Fueled by the 2008 recession, the automotive industry suffered a crisis that hurt the United States’ national economy.
Lead Up to the Crisis
The automotive industry crisis of 2008–2010 was a part of a global financial downturn. General Motors, Ford, and Chrysler, also referred to as the United States Big Three automakers, had limited access to offshore production, unlike their foreign equivalents. The New York Times wrote, “For the most part, the so-called auto transplants – foreign-owned car companies with major operations in the United States – have deep pockets and ample credit, and they are not facing potential bankruptcy like General Motors and Chrysler." Because of the rise in gas prices, fewer Americans were buying cars, thus disturbing the automotive industry. As the New York Times believed, the only reason foreign-own car companies were not struggling was because they were getting sales from the
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Some also saw that the Chapter 11 would give more problem rather than fix them. Promoting a government-facilitated solution, the Brookings Institution argued that the Big Three make automobiles that not enough Americans want to buy. This, if found to be a problem, would not be solved by the Chapter 11 bankruptcy focused on cost-side considerations like wages and benefits. Their strategy would make the company better able to organize the plant and employee resources by transferring or selling the Big Three’s assets to other firms. Another idea that could have helped the bankruptcy would have been a merger between one or more of the Big Three. It would have facilitated cost savings and focused on the most profitable brands. Unfortunately, the United Auto Workers opposed the move because it would have involved layoffs. The Big Three were considering bankruptcy due to the fact that they were struggling to pay their employees the pay they
The Great Recession affected the stock and house markets hard. Automotive industry was not immune to the ramification of the Great Recession. Rising gasoline price crippled Ford Motor Company flagship vehicles such as the SUV and Pickup based on their poor gas mileage. Caught on their heels, Ford Motor Company had no affordable vehicle platform that obtained good gas mileage. Looking for a new path, Ford Motor Company went outside the company to hire Alan Mulally. Mr. Mulally worked for the Boeing Company for 30 years, starting as an engineer and finishing as the Executive Vice President (Bloomberg Businessweek). Sixty days on the job, Mr. Mulally started the restructuring of Ford Motor Company; moving it forward as a global comp...
Automobile manufactures, Chrysler was hit hard by the automotive industry crisis of 2008-2010, and along with General Motors, received billions of dollars in loans from the United States government in late 2008 and early 2009 to prevent both companies from shutting down. Chrysler Walter Chrysler production facility produces V-8 engines and finished automobiles.
Snyder, M. (2012, January 19). 17 Facts About The Decline Of The U.S. Auto Industry That Are Almost Too Crazy To Believe. The Economic Collapse. Retrieved November 17, 2013, from http://theeconomiccollapseblog.com/archives/17-facts-about-the-decline-of-the-u-s-auto-industry-that-are-almost-too-crazy-to-believe
Picciotto, Dan and Nishit K Madlani. "The Global Auto Industry Shifts Its Focus To OVerseas And Emerging Markets." Credit Week (2013): 26. Online. 21 May 2014. .
In the latter part of 2008, the United States’ economy was rapidly plummeting - the stock market crashed, the housing bubble burst and gas prices skyrocketed. The majority of U.S. based firms faced the reality that they would not be able to survive during such desperate economic times. The U.S. automobile industry, in particular, began to buckle under the depressed economy. The government stepped in proposing a multi-billion dollar bailout to stimulate the economy and restore economic balance. The possibility of this unprecedented government intervention was condemned by many economists. If the government helped the ailing automotive industry, this industry would have to tighten their expenditures and plan for the future to prove to critics of the bailout that they would use the government funding to add value to the economy once again.
In addition to a poor organizational structure, Chrysler suffered from ineffective leadership. Before Iacocca, senior management was saturated with people who did not understand the auto industry. Management consisted of financial experts focused solely on tasks such as monitoring short-term results and Chrysler's stock price as opposed to a long-term vision and effective growth strategies. This led to a shortage of capital for investment in the design and engineering of new products critical to the future of Chrysler.
In a capitalistic country with a free market, foreign competition is expected. This is no exception for the automobile industry where America competes with its various rivals. Competition from elsewhere encompasses that from Italy, Germany, and of course, the renowned Japan. The Japanese vehicle industry is especially competitive; according to the Automotive News Data Center, five out of the ten best selling vehicles of the year are Japanese vehicles. This data applies to the U.S. market over the first 9 months of the year. Expectedly, the automobile industry is an important and significant market. Motor vehicles are a major form of transportation as many people in the U.S. own at least one car.
The 2008 American recession threatened the very existence of General Motors as a maker of automobiles. Their bad reputation of being male-dominated
The United States recession (which lead to a world recession), began in 1997 and significantly impacted the United States automobile industry during the recession period. The United States automobile industry is still reeling from the effects of the recession throughout the period of economic recovery that continues today. According to Chu and Su, “In this credit-driven recession, one of the hardest hit sectors was the automotive industry, along with the housing and financial markets. Chrysler and General Motors were pushed into bankruptcy; and 276,000 jobs in the automobile and parts industry were destroyed, a whopping 36 percent of the total employment in the sector”.
In many ways, the automotive industry has huge impacts on Canada. The impact it has creates jobs, and services. It also boosts economy and contributes to its success. Over the last two decades, the automotive industry has been a leading contributor to Canada’s economy and is a primary factor as to whether or not the economy will be successful. There are many contributing branches of the sector that allow it to be successful. This is shown through the production and manufacturing of vehicles, as well as the sale of the vehicles. The automotive industry has had a significant impact on Canada’s economy over the last 10 years. If the production and sale of domestic vehicles were to decline, Canada’s economy to be severely crippled and fall back into a recession.
The automotive sector is a major industry in America. The invention of the automobile in the late 1800’s revolutionized transportation. It wasn’t till Henry Ford in 1903 with his Ford Motor company, was the automobile made available to everyday Americans. Ford’s invention of the assembly line brought the automobile sector into a large industry in America’s economy. According to Veronica Franco of Market Research stated that in 2010 the auto industry had a global value of $728.3 billion. He projects that at the average growth rate of 24.1%, like what we saw from 2009 to 2010, by 2015 the value of the industry will be at $904 billion. So what does this mean for the future of this industry? It is going to continue growing. To see where the industry is going, one must look at the past, present, both the American and global sector, and the future projections.
The American auto industry is in a crisis, their vehicles are not in demand and they need government bailouts to keep their businesses afloat. American vehicles are not on demand because people want fuel-efficient, the car companies that are not at the point of bankruptcy, longer lasting vehicles, and hybrid cars. The American car companies are at a point of bankruptcy and people don’t want to buy cars from a company that may not be there in a couple of months. The foreign car companies are doing well and they much more dependable now that we are in an economic crisis. American cars are not fuel-efficient, not as long lasting, and don’t make many hybrids, so this affects their business negatively. I got some ideas that will make American car companies be on top of the industry again.
The decline in Profit margin in 2014 was because of their less revenue in the North American market where they make good margins with their larger vehicles as shown in Figure
First, the automobile industry is in the decline period of its life cycle (Whytcross, March 2014) w...
This report is a case study on the Australian Automotive Industry. It identifies and describes the five force analysis developed by Michael Porter, and applies this framework to the industry in order to analyse the impact of profitability. Economic analysis is conducted to help support the framework and explores a variety of concepts in order to determine the potential profitability in the industry and whether it is growing or declining. The key success factors that are considered in the report for the Australian Automotive Industry are economies of scale, flexibility to adopt new technology, ability to obtain finance and development of strong supplier relationships (IBISWorld, 2014). These factors are analysed to justify the potential profitability that the industry currently offers and how each force is impacted in relation to these key factors.