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Tuesday, July 10, 2012

Ford, GM and Volkswagen Top List Of Fortune's List Of World's Most Profitable Companies

Things are looking up for the auto industry: Just three years after the car industry's future seemed bleak and unredeemable, signs of a comeback are all around. Fortune's Global 500 ranking, released on Monday, listed three automakers among the world's most profitable companies.
Volkswagen and Ford landed in the 13th and 14th spots, respectively, with General Motors ranked as 48th. This is the first time in at least a decade that more than one carmaker made the top 50 list.
This stands in stark contrast to the situation in 2008 and 2009, when the global car market crashed. For a time, before Congress voted to extend aid to the industry, it seemed as if General Motors and Chrysler might fail and disappear. The two companies ended up with government-led bankruptcies, emerging with billions in government aid, as well as fewer workers, health care obligations and manufacturing sites.
The downturn in the economy enabled the entire industry to become healthier. Ford was able to make major changes in its union contracts and close plants because the crisis gave auto companies the cover to reopen labor contracts and make changes to health care agreements, pensions and the size of their workforces.
Automaker profits in the United States have risen across the board even though the number of their car sales annually is still diminished from a peak level of 17 million in 2005.
"They're now lean and mean," said Charles Chesbrough, a senior economist at analyst firm IHS Global. "They are making very good money at much lower sales volume than they could have handled previously."
Sequel, a hydrogen fuel cell-powered vehicle from General Motors
Sequel, a hydrogen fuel cell-powered vehicle from General Motors. (Photo credit: Wikipedia)
President Barack Obama has been making ample use of the American auto industry's newfound success on the campaign trail. Last week, he flew to Toledo, Ohio, where Chrysler's Jeep plant is located, got on a bus and made several stops in Ohio and then Pennsylvania. In his speeches, he has pointed out that his opponent in November, Mitt Romneywanted to let the automakers go bankrupt without any government intervention.
"And now Chrysler is back, and GM is the No. 1 company in the world, and Ford is on the move," he told voters on Saturday at a campaign stop in Poland, Ohio. "What happened in the auto industry can happen in a lot of other industries because I believe in American manufacturing."
The Volkswagen Group, however, achieved its success without the help of the U.S. government -- or taxpayers. The automaker went through its own major restructuring in 2006, slashing 20,000 jobs. The company fired its CEO that year, and soon after set an ambitious goal: It would become the world's largest automaker by 2018 and double U.S. sales in that time frame.
The German automaker, which makes the Volkswagen, Audi, Bentley, Bugatti, Lamborghini and Porsche brands, hit its goal of becoming first in global auto sales in 2010; GM came in first in 2011. But the Volkswagen Group is still trying to expand its U.S. sales. The automaker sold about 300,000 cars in the United States in 2011, an increase of 100,000 from 2009. But the company still has work to do if it wants to reach its goal of selling 500,000 cars in the United States each year.
Chesbrough said Volkswagon's global approach has helped it achieve its goals. The automaker is well ensconced in markets in China, India and Indonesia, as well as in Latin America, having made inroads in these developing countries long before other carmakers even considered expanding there.
But all the recent successes that have put Volkswagen, Ford and GM atop Fortune's list could be reversed, and the global economy could weaken, Chesbrough warned. If the European crisis results in a breakup of the eurozone, that could freeze credit around the world and make it difficult for people everywhere to buy cars. This could cause a repeat of the auto industry's crisis in 2008 and 2009.
"If it does go south, it will have very detrimental effects on the auto industry," he said. "But that's a worst-case scenario."
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