Auto Show opens amid optimism

When the auto industry ran off the road in 2008, sales plunged 35 percent over two years and General Motors and Chrysler ended up in bankruptcy, borrowing from the federal government.

But now, with a modest recovery already in the rearview mirror, and GM's government loans repaid -- Chrysler is hoping to pay off its own this year -- 2011 looms as a big opportunity for the automakers.

As the annual Twin Cities Auto Show opens Saturday at the Minneapolis Convention Center, auto sales are being buoyed by a combination of pent-up demand and incentives, say executives of GM, Ford and Toyota. Those companies, plus Honda, collectively account for nearly 62 percent of U.S. vehicle sales.

Industry tracker Ward's Auto says U.S. consumer car and truck sales are expected to rise 13 percent this year to 13.1 million vehicles. While that's still about 3 million vehicles shy of 2007 U.S. sales, it's up almost 3 million from 2009.

"It feels like the business is starting to come back," said Michael Sanders, vehicle field sales manager for Toyota's Chicago region, which includes the Twin Cities. "That's a good thing for everybody."

For Detroit automakers, it's about making bigger profits on fewer car sales, said Steve Finlay, editor of Ward's Dealer Business Magazine.

"In years past, Detroit auto companies made cars and figured out afterward what to do with them," Finlay said. "They had to because they had high fixed operational costs. But they often lost money on some vehicles. But now, as a result of almost going out of business, the domestic car companies have reduced car production, and they're making more money per car."

"The whole industry was quite down last year, but 2011 is looking to be very competitive and, unless there's a major oil crisis, it will be bigger than last year by all the industry estimates I've seen," said Dan Nicholson, GM's vice president of global quality in Detroit. "We're fighting for market share and we think our improving quality story is an important part of that."

The domestic car makers got a boost last June, when industry watcher J.D. Power and Associates said that its survey showed, for the first time in 24 years, that American cars had a slight quality edge over imports.

The Midwest has always been strong for domestic automakers, which dominate the pickup business. Minnesota auto sales rose 3.7 percent last year -- and all of the gain was due to trucks, according to the Minnesota Automobile Dealers Association. Car sales dropped 5.8 percent to 56,296, while truck sales were up 13.7 percent to 64,607. About 48 percent of new vehicle sales in Minnesota were from the domestic makers, compared to their national market share of slightly under 45 percent.

Toyota had the opposite problem in 2010, when it lost business due to recalls for accelerator-related problems, although the federal government ruled this year that ill-fitting floor mats and not bad electronics were to blame. Now it's trying to make up the lost ground -- and then some.

"The loyal customers who had bought four, five or six cars in the past stayed with us, but some of the customers who would normally consider Toyota took us off their lists and that resulted in us losing some market share," Sanders said. "Ford happened to have new products at the time the Toyota recall hit, and they gained some market share."

Small changes in market share are the norm, Nicholson said.

"I do expect us to make big gains in market share in 2011, but when I say big I don't mean I expect to be gaining 3 or 4 percentage points of market share," Nicholson said. "It's little by little. In addition, how much share we gain will depend on how big the auto market is. We're capacity-constrained on building the Chevy Equinox, and we're already selling all we can make."

But while it looks like a better year for the auto industry, it also promises to be a more competitive year.

"Obviously there a moment here in which we could capture some market share, and get some buyers back to our brand," said Paul Russell, Ford's marketing manager for cell-phone-compatible Sync products in Dearborn, Mich. "But the competition is stronger than ever, from the domestic car companies and from the Japanese, European and Korean companies."

Steve Alexander • 612-673-4553