President Barack Obama hails it. Super Bowl commercials celebrate it. But is it real? I refer, of course, to the vaunted recovery of the Detroit automakers. Do you see the resurgence in the data as well as in the high-gloss ads? Not really.
There's a recovery of sorts. Sales of domestic autos are running at 400,000 to 500,000 a month. Americans spent $114 billion on them last quarter. In both cases, that's a return to pre-recession levels. But it's probable that the rebound is merely cyclical rather than the start of the secular revival that many have been quick to proclaim.
The U.S. economy is recovering from a deep recession. Historically, that's when orders of durable goods, including automobiles, tend to rise most rapidly. A rebound like that isn't a structural recovery, though. Consumers make catch-up purchases, deferred during the recession -- then growth in production of durables tends to subside.
Behind the business cycle, Detroit has been in decline since at least 1970. Recoveries haven't brought production and revenues all the way back -- recessions punch deeper and deeper into U.S. car manufacturing. Is this recovery any different for Detroit? No, probably not. There's nothing in production and sales data to convince an objective analyst that Detroit has broken this long-standing pattern.
Yes, Detroit has returned to where it was before the recession -- but that was the lowest it had been in decades. Domestic automobile sales ran at roughly 450,000 per month in the 2000s, 600,000 in the 1990s, 700,000 in the 1980s and 800,000 in the 1970s. (The decline happened despite population growth.) Car manufacturing makes up an ever smaller share of gross domestic product, falling from 5 percent in the 1950s to less than 1 percent last month. Jobs in the industry have dropped by 40 percent since 2000, from 1.3 million to 800,000.
If the recovery is nothing more than a cyclical bounce, it calls the bailout of the "Big Three" automakers into question. Obama claimed that this was not just an emergency rescue but a longer-term restructuring and a strategy for rejuvenation. "We will look back and say that this was the moment when the U.S. auto industry shed its old ways, marched into the future, remade itself, and once more became an engine of opportunity and prosperity not only in Detroit, not only in our Midwest, but all across America," he said in a speech on March 30, 2009.
Obama has since called the bailout a success. "We refused to let Detroit go bankrupt. We bet on American workers and American ingenuity, and three years later, that bet is paying off in a big way," he said last October. In an August campaign speech, he cited the bailout as a model for the federal government's relationship with other American manufacturers: "Now I want to do the same thing with manufacturing jobs, not just in the auto industry, but in every industry," Obama said.
Federal aid may well have staved off the automakers' collapse. And it's true, there was some real restructuring, including a new labor contract with the United Auto Workers and the discontinuation of several brands. But there was no rebirth.
Detroit now has a fresh problem to contend with. The Bank of Japan's new monetary policy has reduced the value of the yen by 20 percent. That will help Detroit's Japanese competitors. Wall Street is waking up to this. Shares of Toyota Motor Corporation and Honda Motor Corporation are up 70 percent and 60 percent respectively since last year. That's when it became clear that Shinzo Abe, who'd campaigned for monetary stimulus, would be elected prime minister. (So far, there hasn't been much downward pressure on shares of Ford Motor Corporation or General Motors Company, though.)
Americans are unwilling to subsidize Detroit forever, and who can blame them? The lesson may be, don't expect too much of a president, or a bailout, when it comes to reviving industries in decline.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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Evan Soltas at email@example.com