Changing lanes? Helped in part by Toyota's problems, American carmakers are starting to show signs of life.

• Author: Smith, Patricia
• Position: NATIONAL

It's been the roughest of rides for U.S. carmakers the last few years. In 2008 alone, the "Big Three"--General Motors, Chrysler, and Ford--lost $53 billion--even after shedding more than 100,000 jobs. Then the 2008 economic crisis brought Detroit to the brink of collapse and forced G.M. and Chrysler to beg for billion-dollar government bailouts just to stay in business.

It was a long way from the glory days when Detroit automakers collectively employed almost 1 million Americans and controlled more than 90 percent of the U.S. car market.

Now, however, things may be starting to turn around for Detroit, in part because of a big competitor's troubles of its own.

Japanese carmaker Toyota has long been known for the quality of its products--one reason it overtook G.M. in 2007 as the world's biggest carmaker.

But starting in January, it was forced to recall more than 8 million vehicles because of problems with runaway acceleration and faulty brakes.

Toyota's market share fell that month to its lowest level in four years, as both G.M. and Ford reported double-digit sales increases over January 2009 (see chart). In an even more significant sign of the industry's improving health, Ford--the only Big Three carmaker not to take federal bailout money--reported a $2.7 billion profit for 2009.

"I do believe strongly now that the Detroit automakers are on the edge of something very good," says Gerald C. Meyers, an auto industry expert at the University of Michigan. "Going forward now, the old problems are fundamentally resolved--the costs are down, and the products coming are going to be much better--at least at G.M. and Ford. These companies are poised for a good market."

Chrysler, however, may be another story. Now controlled by Italian automaker Fiat, Chrysler's sales have fallen for 25 consecutive months, even when sales at Ford and G.M. picked up in January. Many analysts are pessimistic about its prospects for survival.

GOVERNMENT BAILOUTS

When it became clear last year that without bailouts G.M. and Chrysler would collapse, Washington stepped in with more than $62 billion in loans to the two companies. They both ended up filing for bankruptcy anyway, leaving the government owning 60 percent of G.M. and about 10 percent of Chrysler.

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Detroit's troubles have been decades in the making. The auto industry was once the engine of the U.S. economy; indeed, it was often said, "As G.M. goes, so goes the nation."

But several critical...