Optimism Reigns at Traverse City Auto Conference

The Detroit News

After five years of gloom and doom, the 45th annual meeting of auto executives, analysts and reporters in northern Michigan that opens Monday has something to cheer about.

Actually, a lot to be happy about.

The Ann Arbor-based Center for Automotive Research holds an annual Management Briefing Seminars in Traverse City, drawing CEOs, union leaders, politicians, Wall Street analysts and dozens of reporters.

Over the last five years, the mood has mostly been grim. Last year, 54 auto suppliers filed for bankruptcy -- and early on it was unclear if two U.S. automakers would survive.

This year, auto sales have risen -- and are on pace to be about 11.5 million vehicles this year, above last year's dismal 10.4 million sales, which were the lowest tally recorded in 27 years. That figure was boosted by the government's $3 billion "Cash for Clunkers" program that helped sell 677,000 vehicles.

Detroit's Big Three, which collectively lost more than $100 billion between 2005 and 2009 and shed more than 200,000 jobs, each recorded operating profits in the first quarter of this year -- the first time that's happened since 2004.

While last year Gov. Jennifer Granholm and others were pleading with at least $1 billion in federal aid to keep suppliers alive, the boost in production has largely stabilized the industry -- and few companies have sought bankruptcy protection this year.

The auto industry has added 55,000 jobs in the last 12 months -- after shedding 334,000 in the previous 12 months. Domestic automakers are adding jobs, shifts and keeping some plants opened that were once slated to be closed.

On Friday, Chrysler Group LLC reversed course and said it would keep open Sterling Heights Assembly Plant, which was slated to close in 2012, and add 900 new jobs.

Last year, attendance at the Traverse City event plummeted as auto sales had sharply declined and two U.S. automakers -- General Motors Co. and Chrysler had exited bankruptcy only weeks earlier -- the mood was grim.

About 650 registered for last year's annual conference of seminars, down from 900 to 1,000 in recent years. This year, attendance is up and revenue is up by more than 25 percent, said David Cole, chairman of the Center for Automotive Research. "The gloom is gone," Cole said. "The storm has finally passed." The conference has been shrunk from five days to four days this year.

"Clearly, the automotive industry is exiting one of the most difficult and challenging times in modern history. The restructuring has been massive and the emerging new industry is far more lean, flexible, and efficient -- poised to see unprecedented profitability in the years ahead," Cole said.

Lisa Hart, a spokeswoman for the Center for Automotive Research, said Saturday that about 800 people have registered to attend this year, but the final number could rise because people still were registering.

Ford Motor Co. has earned $4.7 billion in profits in the first half of 2010 -- its largest tally since 1998. But the company still is working to shed debt. It pared its debt back from $34 billion to $27.3 billion in the second quarter of the year. GM is set to report a second quarter profit early this month and Chrysler will report an operating profit on Aug. 9 -- though it isn't clear if Chrysler will report a net profit.

Automakers still have a long way to go. GM, which got a $50 billion bailout from U.S. taxpayers, is 61 percent owned by the Treasury Department. It plans to file the paperwork in the middle of August and hopes to have its public offering by year's end. Chrysler won't go public until 2011 at the earliest.

Ford Americas chief Mark Fields will speak, as will GM chairman and CEO Edward Whitacre Jr. and the new United Auto Workers president Bob King.

The session also includes John Krafcik of Hyundai, Jim O'Donnell of BMW North America and Tim Manganello of auto supplier BorgWarner.

Toyota Motor Corp. will bring the company's quality chief to the event: Steve St. Angelo of Toyota. Toyota has recalled more than 5 million vehicles this year in more than a dozen campaigns and paid a $16.4 million federal penalty for delaying a recall.

Much has changed in recent years.

At the 2006 seminars, The Detroit News reported the "good-old days are over and they're not coming back," adding "Every company must adapt to this new reality or die trying." Then-GM chairman and CEO Rick Wagoner lashed out at the failure of Washington politicians to address major issues like health care costs.

"I do know the world is changing," he said, "and fast."

Cole said then the industry was facing pain and needed to accelerate its internet presence and search engine optimization efforts.

"The entire domestic industry is fighting for its life," he told The Detroit News in 2006. "They had to be scared."

State's Center For Automotive Research Tapped by Federal Task Force

Story from Michigan Business Review

Michigan-based auto industry experts are quietly playing an influential role in the deliberations of President Barack Obama's auto task force.

Among those directly communicating with the task force is the Ann Arbor-based Center for Automotive Research, whose chairman, David Cole, previously labeled pro-bankruptcy politicians "ignorant."

At least two officials from the University of Michigan's Transportation Research Institute also have met with task force representatives to discuss various industry issues.

The task force's decision to tap Michigan's auto expertise is reflective of the influence of independent analysts in the midst of the industry's life-threatening crisis.
"I think what everyone has discovered is there weren't very many people who knew a lot about the industry," Cole said. "And we have a lot of data and a lot of facts that I think have been very helpful. Ultimately facts are really important."

The experts' accounts of their communications paint a picture of a task force eager to absorb a wide swath of information about the industry and willing to consider a variety of options for preserving the domestic auto industry.

"We've had a fair amount of interchange," Cole said. "They're sitting down, meeting with the companies and other people that know a little bit about the industry and trying to come up with a solution to the problem."

The president's task force - which is led by Steven Rattner, Ron Bloom and Treasury Secretary Timothy Geithner - has not shown a willingness to cave to the auto companies' request for continuous investment.

Obama is said to be seriously weighing the prospect of helping General Motors, Chrysler or both delve into a quick, surgical bankruptcy designed to place the companies on the path to profitability.

And GM CEO Fritz Henderson is talking openly about the possibility of bankruptcy - a prospect his predecessor, Rick Wagoner, largely shunned. "If we're not successful doing it out of court, we'll do it in court," Henderson said at a press conference.

CAR's chief economist, Sean McAlinden, recently traveled to Washington D.C. to meet for two days with task force advisers, Cole said. CAR officials have vocalized a concern that bankruptcy for GM or Chrysler could lead to a cascading implosion of the auto supplier base, which recently received $5 billion in federal loans as a lifeline of sorts.

But in a D.C. press conference, Obama maintained that helping the major automakers return to profitability "may mean using our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger."

Despite the threat of bankruptcy, Cole praised the task force's deliberations. "They're smart guys working hard," he said. "I think the comments the president made the other day were good."

Cole, who told Business Review in December that bankruptcy of one of the major automakers would "kill Michigan," has softened his stance in light of Obama's decision to guarantee warranties for new car buyers.

"You have to provide protection for consumers," Cole said. "They're spooked enough as it is because of the credit crisis."

At U-M, meanwhile, analysts Walter McManus and Bruce Belzowski met with task force representatives - who were prepared with an exhaustive series of issues to discuss, Belzowski said.

Among the issues the task force wanted to discuss was the Chevrolet Volt, an extended range electric vehicle GM is expected to commercialize in November 2010. The Volt's 400-pound lithium-ion battery pack would allow drivers to travel 40 miles on a single charge of electricity before using gasoline.

The vehicle has drawn an abundance of attention and praise from alternative propulsion vehicle proponents. But Belzowski said that during discussions with the task force he emphasized that the Volt would cost between $30,000 and $40,000 and would be produced in small quantities at first.

It will be "a lot more expensive than the average buyer is willing to spend," Belzowski said.

That sentiment was reflected in the task force's report, which said the Volt was promising but would "likely be too expensive to be commercially successful in the short-term."