Outbreak of optimism in Detroit as motor industry hopes the worst is over

• Chrysler and Fiat join forces to launch smaller, greener cars• Monthly car sales in the US have stabilised
Andrew Clark in New York
guardian.co.uk, Wednesday 4 November 2009 19.01 GMT
It is too early to hang out any bunting but quietly, tentatively, a more upbeat mood is spreading in Detroit's downtrodden, downsized motor industry.
Chrysler set out ambitious plans today to use technology gained in its tie-up with Italy's Fiat to bring a new generation of smaller cars to US streets. Its proposals, outlined to analysts at its Auburn Hills headquarters, came two days after Ford surprised Wall Street with a $1.1bn (£670m) profit, its first quarter in the black since early 2008.
And industry-wide monthly US vehicle sales for October were flat year-on-year, a sign of stabilisation even without the "cash-for-clunkers" boost.
After $80bn of emergency aid from the US government, two major bankruptcies, scores of factory closures and tens of thousands of job losses, the industry may, finally, be past the darkest point of its trauma.
Jeff Schuster, head of forecasting at the research firm JD Power, said that if he were a car factory worker, he would feel more secure in his job. "I might be able to breathe a little bit with relief that I'm probably not going to end up in an unemployment line," he said.
General Motors' decision to hang on to its European operation – greeted with relief at Vauxhall factories in Britain – is a sign of confidence that its financial health has improved sufficiently to invest in turning around a loss-making yet technologically promising operation. GM, which is 60% owned by the US treasury, has cut its workforce from 318,000 three years ago to 209,000 globally and has got rid of brands such as Hummer, Saab, Pontiac and Saturn.
Over in Japan, Nissan returned to the black this week by delivering a 25.5bn yen (£169m) quarterly profit, ending nine months of losses. And Toyota raised its target for its sales for the year to March 2010 from 6.6m vehicles to 7m.
Chris Hopson, an automotive analyst at IHS Global Insight, warned that the US economy remained extremely weak. He expects US vehicle sales of 10.3m this year and 11.5m next year. But the real recovery will not be until 2011, with sales of 13.8m, and 2013, when he expects sales to return to the 16m-plus level of before the slump. "It's a little bit early to declare victory for any of these companies," he said. "But do all these numbers improve sentiment? Yes."
In Detroit this week, voters re-elected a former basketball star, Dave Bing, as mayor, buying into an upbeat message of renewal. "This is our time to shock the world," he said. "Because nobody thinks we're going to come back."