Early Thaw for U.S. Auto Industry Can't Offset Nuclear Winter

A modest recovery seems to be shaping up for the “U.S. auto industry,” starting with third-quarter financial results, but let’s not forget that by “U.S. auto industry” we mean only the portion of the U.S. auto industry that’s still in business.

The recovery follows a nuclear winter, with effects that will be felt for years to come.

Some analysts expect Ford (F) to approach breakeven or even make a profit for the third quarter. Daimler (DAI) and Mazda (MZDAF.PK), two very different companies which both depend heavily on the U.S. market, each posted a small quarterly profit for their global operations this week, following three quarters of losses. Some of the biggest auto dealer chains in the United States, led by AutoNation (AN), also posted quarterly profits.

Of course, there’s always the possibility that the third quarter was a
 fluke — especially since the temporary Cash for Clunkers program boosted
 auto sales considerably in late July and most of August. For now,
though, things are looking better than the pessimists had anticipated.

Auto sales didn’t fall in September as much as some had feared, after Cash for Clunkers was discontinued. Several analysts now expect U.S. sales to bottom out this year, with a gradual recovery in 2010.

Regardless, there’s no rosy dawn for the tens of thousands of auto industry jobs that have been lost at Chrysler, Ford and General Motors; the thousands of Chrysler and GM dealerships that are being closed; the billions of dollars in debt that bankruptcy erased at Chrysler, GM and numerous auto supplier firms; or the factories that are being shuttered.

All that comes under what corporations often label “discontinued operations,” a convenient construct for sweeping bad decisions under the rug.

Motors Liquidation Co. (MTLQQ.PK) is an apt example. That’s the name General Motors gave to the factories and other operations it’s getting rid of under its bankruptcy reorganization.

Selling off factories that GM no longer needs is just about as tough as it sounds, based on recent remarks by Al Koch, vice chairman of Alex Partners and president of Motors Liquidation Co.

“We’ve got a collection of old industrial properties at a time when nobody’s looking for old industrial properties,” Koch said in an auto industry panel discussion in New York earlier this month at the Columbia University School of Business.

“Most have some environmental remediation that needs some taking care of … It’s going to take a considerable amount of time in order to dispose of these properties … The disposition of old GM properties is going to take a few years and a lot of dedication,” he said.

In the rush to report signs of a recovery in the next few quarters, Wall Street and us media could forget to add a big asterisk: “not counting discontinued operations.”

Chart: GM