Detroit Automakers' Sales Turnaround Due in Part to Fuel Efficiency

Detroit Automakers' Sales Turnaround Due in Part to Fuel Efficiency

In the last two weeks, Ford, General Motors and Chrysler have all released positive earnings reports, with Ford boasting its biggest profits in more than a decade and Chrysler posting its first profit in five years.

Among the drivers behind this shift: A renewed focus on fuel efficiency and building smaller cars, two factors that have helped the American automakers increase their sales and weather rising gas prices.

"With the fuel prices moving up, we now have the vehicles that people want," Ford CEO Alan Mulally told Bloomberg. "The largest vehicles are slowing down a little bit, but all these smaller ones from Ford are now available."

The Ford Fiesta (pictured at left) subcompact car is one of the new, smaller vehicles that has helped earn Ford $2.55 billion in profits in the first quarter of 2011.

General Motors too saw big sales of small cars: Its Cruze economy car was one of the vehicles selling in record quantities, leading to an overall 27 percent increase in sales in April 2011 over the previous year. GM will report its quarterly results on Thursday.

Chrysler managed to turn a $116 million profit in the first quarter, its first since 2006. The company's CEO, Sergio Marchionne explained during its earnings call that although it still has a heavier reliance on SUVs and light trucks than its competitors, Chrysler will still see a 25 percent improvement in its fuel efficiency between 2010 and 2014.

"I know there are concerns about rising gas prices, but we have not stood still in terms of improving the fuel efficiency of our fleet," Marchionne said.

The quarterly and monthly earnings mark a turnabout from three years ago, when skyrocketing gas prices and the start of the economic recession nearly collapsed the Big Three automakers. GM and Chrysler have since come out of bankruptcy and Ford managed to turn itself around on its own, and all three have stepped up their focus on greener, more efficient vehicles.

Ford has been greening all fronts of its business, from unveiling a batch of electric vehicles during the Detroit Auto Show to boosting the fuel efficiency of its signature SUV, the Explorer, by 30 percent. The company is also steadily expanding its use of biobased materials, recycled materials and a number of other technologies to reduce the emissions of its vehicle fleet.

General Motors, as we reported this week, received the most clean-energy patents in 2010 as part of its drive to create more efficient vehicles, and has managed to make half of its facilities landfill-free, as part of its ongoing zero waste program.

Although Chrysler is arguably the slowest mover among the Big Three in terms of reducing its environmental impacts, this week's news about its progress seems to bear out the prediction from 2009 that a post-bankruptcy Chrysler will be leaner and greener.

It remains to be seen, of course, how long the market shifts toward more efficient vehicles, but in a just-published article in the Wall Street Journal, GM's sales chief, Don Johnson, suggested that his company believes the trend is here to stay.

"People, we're seeing the writing on the wall," Johnson said, referring to the rising gas prices. "Consumers are continuing to rethink their vehicle choice."

Fiesta photo courtesy of Ford.