Report: US & Global Auto Industry – 2010 State of the Union

GM Headquarters

2009 was a tough year for the auto industry to say the least. Not only did we witness massive government bailouts, epic bankruptcies and a precipitous plummet in sales, but over 1,500 dealerships shuttered their doors. When I was back in my hometown of Cleveland, OH over the holidays, I notice at least 6 large dealerships throughout the city that had closed up shop, with all of the remaining ones seemingly relegated to the ubiquitous “Auto Mile” of car lots mostly owned by large conglomerates. A sad state indeed.

Current estimates peg the total number of new cars purchased last year at just around 10.5 million, which is about 7 million shy of the high reached in 2000 and 2 million below sales in China (yes, we’re no longer numero uno). The Cars Allowance Rebate System (CARS) program, aka Cash for Clunkers, dolled out $2.8 billion in $3,500 – $4,500 rebates and supposedly resulted in 700,000 new car sales.  According to several leading analysts, this was just enough to keep the industry on life support while everyone scrambled to figure out how to infuse more cash into daily operations. Even though many hailed the program as a success, it had its detractors as well, and for good reason. Edmunds concluded that really only an additional 125,000 cars were sold that wouldn’t have sold otherwise, resulting in a taxpayer burden of $24,000 per vehicle.

Entering 2010, the auto industry landscape looks quite different than years past. There hasn’t been a time in recent memory with so many shakeups, changes of ownership and jettisoning of brands as in the last couple of years. Couple that with globalization and the increasing partnerships formed between large automakers, it’s easy to miss what went down. We thought it important to quickly run through the various car manufacturers to see where things netted out and just where we stand as we kick off 2010.


CHRYSLER (Chrysler, Dodge, Jeep, RAM)

From 1988 until 2007, ownership of this company rested in the hands of Germany’s DaimlerChrysler AG group (now Daimler AG). However, in May 2007, a majority stake in Chrysler was sold to Cerberus Capital Management, with the company changing its name to Chrysler LLC. In the beginning of 2009, Chrylser LLC filed for bankruptcy and emerged as Chrysler Group, with management controlled by Fiat, who took a 20% minority stake. Got it? Fiat now has the option to steadily increase ownership until outright control but, for the time being, the US government owns 8%, the Canadian government has 2% and the UAW a whopping 55% share.

In the meantime, Sergio Marchionne, the new CEO of Chrysler and long-standing Fiat chief, has announced a 5 year plan to mix and match brands. Chrysler, Dodge and Jeep will retain their American styling sensibilities but benefit from some Italian engineering. Chrysler will also offer a handful of rebranded Fiats and Alfa Romeos. And Dodge may also resell Alfa models. RAM will be spun off on its own as it doesn’t seem to fit. Let’s hope that this marriage is much more symbiotic than with Daimler, who seemed to sleep in a different bedroom.

FORD (Ford, Lincoln, Mercury)

Ford also suffered a tough year, but was the one US auto company that didn’t take any TARP funds, a huge boon to its public image and perception of stability. In addition, in a time when many companies were cutting back on R&D, Ford showcased their innovation by delivering new fuel-sipping EcoBoost engines along with the widely exulted Fusion Hybrid.

There are some analysts who believe that taking government funds or going through bankruptcy actually would have better positioned Ford in the marketplace against GM and Chrysler who are now lean and mean. Ford is looking to prove them wrong, as the company took steps to reduce the fat by dropping their controlling interest in Mazda after unloading Jaguar and Land Rover to India’s Tata Motors in 2008 and by putting Volvo up for sale. The plan for Mercury is still unclear, with the nameplate down to just 4 models – Milan, Mariner, Mountaineer and Grand Marque.

GM (Chevrolet, Buick, GMC, Cadillac) / GM Europe (Opel, Vauxhall)

GM took $50 billion from the government in exchange for a 60% share in the company. Pontiac was jettisoned in bankruptcy, with the 2010 Vibe and 2010 G6 (available only for fleet service) serving as the last remaining models. The company’s plans to sell Saturn and Saab both fell apart and the status of Hummer has been in limbo for months at the hands of its new Chinese suitor.

After working frantically to sell off the Opel division in Europe, GM backed away and decided to retain one of their only international brands. This is actually good news for US consumers who will get some solid German engineering applied to Buick, which may hopefully continue to skew its demographics to a younger subset. After all, it was only last year that Buick’s marketing efforts focused on reaching consumer’s “maybe” list, not exactly high expectations coming from that camp.



From 1988 through 2007, Aston Martin was a part of Ford Motor Company, as one of its marque brands in the upmarket Premier Automotive Group. But in March of 2007, Aston Martin was purchased by a joint-venture backed by two investment firms in Kuwait along with American businessman John Sinders and Prodrive owner David Richards. Under Ford’s stewardship, the brand ramped up sales significantly and it looks like the company will continue on this trajectory with new models such as the four-door Rapide and DBS Volante  and halo-vehicles like the One-77 creating brand exuberance.

One thing to pay close attention to may be Aston Martin’s racing aspirations. Sinders is an avid competitor and Richards runs a large motorsports company. Last year at the 24 Hours of Le Mans, the company entered three LMP1 racecars for the first time in its history.

FIAT (Ferrari, Fiat, Maserati, Alfa Romeo, Abarth, Lancia)

After a relationship with GM in early 2000 and a love affair with Ford in 2005, it looks like Fiat has finally found the US partner is was so sorely yearning for in Chrysler. We have been eagerly awaiting Fiat’s return to our shores for quite some time, hoping to see more than just the Alfa Romeo 8C, which is absolutely gorgeous but outside of nearly everyone’s price range.

Now, at the very least, we can look forward to Fiat platforms and engines in lineups from both Chrysler and Dodge. And it looks like the Fiat 500 and the Alfa Romeo MiTo subcompacts might follow soon thereafter. The biggest challenge is transforming Italian styling and design cues to fit with the meat-and-potatoes American consumer. We just hope that Fiat doesn’t sacrifice too much of what makes their cars so fantastic.


Henrik Fisker, best known for his design finesse while at Aston Martin, has taken his unique styling and creative vision to the land of luxury hybrids. With a trunk full of $529 million in US government loans, he plans to churn out plug-ins at a steady clip. His first offering, the $80,000 Karma luxury sedan is slowly rolling off the production lines in Finland after satisfying all of the initial orders.

But the real goal here is for Fisker to move closer to the mass market by 2012 with lower-cost options including a $47,000 sedan with the code name Project Nina. By occupying a vacated GM plant in Delaware, Fisker plans to keep things local and make Washington happy.

HONDA (Acura)

Honda always seems to keep it slow and steady and this past year was no different. Even though it took a sales hit like everyone else, the company managed to jump ahead of Chrysler to become #4 in US sales behind GM, Toyota and Ford. 2009 marked the return of the Insight, the first commercial hybrid-electric sold in the US starting in 1999.

Honda continued its push into alternative energies and showcased the FCX Clarity, a hybrid hydrogen fuel cell vehicle. The company’s biggest challenge looks to be the revival of its luxury brand, Acura, which has fallen behind the likes of Lexus and Infinity.


Hummer was on a tear before gas prices went through the roof and 6 mpg fuel economy was no longer acceptable with the green movement in full swing. GM tentatively sold the brand to Sichuan Tengzhong Heavy Industrial Machinery Inc, but China’s government has been slow to sign-off on the deal. The transaction was reportedly $150 million, with GM agreeing to continue production until 2012, when Tengzhong would officially take over operations.

If they ever get the go-ahead, Tengzhong plans to introduce more fuel-efficient and environmentally friendly vehicles than the current lineup of fossil-sucking behemoths. The Hummer brand, trademark and intellectual-property rights will all change hands. Under the proposed agreement, existing Hummer dealers in the US would continue to function under the same contracts they had in place with GM. That said, word on the street is that Beijing wants its automakers to remain domesticated and steer clear of foreign interests.


While the American car companies were struggling in the downturn, South Korea’s automotive powerhouse was in a prime position to capitalize. With outstanding warranties and price points that offered more features per dollar, the company was able to steal plenty of sales away from the Big 3. Hyundai went up to 4 points in market share in the US with a 6% increase in sales. Kia did even better by boosting sales 8%. On the global stage, Hyundai-Kia jumped past Ford, to become the world’s 4th largest automaker behind Toyota, GM and VW.

Hyundai shocked everyone with their Genesis sedan, winning every conceivable automotive award, and the Genesis Coupe was heavily embraced by the import tuning crowd. They also delivered the one-two by offering their industry-jarring Hyundai Assurance Plan, which appeased the fears of those worrying about making payments if they lost their job by allowing returns if particular conditions were met. Soon after it was launched, Ford and GM scrambled to unveil copy-cat programs.


GM has had little success trying to sell off the Swedish brand it acquired in 1989 and decided on December 18th, 2009 to “wind down the business in an orderly and responsible manner.” After starting the process a year before, things actually looked promising as over 27 parties expressed interest in a potential purchase. It turns out that only two came close to finalizing a deal and they were unlikely suitors.

Strangely enough, the two players involved – Spyker from the Netherlands and Koenigsegg from Sweden – were both boutique supercar manufacturers . If you combined the output from both companies, they don’t produce more than 100 vehicles a year. Neither of these two companies could satisfy GM’s concerns enough to take over the much larger brand. China’s Beijing Automotive scooped up Saab’s spare parts and tooling operations, most likely to make a mint in their local market.


For a long time Saturn was heralded as the one GM brand that the company got right, creating a true economical alternative to imports and a haggle-free purchase experience. But after much fanfare it was left to play by itself in the late 1990s. GM didn’t pay any attention to it for quite some time and when it finally did, it diminished Saturn’s autonomy by pulling from its existing cache of models. In 2006, by the time they decided to refresh lineup with cars like the Sky, the damage had already been done.

Racing legend Roger Penske sought to increase his billion dollar auto empire by selling Saturns through his dealership network, but couldn’t solidify a deal to handle the manufacturing side of things. In September, the final closing announcement was made and over 370 Saturn dealerships were told of their fate. Many are still seeking approval to stay on selling cars from GM’s remaining brands. Since Saturn dealers were some of the best in the business, hopefully the standouts will be given a reprieve.


After becoming a press favorite in 2008 when it launched, Smart looked like it had a promising future as a quirky new brand. But when the recession struck, their message of fuel economy and low price still couldn’t get Americans to commit to driving such tiny mobiles. Sales went off a cliff with almost a 40% drop, leaving many wondering about whether or not these cars are just a cute fad that flickered bright and then burned out. Only time will tell…


Subaru came out of 2009 as a true rockstar. While nearly everyone else was seeing red they were firmly in the black with almost a 14% sales gain, topping the industry and raising many eyebrows. How did they do so well with the economy so bad, you ask? A solid lineup of new cars including the Legacy, Forester and Outback helped offset percentage declines amongst the Impreza and Tribeca models, and allowed Subaru of America to record several record setting months.


Suzuki’s name is more synonymous with motorcycles and ATVs than cars. In fact, many people don’t even know they still makes cars since the Sidekick craze in the 90’s died off. But alas, they are still kicking, with a new infusion of operating capital as VW took a 19% stake on their quest for global domination. If you keep your eyes out, you just may happen to spot the XL7, first introduced in 2006, somewhere out in the wild.

TATA MOTORS (Jaguar, Land Rover, Tata)

After being harangued for many years for lack of vision and leaking money, Ford finally sold off their Jaguar and Land Rover (JLR) business to India’s Tata Motors in 2008. Strangely enough, this was done just as both brands had finally found their stride with the new Range Rover and Range Rover Sport and the redesigned Jaguar XF and XJ models winning the hearts and minds of drivers everywhere.

The monetary situation is still no better with Tata than with Ford. Let’s hope that Tata can weather the storm of financial losses that rained down a $504 million line of red on their balance sheet.  With many components now being made in India to cut costs, let’s also hope that their model lineup doesn’t suffer as they scramble to curb losses. After all, nobody wants to think that their new $85,000 XK Coupe is sharing parts with a $2,500 Nano.


With the CEO’s office a perpetual revolving door, Tesla has finally found some stability with co-founder Elon Musk back at the helm. And with a large supply of government booty, $464 million worth, Tesla is kicking production into high gear. With the $102,000 Roadster already being delivered, the company is moving on to ramp up production for their next offering, the Model S, which will be built in California at a former NASA site.

With high hopes of a late 2011 launch, the Model S will move into the product lineup as a BMW-fighter in the $50,000 price range (after a $7,500 government rebate). Tesla is also working with Daimler AG to deliver an electric powertrain for the SMART brand which is looking to unleash a fleet of EV cars.

TOYOTA (Toyota, Lexus)

Last year, Toyota finally showed a chink in their armor, taking a $4.8 billion loss for its fiscal year as sales across the globe belly-flopped. They also rolled out the largest recall in the company’s history affecting nearly 4.2 million cars and trucks in danger of “floor mat entrapment of accelerator pedals.” Since 2002, it has been reported that as many as 19 people have lost their lives due to this engineering goof.

Back in Japan, Akio Toyoda, grandson of the company’s founder, took over from Katsuaki Watanabe. His focus is now on moving away from the large, expensive models that the company has been churning out to focus on changing the culture of the company. He has stated that Toyota is “grasping for salvation” and that “We have to make better cars.” Nobody knows what that all means but Toyoda certainly does, which is ok by us.

VOLKSWAGEN (Audi, Bentley, Bugatti, Lamborghini, SEAT, Volkswagen, Scania, Porsche)

The saga between the Volkswagen Group and Porsche this year would make for a great movie. Porsche CEO Wendelin Wiedeking tried to work some financial wizardry to take over the much larger Volkswagen. But as the global economy entered a massive recession, Porsche racked up $14 billion in debt in a failed attempt to gain a majority stake. In fact, the process almost forced Porsche into bankruptcy, were it not for some last minute rope-a-dope from VW board chairman, 72 year-old Ferdinand Piëch, who expertly maneuvered to turn the tables and absorb Porsche instead.

Now we can look forward (or not) to 911s and Panameras with VW badges. We imagine things may be awkward for a bit but long-term this could amount to some pretty fantastic automobiles as the companies share their part bins. For example, Porsche is looking to build an electric car and the technology in the Audi e-Tron looks to be a perfect match.


Ford snagged Volvo for $6.5 billion premium back in 1999 as an effort to bolster its Premier Automotive Group (which also included Aston Martin, Jaguar, Land Rover) and sell luxury cars alongside Mustangs at mega-dealerships. The plan never worked out and they have been having a fire-sale over the last couple of years. It looks like China’s Geely is going to pony up scant $2 billion for the brand and take things over. The deal is expected to be finalized in the first quarter of 2010.