For automakers, some glimmers of hope

Roland Jones Business news editor • Profile • E-mail

It has been a difficult few years for U.S. automakers, with the nation’s Big Three — General Motors, Ford and Chrysler — taking their fair share of knocks.

The latest blow came in late October when all three companies reported losses for the third quarter.

Chrysler posted an operating loss of $1.5 billion, while Ford said it lost an astounding $5.8 billion, weighed down by the costs of its massive restructuring plan. The only ray of hope came from GM, which initially said it lost $115 million and then revised that Tuesday to $91 million, which was much smaller than expected.

But despite the pain, observers say the Big Three appear to be finding their feet in a number of areas, including vehicle quality and stronger sales, particularly in Asia, and there are also signs that the restructuring plans underway at GM and Ford are taking hold.

“GM in particular — I think we are seeing good news from them,” said Kevin Reale, research director for AMR Research, an industry consulting company.

The world’s largest automaker is the best example of how the industry is changing for the better, said Reale. The company’s plan to restructure, which includes massive job cuts and plant closures, is beginning to bear fruit, shown most recently by GM’s smaller-than-expected quarterly loss.

Other industry improvements include increasing the use of digital tools to reduce the time it takes to bring a new vehicle to market, improved collaboration with suppliers to cut costs and moving into emerging marketplaces like China, Reale said.

“We are also seeing major changes in quality at GM,” he said, noting that GM’s warranty payout costs have declined over the past three quarters, improving its position against Japanese rivals like Honda and Toyota, long known for quality and reliability.

Indeed, GM and Ford saw their newest models placed high in Consumer Reports magazine’s recently-released list of the most reliable vehicles for 2007.

Ford’s Fusion topped the list of the most impressive new models, with the magazine’s testing staff praising the car’s “nimble handling and comfortable ride.” The Fusion and the Mercury Milan were named among the most reliable family cars, outscoring V6 versions of the Honda Accord and Toyota Camry.

GM’s new versions of the Chevrolet Tahoe and the GMC Yukon made the list of most reliable large SUVs, just behind three offerings from Toyota: the Land Cruiser, Lexus LX and Sequoia.

David Champion, who oversees auto testing for Consumer Reports, said the key for Ford and GM is whether the initial strong reliability ratings on the new models would be sustained, an area where Toyota and Honda have excelled.

“Whether they start out good and remain good remains to be seen,” he said.

When it comes to sales, GM and Ford appear to be making progress. They surprised Wall Street and the automotive industry by reporting stronger-than-expected October sales, suggesting a turnaround is in the offing after months of declines.

GM led the industry with a 17.3 percent sales jump compared with last year, while Ford said its October sales increased 8 percent. Chrysler was the odd one out, reporting a sales decline.

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