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The Globe and Mail

Sales gains give hope for Detroit Three auto makers

The Oakville assembly plant sign is seen from the parking lot of the facility in Oakville, a Toronto suburb, February 15, 2006.

J.P. Moczulski/Reuters

There is joy in Detroit for the first time in years, even though vehicle sales are still abysmal.

U.S. auto sales bounced up 9 per cent in 2010, new figures released Tuesday show, and the companies forecast another strong rise this year. But just as important, the large U.S. auto makers - which were in a state of crisis for most of the past decade before two of them finally tipped into bankruptcy protection - have cut costs so drastically that they are now making money, although traffic in the showrooms remains far below pre-crisis highs.

In the world's largest economy, last year was the second-worst year since 1982 for sales of new cars and trucks. Americans bought about 11.5 million new vehicles last year; only 2009 was worse, with 10.6 million.

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But the mood is much brighter, and the difference is the transformation of the Detroit Three that occurred during the 2008-09 crisis that drove General Motors and Chrysler LLC into Chapter 11 protection, which they survived only because of taxpayer bailouts from the Canadian, Ontario and U.S. governments. In addition, Ford Motor Co., which dodged the financial crunch that hit its primary two competitors, had a banner year, overtaking Toyota Motor Corp. for second place in the American market.

"In many respects, 2010 was one of Ford's best years ever," said George Pipas, manager of U.S. sales analysis for the auto maker. "It is our largest full-year increase in sales since 1984-I remember that-and then some."

General Motors Co. is forecasting an increase in the U.S. market in 2011 that will take sales to more than 13 million.

"Our outlook is quite optimistic," said Don Johnson, vice-president of sales operations for GM.

David Cole, chairman emeritus of Center for Automotive Research described the U.S. numbers as Depression level sales that are still three million to four million below the troughs of the cyclical recessions that periodically hammer the industry.

"What's remarkable is that companies are now profitable at a level of sales that we would have thought almost impossible to be profitable at a couple of years ago," Mr. Cole said.

GM, Chrysler and Ford shed tens of billions of dollars in costs, closed dozens of plants and were given an additional boost by the recall crisis that battered Toyota during the first quarter and damaged its long-standing reputation as the industry's quality leader.

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While Ford and GM are profitable at this lower level of sales, one question overhanging the industry is whether the glory days of 1999 and the early 2000s will return. Before the economic meltdown, American consumers consistently bought between 16 and 18 million cars a year.

"I would says there's as many opinions out there as there are people who you ask the question of," Mr. Johnson said. "We wouldn't be planning on jumping back to a 17.5-million-type industry so I do believe there's been some structural change."

Preliminary figures show that Canadians drove off dealers' lots in about 1.56 million new cars and trucks last year, up 7 per cent from 2009.

Ford was a winner on both sides of the border. Its 19 per cent sales increase allowed it to jump ahead of GM in Canada to become the market leader for the first time in more than 50 years.

The company's U.S. sales also rose 19 per cent.

GM posted a 6 per cent U.S. gain, but sales for General Motors of Canada Ltd. slid 3 per cent.

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Chrysler Group LLC also enjoyed rebounds in both countries - up 26 per cent in Canada and 17 per cent in the United States - after a horrible 2009.

In Canada, the Detroit Three rode soaring truck and sport utility vehicle sales to regain their status as the Big Three. Toyota Canada Inc. which jumped ahead of Chrysler Canada Inc. into the No. 3 slot in 2009, had the worst year among the large auto makers and dropped into fourth spot with a 16 per cent plunge.

The Japan-based auto maker's U.S. sales were flat, but it added to the mood of optimism by forecasting that overall sales in the United States will rise to 12.5 million this year.

In the fierce battle between Germany-based auto makers BMW Canada Inc. and Mercedes-Benz Canada Inc. for leadership in the luxury market, Mercedes prevailed, with sales of 28,065 compared with 27,202 for BMW.

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