Detroit bounces back

As Detroit works through one of the biggest bankruptcies in municipal history, the auto industry begins to return to profitability. It’s one of the best turnaround stories of the year told through the annual auto show.

The Wall Street Journal had this story by Joseph B. White about the state of the city:

Leaders of the world’s major auto makers gathering in Detroit this week for the North American International Auto Show will find a far more hospitable climate than they’ve experienced during the past several years.

Detroit’s weather promises to be chilly and dank as ever. But the U.S. auto industry is enjoying blue skies. Sales in 2013 recovered nearly all the ground lost during the Great Recession in 2009, as demand for luxury cars and highly profitable trucks and sport-utility vehicles boomed and gasoline prices drifted down. The pace of growth in 2014 will slow, but most industry executives expect smooth sailing for the near term compared with the turmoil of recent years.

What could possibly go wrong? That will be the subtext as industry executives pitch new models to media and check out each other’s wares.

For Detroit’s restructured auto makers, one challenge will be to avoid repeating a pattern of boom and bust that’s plagued the U.S. car business since the early 1980s. Prosperity has tended to beget ill-advised diversification and bloated costs in Detroit. This time, however, the pain of near-death, bankruptcy and humiliating federal bailouts may not be so quickly forgotten.

The New York Times had this piece by Bill Vlasic about the boon the auto show will bring to the city:

Ever since Detroit filed for bankruptcy six months ago, political and business leaders here have insisted that the city’s long-awaited comeback has already begun.

This week is their chance to prove it, as thousands of automotive executives, suppliers and members of the news media descend on downtown for the annual North American International Auto Show.

The auto show has historically been a financial boon to the city, and this year is no exception. Organizers estimate that it will contribute $365 million to the local economy in wages and other spending.

Yet with the city mired in Chapter 9 bankruptcy, the event has taken on added importance. With Detroit’s worldwide reputation as shaky as its finances, it desperately needs a successful show to improve its battered image.

Reuters Deepa Seetharaman and Ben Klayman had a story about the changes in leadership at the top of the U.S. automakers and what that means for the industry:

General Motors Co (GM.N) named a new chief executive, Ford Motor Co (F.N) kept its old leader and Chrysler Group LLC’s CEO averted a divisive public offering. And that was just in the last 30 days.

This year is shaping up as a test of leadership at GM, Ford and Chrysler, five years after the U.S. auto industry’s searing restructuring. While the risks ahead are no longer life-threatening, how the companies respond will set their direction for years to come and signal whether the lessons of the financial crisis were embedded deeply enough.

“It’s a turn of an era,” Xavier Mosquet, senior partner and managing director at Boston Consulting Group, said in an interview. “Frankly, it is a totally different, new type of competitive situation that is emerging.”

Analysts see 2014 as a transition year, with slowing growth in the U.S. auto market and companies facing a renewed mandate to gain ground overseas. The 2015 contract talks with the United Auto Workers union also loom in the background.

In the weeks leading up to this year’s Detroit auto show, GM, Ford and Chrysler have all taken steps that highlight the leaders who will help them face what Mosquet described as the most competitive North American market in decades.

Kim Gittleson writing for the BBC said that the U.S. carmakers are gearing up for a year of transition:

This year promises to be one of transition for the big three, with Mary Barra taking over from Dan Akerson as the head of GM, while Ford boss Alan Mulally is set to depart at the end of this year.

In 2013, Chrysler avoided a public stock offering and finally came under complete ownership of Italian carmaker Fiat, giving boss Sergio Marchionne the chance to finally integrate the two firms, which badly need each other.

All of these developments are seen as good omens for the resurgence of the US car industry in 2014.

“Detroit is on the offensive again and it’s for very substantive reasons – good product, competitive costs, and improving brand reputation,” says Guggenheim car analyst John Casesa.

The Detroit Free Press had a story by Nathan Bomey about the relationship between Barra and the man she beat for the job – Mark Reuss:

Barra and Reuss rose through the GM ranks at a similar pace. She graduated from General Motors Institute and he from Vanderbilt University, but both joined GM as student interns and never left.

Both held high-level engineering jobs before being assigned to different roles at the height of GM’s crisis — Reuss as president of GM’s Australia unit and Barra as head of GM’s human resources division.

Although the leadership transition is not complete yet — CEO Dan Akerson retires Wednesday — Barra and Reuss already have a crisis on their hands.

Late Friday, GM recalled all of the 2014 Chevrolet Silverado and GMC Sierra full-size pickups with 4.3-liter and 5.3-liter engines to address a software issue that could cause exhaust components to overheat and ignite engine fires. The automaker said it issued the voluntary recall for 370,000 pickups after getting reports of eight fires with no injuries.

Despite the signs that GM and other auto companies are heading in the right direction, there are still some obstacles that they’ll have to overcome. But more importantly, the show is critical for Detroit as it attempts to come back from bankruptcy.