World comes crashing down

Font Size

Print

Feedback

Email

Discuss

Related Articles

Vehicle sales hit 11-year low in DecemberHonda’s new zero-emission, hydrogen fuel cell car ...

: Industry sales in the United States have fallen 14.6% this year, including a dismal 31.9% drop in October according to The New York Times. Sales began declining in the spring because of rising gas prices, but have since gotten worse. The sales rate in October was the lowest recorded in 25 years. It reports how the Big 3 — Chrysler, Ford and GM, have endured humbling times before, but nothing like the situation they faced in the fall of 2008, when their chief executives turned to Washington for not one but two bailouts. A measure of their plight could be found in one of the arguments against the second bailout: that even the $25 billion in cash the companies were seeking (on top of $25 billion in loan guarantees already pledged) might not be enough to keep them alive.

Accordingly the first bailout was requested in September, after a summer in which record gas prices had led to consumer flight from the pickup trucks and sports utility vehicles that provided the bulk of the Big Three’s profits. Industry leaders sought and received $25 billion in federal loan guarantees, money designated for speeding the makeover of Detroit’s product line to feature smaller, more efficient vehicles.

The second request came six weeks later, after sales had plunged across the industry in the face of consumer fears and the drying up of credit in the wake of Wall Street’s meltdown. The goal of that bailout was simple survival, as General Motors and Chrysler watched their cash reserves burn toward zero and Ford worried about being pulled under by their collapse.

The global automotive industry has undergone such dynamic changes that it may be split into contrasting yet interlinked performances of the automotive industries of developed countries on one hand and developing countries on the other. As Yashika Singh, Head Economic Analysis, Dun & Bradstreet, India opines, the impact of the global economic meltdown has resulted in a critical slowdown in the automotive industry, with the developed nations suffering a major setback. Moreover, rising cost of production has been eroding the competitiveness of most of the top original equipment manufacturers (OEMs) and auto components manufacturers in major markets.