Five or more years down the road, we'll see an altogether revamped U.S. auto industry, with at most two carmakers, far fewer parts makers, slimmer dealer networks and very different cars.
U.S. sales will hit 13.5 million vehicles by 2011, rising to 17.2 million by 2019. That's equal to the 2000 peak and almost double the trough of 9.5 million vehicle sales likely for this year.
Foreign firms will keep producing cars here to save on shipping costs and limit currency risks. They'll soon hit parity or better with U.S.-owned firms and even surpass them slightly in the next decade. Just a couple of years ago, Detroit had a 2-1 edge.
Come 2019, U.S. firms will make nearly half of the 10 million vehicles manufactured on U.S. soil. That compares with 5.5 million made here this year.
Imports, meanwhile, are sure to go up, from 4 million today to about 5.5 million in 2011. Look for 7.2 million imported vehicles in 2019.
Expect 250,000 more industry jobs to go by December 2010, as the Chrysler and General Motors (GM) bankruptcies play out. Personal income lost will top $13 billion between now and the end of 2010. Job losses won't be limited to the major auto centers in Michigan, Ohio, Illinois and Missouri, but will extend nationwide as dealers close and parts suppliers cut back. Hardest hit: Alabama, Arkansas, California, Florida, Iowa, Kentucky, New Jersey, New York, North Carolina, Pennsylvania, Tennessee, Texas and Virginia.
Southeastern states stand to gain as Toyota and Honda expand production along with other foreign based firms. Parts suppliers are also migrating southward.
As the industry adapts, the cars Americans drive will change dramatically. They'll be more agile and more fun to drive, with Indy racer pickup and handling. Vehicles will weigh 500 pounds less, with better weight distribution.
New materials are sure to inspire designers, who'll offer head turners that fire up sales without relying on $5000 incentives that sap company profits.
There'll be even more improvements, too, on safety, but expect a learning curve for drivers, especially baby boomers not used to autos that offer almost a joystick experience in their quick and easy response to the driver's touch.
Cars will get better gas mileage, of course, with hybrids starting to rule the highways. They'll account for 50% of vehicle sales by 2015, up from 3% now. The hybrid boom will hit late in 2011, when 2012 models are rolled out and stiff new miles-per-gallon (mpg) regulations really kick in, says John Wolkonowicz, a senior automotive analyst with IHS Global Insight, an economic consultancy. But making cars that are capable of getting 40 mpg means adding $1500 to their production cost.
Most likely winners over five years: Toyota, Honda, VW, Ford and maybe GM. Others won't crumple overnight, but more consolidation and cost cutting are inevitable among Fiat, Subaru, Suzuki, BMW and a gaggle of Chinese and Indian competitors.
Chrysler is in the weakest position of U.S. firms. It has no new models, the lifeblood of carmakers, and there's no more federal aid in sight. "Chrysler will emerge from bankruptcy, but after Daimler sold it to Cerberus, there was only a shell of a company left, and Chapter 11 reorganization has gutted it even further," says Wolkonowicz.
Odds favor a GM-Ford merger or partnership by 2020 so they can compete profitably against other behemoth automakers domestically and especially in China, which soon will vastly exceed the U.S. as the world's largest new vehicle market.
Consolidation won't be done just for bragging rights. "Global-scope purchasing and manufacturing operations are needed to bring competitive, profitable vehicles to market with development costs that are astronomical and not going down," says Jeremy Anwyl, CEO of Edmunds.com, an auto industry consultancy.
