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The US Economy and the Impact of the Automobile Industry

November 17, 2016
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The final 2008 auto industry sales numbers are now in, and they do not make for pretty reading. As reported by the AP, every major manufacturer reported drops of more than 30 percent (year-on-year) in December.

The Decline of the US Economy equals Failure for the Big 3 Auto Giants

Leading the fall was Chrysler, selling 53 percent fewer vehicles than last December and 30 percent fewer in 2008 than in 2007. GM sold 2.9 million vehicles in 2008, down 23 percent, the lowest number in 49 years. Toyota and Honda saw declines in December that were were even larger than their US-based competitors'. Toyota was down 37 percent and Honda 35 percent, compared with Ford's 32 percent drop and GM's 31 percent slide. Nissan also dropped 31 percent. Cumulatively, these figures represent the largest year-on-year drop in US auto sales since the Arab oil embargo days of 1973-74.

Indeed, the crash in sales over the last several months has meant that auto-makers, despite shutting down production for weeks at a time, have been unable to clear inventory. Lots around the country are full and manufacturers and dealers are offering substantial programs of rebates, discounts, 0% financing and other incentives to entice buyers back to the showrooms.

The Impact of the US Bailout on the Industry so far:

At the end of December GMAC received $ 6 billion in aid from the federal government and is now easing up its terms for writing new auto loans. GMAC's share of financing of GM car purchases had dropped to 3% after their October decision to lend only to people with credit scores of 700 or higher. The new terms mean that buyers with credit scores over 620 are now finding financing. The credit freeze seems to be thawing and some dealers reported that up to 40% of their sales in the very last week in December.

The bridging loans arranged by the Bush administration will expire at the end of March, when the Big 3 will be required to show restructuring plans for viability. The incoming Obama administration has not yet announced plans for their approach to the problem and so the automobile trade has to proceed without knowing what will impact them in the spring. It's likely that these plans will include large concessions from suppliers and labor and some paring back of dealerships. Would the Bankruptcy of the Automobile Industry be less of a negative impact for the US Economy?

The Big 3 have said that a formal Chapter 11 bankruptcy is the worst possible outcome for the entire economic base of this country as a whole. The main point of the auto manufacturers is that consumers will be loath to buy a car from a manufacturer who is "bankrupt". In addition to the bailouts, they are going that extra mile to avoid bankruptcy. The various Factors Contributing to consumer responses to the automobile industry and hwy impact on the US economy are On :

  • oversupply on the car lots
  • motivated dealers
  • easier financing terms
  • long-term industry presence for after-sale support
  • world-wide economic recession driving down the price of gas

This it all adds up to one thing. There is no better time to buy a new car.

If you can take advantage of the great deals on new cars and want to sell used cars to us to buy a new one, remember Big Bucks Auto. Despite everything happening in with the economy, we have been here for over three generations and will be going strong for many more.

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Source: http://ezinearticles.com/?The-US-Economy-and-the-Impact-of-the-Automobile-Industry&id=1880057

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