A fresh start for a new year
We expect 2014 to be a good year but one that will present new challenges. The period of rapid U.S. auto sales gains is over. A slower growth rate in 2014 will create more pressure on margins and more temptation to revert to bad habits, particularly overproduction and excessive incentives.
Still, the year holds promise. The economy is improving; interest rates are still near historic lows; fuel prices are easing.
The long recovery helped the auto industry put its house in order. Free from crises, most automakers, suppliers and dealers can focus on the fundamentals of their businesses. Nowhere is that more apparent than at General Motors and Chrysler, which start the new year free of the big structural distractions left over from their 2009 bankruptcies. With the U.S. government selling off its equity, GM has shed its "Government Motors" label.
Last week's agreement for Fiat and Chrysler to buy out the equity held by a union trust fund for retired worker health benefits lets Fiat complete its consolidation of Chrysler. And it helps the UAW by separating legacy health care cost funding from the performance of Chrysler stock. Both sides are structurally sounder with the agreement.
By addressing old problems, the industry is better prepared to face new challenges.