In April 2009 Ford declared that it would not need government aid and claimed that it had a plan to break even in two years. Ford has been ahead of its main rival General Motors in scaling down its business by selling Aston Martin, Land Rover and Jaguar over the past two years. GM, meanwhile, went through a massive reorganization after filing for Chapter 11 bankruptcy proceedings. GM is temporarily majority owned by US government after it invested $57.6 billion in the company.
Per the plan GM executives presented in congressional hearings the company would reach the break-even point by 2011. They further declared that they would cut costs by eliminating 47,000 jobs, closing five more unprofitable factories and cut at least $18 billion in debt from its balance sheet. It was expected that these cost cuts would allow the company to break even when the U.S. auto market returned to between 11.5 million to 12 million vehicles sold per year.
J.D Power and Associates, a global marketing information services firm, announced its projections about the new automotive industry break-even point. According to Gary Dilts, senior vice president of U.S. automotive at J.D. Power and Associates, due to cost-cutting measures such as renegotiation of union and supplier contracts, the break-even point for the domestic automotive industry will decrease by more than 2 million units when comparing current industry conditions to those forecast in 2010. Dilts explains the reason for this decrease due to the significant declines in the auto industry which resulted in lost sales volume of more than 7 million units between 2000 and 2009. This sales volume makes $175 billion in net revenue. Continue reading ‘Break Even Point For The US Domestic Auto Industry’ »