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\ABS\Auto Blog Samurai\data\insurance\wwwallstatecom\automakers+have+trimmed+production+which+has+helped+boost+profits_16000325_800710738_0_0_14038478_300.jpg "Automakers have trimmed production, which has helped boost profits.")
Even though consumers aren't buying new cars at the same rate they used to, the automotive industry is performing quite well, according to The Wall Street Journal*.
This was illustrated by a large proportion of automakers which recently reported their sales totals for January. As compiled by the Detroit Free Press**, Chrysler generated a 44 percent sales increase compared to the same month last year—moving more than 101,100 vehicles—making January 2012 its best start to the year since 2008. Fellow American car maker Ford also fared favorably, with sales totals up a more modest 7 percent.
Michael Jackson, chairman and CEO of Ford, said the entire automotive industry went through a significant transformation after receiving a bailout from the government.
"It is a new world," Jackson told the Wall Street Journal.
Automakers have reduced operating costs
Instead of oversupplying their inventories, Jackson noted that automakers have generally been trimming back on their supply levels so that output is more commensurate with demand. In addition, instead of relying on discounted offers to stimulate demand, manufacturers have implemented some of the things that surveys have suggested consumers want, such as putting more of an emphasis on the quality of vehicles' exterior design.
"This type of behavior simply didn't exist in the U.S. auto industry for 40 years," Jackson told the newspaper.
Last year, automakers sold approximately 13 million cars and light trucks throughout the U.S. At one time, that amount of automobiles sold would be viewed as a negative for the car industry as a whole. But today, it translates into a boon for the sector, according to Peter Nesvold, a leading financial analyst expert, in an interview with the Journal.
Closing plants reduced production capacity by 30 percent
He noted that today's automakers have reduced their operating costs significantly by closing down factories that aren't producing as much as they used to. This has reduced production capacity considerably but also helped to offset losses experienced during prolonged periods of reduced buying among consumers.
"Supply and demand are roughly equal, and that's healthy," Nesvold told the newspaper.
Sales haven't improved for everyone, however. As the Detroit Free Press reports, General Motors sustained a net loss for car sales in January, falling by 6 percent year-over-year. This may stem, in part, from the bankruptcy filed by Saab in late December, which GM owned.
Overall, however, automakers' sales climbed in January, with Nissan, Toyota, Hyundai and Honda all reporting increases in sales volume, according to the Detroit Free Press.
*according to The Wall Street Journal on January 27, 2012
**according to the Detroit Free press on February 1, 2012
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