The US auto industry is booming, surging to an annual sales pace not seen since before the Great Recession. There’s a good chance that 18 million cars and trucks will be sold here by the time the books are closed in December.
This is great for just about everyone selling cars in the US. But the industry hasn’t forgotten the dark days of 2008-09, and in particular a cataclysmic 2009 when the annual sales pace plunged below 10 million.
It would be extremely unlikely for that to happen again, at least not for quite a while. But when General Motors had to be bailed out and went bankrupt in ’09, the company emerged much leaner, shed debt, and was supposed to be able to break even in a 10-million market.
According to GM vice-president Mark Reuss, the automaker can now break even in a market below 10 million. Reuss, who oversees all product development for GM, pointed this out a roundtable discussion with several journalists at the LA Auto Show. A few of us were so stunned that we asked him to repeat himself, which he proudly and happily did.
For perspective, Barron’s reported earlier this month that in 2007, GM required a sales pace of 16 million to break even. Effectively, the “old GM” needed sales to be headed in the direction of a boom just to keep from losing money.
At the moment, GM holds around 17-18% of a market that’s closing in that 18-million sales pace. Times are good — much, much better than during 2009. But the ability to stay in business even if the market again completely craters is impressive. It means that GM should be able to hit its basic profit targets in a market of 14-15 million in annual sales and stretch in a market like the one we’re in now.
GM continues to have numerous challenges and will need to guard against becoming dependent on sales of big trucks and SUVs, which are once again popular with consumers in a world of cheap gas and low interest rates. But despite the opportunity to sit back for a bit and watch the money roll in, GM hasn’t forgotten what was the worst episode in the company’s more than 100 year history.
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