autoevolution
 

Automotive industry says: “Bring the pain!”...

... just like it was a line from a B-category action flick or the name of Method Man's '90s single. Everybody is preparing nowadays to take the world economic recession head on. Regarded by some as one of the barometers of the world economy, the automotive industry is also trying to survive, even though sales are tumbling, profits are turning into losses, plants are closing and jobs are being axed. But is the economic recession the sole reason for this? I think not.

Let's take them one by one. I think that everybody agrees when I say that the US auto industry has been hit the worst by these grim economic times. The recession caught the “Big Three” with their pants fully down, so it was pretty much like rabbit hunting with napalm. Basing most of their product line on gas-guzzling SUVs and trucks and not investing enough in new models to overcome the Japanese and European attacks in recent years has kneed the US car making industry down.

They were practically beaten at their own game, considering the play was about selling the most with the least of investment in the future. Just like in a game of go, or better yet, a juicy slice of beef infested with E. coli bacteria, each of America's automotive trinity road to perdition started with the huge spike in the oil price. The domino pieces only took their first impulse from the soaring gas prices, because these took out their main product line, trucks and truck-based SUVs. With a market which used to giggle at the sound of a gargantuan V8 under the hood of a body-on-frame SUV almost gone (everyone noticed the number of SUV arsons last year), GM, Ford and Chrysler had no umbrella to cover under. Except...

General Motors is going for the easy way out of this situation: beg. “Yea, though I walk through the valley of the shadow of death, I will fear no evil; for thou art with me: thy rod and thy staff, they comfort me.” In our case, the rod and the staff are the US Government and the big cheese at the helm. The White House already promised 25 billion in US dollars to aid the suffering trio from Detroit, but GM wants a bigger slice from the cake. They might have a good reason also, the buy of Chrysler LLC from Cerberus.

That would give a(nother) considerable blow to its employees (including the dealers). So far, Ford has almost escaped the shadow of bankruptcy thanks to clever thinking. They didn't base ALL of their money-making product lines on gas-guzzlers (Ford Europe has one of the least polluting car fleets in Europe), AND they systematically sold the money-losing companies from the group (first Bond-friendly Aston Martin and then Jaguar and Land Rover), with rumors indicating that Volvo might be axed next.

What about Europeans, then? Since most of the popular car makers on the old continent were already manufacturing fuel-efficient vehicle, the gas-prices blow didn't take much of their market share. But, since the whole market got smaller, the market slices took the same route. As a result, the Europeans need not celebrate, since thousand of jobs have already been axed as a result of the struggling sales, while production lags are happening in almost every car plants in Europe.

As in most cases from other domains, the rich will suffer the least. Premium car making companies like BMW and Mercedes-Benz have their own share of downsides induced by the present situation, but considering their cars go mainly to the ones that aren't exactly hit in the face by the prices at the pump, the Germans don't need to worry so much. For example, the most brutal decision made by Mercedes-Benz is to halt production on SOME of its models from December 11 to January 12 2008.

In my own but not-so-personal opinion, the future on the whole is pretty grim, and even though oil prices are predicted to drop to their 2005 level in 2009, the automotive industry won't recover for another five or six years. Sagging consumer confidence in pickups and SUVs will turn customers to more compact-sized cars, but these have a much lower profit margin than their big brothers. Some analysts are predicting that the market won't start to recover until 2013 or later, during which time we should all put our economies aside because the global financial crisis may have even deeper consequences. In other words, “si vis pacem, para bellum” (if you want peace, prepare for war). That advice goes to the car makers also.
If you liked the article, please follow us:  Google News icon Google News Youtube Instagram X (Twitter)
About the author: Alex Oagana
Alex Oagana profile photo

Alex handled his first real steering wheel at the age of five (on a field) and started practicing "Scandinavian Flicks" at 14 (on non-public gravel roads). Following his time at the University of Journalism, he landed his first real job at the local franchise of Top Gear magazine a few years before Mircea (Panait). Not long after, Alex entered the New Media realm with the autoevolution.com project.
Full profile

 

Would you like AUTOEVOLUTION to send you notifications?

You will only receive our top stories