There's a growth binge planned for Detroit's two largest automakers, but it mostly won't be happening at home.
In separate day-long conferences this week, General Motors Co. and Ford Motor Co. raised bullish prospects for fatter profit margins and expanded production volume, focused intently on luxury car buyers, emerging markets and a quickly maturing China.
"It's about growth," GM CEO Mary Barra told investors and analysts Wednesday at the automaker's Global Business Conference. "We know we cannot become the most valued automotive company if we do not grow."
Yup, and a whole lot more. With wrenching bankruptcy and restructuring now replaced by near-record profits, sizable cash hoards and stocked product pipelines, GM and Ford are pursuing growth opportunities in the fiercely competitive luxury space and new, if often volatile, markets far from North America.
That's good news and bad news for the home of the U.S.-owned auto industry. Sustained profitability at home — bolstered by substantially lower break-even points and pent-up demand — is likely to be increasingly affected by the global instability that roiled equity markets Wednesday and caused Ford to downgrade its earnings expectations for the year.
The truth is this: The mature markets of the United States, Canada and western Europe are no longer dynamic enough for long enough to drive the kind of growth trajectory that would draw smart money to Detroit. Despite strong vehicle sales in the States, underscored by strong September sales, longer-term trends tell the tale.
Between 2000 and this year, according to GM, China accounted for 72 percent of global industry growth as so-called mature markets shrank by 14 percent. Yes, shrank. Emerging markets that grew 42 percent over the same period are estimated to expand by 55 percent between next year and 2030 as China slows.
In 2000, Ford says, North America accounted for 36 percent and Asia-Pacific 23 percent of the global industry's 58 million cars and trucks. Last year, the North America claimed 22 percent of an 85 million-unit global market, with Asia claiming 45 percent. By 2020, North America is expected to be just 19 percent of 110 million cars and trucks worldwide, with Asia accounting for almost 50 percent.
The arc of change is undeniable. Also driving the priorities of GM and Ford, at home and abroad, are the disproportionate earnings power of the luxury business (explaining, yet again, the renewed emphasis on Cadillac and Lincoln) and their bread-and-butter full-size trucks. Together, the two segments account for 14 percent of global volume but deliver 60 percent of the profits.
"There is tremendous potential for growth in this industry," GM President Dan Ammann said. "There is tremendous potential for growth at General Motors. The fundamental message is we're just getting started from a product perspective."
Talk about a turnaround. Less than six years ago, GM collapsed into a humiliating bankruptcy; mulled selling its European operations, imperiling roughly half of its product development apparatus; and began changing CEOs (and direction) with counterproductive regularity.
Ford eschewed direct federal support, but privately negotiated with Japanese rivals Toyota Motor Corp. and Honda Motor Co. to shore up their mutual supply base should GM collapse and take the industry with it. And Chrysler Group LLC, now a unit of Fiat Chrysler Automobiles NV, is showing a muscularity all its own.
The net effect is largely retooled companies eyeing opportunity in an industry Barra says will change more in the next 10 years than it has changed over the past 50. Demands for connectivity, alternative propulsion and autonomous vehicles are driving an accelerating pace of innovation.
Add the emergence of new start-up competitors like Tesla, the California electric car maker, and new foreign markets filled with customers hungering to own their own vehicles, and the new chapter in the development of the auto industry is less a tired tale of "Old Economy" and more a growth story.
Detroit, in sharp contrast to not too many years ago, is in a position to compete. Its players have the capital and the technical capability and the realistic leadership to, as Ford CEO Mark Fields put it, manage the world as it is, not as they want it to be.
But not without a price: the reality of the global economy is that as much as Detroit's automakers have a credible shot at shaping the future of the industry, their home market will be an increasingly small part of a big world.
Daniel Howes' column runs Tuesdays, Thursdays and Fridays.