 2014, predicting sales of over 16 million units.
The turnaround has had a positive effect on suppliers and retailers. Alcoa, the world’s third-largest producer of aluminum, supplies lightweight alloy materials to auto manufacturers. It recently completed a plant expansion in Iowa and will expand another plant in Tennessee. Both expansions will total nearly $600 million.
Retailers are also seeing improved numbers. AutoNation, the largest auto retailer in the U.S. owns and operates hundreds of local dealerships, like Tampa, Fla.-based AutoNation Nissan Brandon.
Numbers improved for AutoNation in February in spite of cold weather, which kept many customers at home and left the overall light vehicle industry flat. New vehicle sales increased four percent, with luxury car sales up seven percent from a year ago. Domestic and import brands were also up, as were same-store sales.
Why the Turnaround Happened
One of the most important factors in the turnaround is that jobs are starting to come back. The auto industry alone has added over 173,000 jobs in the last four years. Unemployment numbers are down from 2009, leaving customers with more disposable income to buy or lease new vehicles.
Another key factor is that the auto industry made adjustments to how it operated. Gasoline prices had reached an all-time high in the summer of 2008, just before the global financial meltdown. The economic crash made people rethink the way they handled transportation, as they sought alternatives to cars that run on fossil fuels. The industry responded with hybrids, electric vehicles and cars that could run on different fuels.
The industry is also avoiding things that cost a lot of money. GM, for example recently slowed down production on particular models that did not sell as well as expected. In the past, the company would have maintained production levels and offered generous incentives to sell off the excess.
If predictions are accurate, 2014 sales and production will come close to 2000 levels. Thanks to an economic turnaround and an auto industry that changed with the times, cars are more efficient and technologically advanced, leaving consumers with more options than before.