Dealers Are Resilient as Ever

Is a gloom-and-doom scenario really threatening to engulf the domestic Detroit Three?

Hard-nosed auto “experts” have opined their Gloomy Gus forecasts, much to the dismay of veteran industry executives who can't begin to believe what they are reading.

Here are some headlines in June trade weeklies and business magazines:

“GM: Burning Cash Like Rubber: The carmaker will need to dig up capital just to keep the wheels turning.” — Business Week

“Desperate Times: The domestic auto industry is on the verge of extinction.” — Forbes

“Detroit 3 Slash Sales to Fleets: A wild ride as market slips to small cars.” — Automotive News

The doomsayers who wrote these stories are presumably too young to remember how the Big 3 survived crises far worse than the one gripping 100-year-old General Motors, 105-year-old Ford and 84-year-old Chrysler.

Those auto companies did survive and, in so doing, kept alive a domestic auto industry in the face of perils like the Great Depression of the early 1930s, World War II and flat-out oil embargos of the 1970s and 1980s.

What kept the Detroit 3 afloat, the cynics forget, were franchised dealers who know how to survive downturns.

To wit: New cars down, used cars up. Two new cars for the price of one (Folger Kia, Charlotte, NC). Service specials. Certified Pre-owned Cars to the front line. Stand-alone pre-owned showrooms (Penske Chevrolet and Honda, Indianapolis). More advertising on the Internet (all concerned). A separate specialty shop (Feeny Chrysler-Jeep, Midland, MI)

The situation, as dire as it may seem for domestic auto makers and their dealers, is far from disastrous. Admittedly, the Detroit 3 did lose sight of the small-vehicle market while they were focusing in the 1990s and early 2000s on high-profit fullsize SUVs and pickups.

But hindsight is 20-20. The F-150s, Silverados and Rams which Motown pushed in the high-rolling 1990s and until 2005 or so were selling like such hotcakes that each of the Japanese Big 3 invested in competitive products — namely extended-length Tundras, Titans and Ridgelines.

And, even in the first five months of 2008, when U.S. new-vehicle sales nosedived 8.4% from a year ago to 6,224,718 units, the Detroit 3 retailed 1,805,765 trucks and SUVs, or 61.7% of the total truck market.

We're not Pollyannas, but the domestic auto makers still accounted for 61.7% of the May truck market. Truck sales did plunge 20.1% in May as the Detroit 3's market share descended to a near-record low of 44.4%.

Numbers crunchers called the downdraft “scary.” But could anything be worse than no trucks at all, as in WWII, or cash-starved buyers as in the Great Depression of 1929-39?

These days, Detroit 3 dealers are down but, far from out. They are resilient as always. Each of the domestics has weathered a reverse cycle.

GM did in the early 1990s, when its chairman and president were fired after a financial storm.

Chrysler did in the late 1970s and early 1980s, only to be saved by a $1 billion federal loan-guarantee bailout.

Ford did in the aftermath of WWII, when Henry Ford II brought in the “Whiz Kids” after a funding crisis. Yet each is alive today looking to new models to hold off the surge of foreign brands.

This business always has gotten huge lifts from new models — and the Detroit 3 are busily sending restyled and “refreshed” 2009 models to their dealers — Dodge Journey, Cadillac CTS-V, Ford Flex, Lincoln MKS, Chevrolet Malibu.

Maybe the domestics were sparked into early '09-model rollouts by Hyundai's launch last winter of the well-received '09 Sonata, but this is after all a new-product business every year.

Take it from an auto journalist who has covered this industry for 65 years, the Detroit 3 are not about to be swept into oblivion.

Mac Gordon is dean of U.S. auto writers. He can be reached at [email protected].