The global recliance on the auto trade will not see the industry through these perrilous financial times, writes Theresa Cummins.
AS THE GLOBAL downturn continues, car manufacturers are emulating banks and financial intermediaries with their pleas for financial support, in an attempt to keep their industry afloat.
US carmakers General Motors and Chrysler have asked the US government to increase their bailout by $21 billion, in addition to the $17 billion already received. GM reported last week that it would be enforcing 10,000 redundancies worldwide, as part of its plans for survival.
If the restructuring plans for the two auto companies are accepted by the US Treasury Department, both are positive of being profitable over the next few years. General Motors chief executive Rick Wagoner outlined how the plan was “comprehensive, responsive, achievable and flexible.”
“We have a lot of work in front of us, but I am confident it will result in a profitable General Motors,” he enunciated. GM and Chrysler first accepted bailouts at the end of last year, citing financial distress and possible ruin if support was not received. Since then, both companies have reduced employment figures, shut factories across the country and axed brand models, in cost saving attempts to increase the viability of their companies. In addition, GM has put its Saab division up for sale, and is appealing to the Swedish government for financial support before the event of a potential sale.
“High oil prices, rampant unemployment and economic uncertainty have all been significant factors in the auto industry downturn”
The two auto giants, similarly to most car manufacturers across the globe, have seen a dramatic decrease in sales over the last year. High oil prices, rampant unemployment and economic uncertainty have all been significant factors in the auto industry downturn.
Car manufacturers have said that stricter lending requirements, enforced by banks, have contributed substantially to the lack of demand for new vehicles, with consumers failing to obtain the finance for such deals. Analysts however have been critical of the companies, expressing annoyance regarding their slow response to coping with the downturn.
The need for smaller, more fuel efficient vehicles has never become more apparent than in the current economic slump. The problems experienced by the American car manufacturers have been resonated in European and Japanese auto companies. At Toyota, the fall in sales on a year-to-year basis has been the worst the Japanese company has witnessed in 20 years.
The latest 850 job cuts at BMW’s Mini manufacturing plant in Oxford reflect the flagging state of the automotive industry in Europe. The car manufacturer adds to the ever growing list of casualties affected in the sector, with Aston Martin, Honda, Bentley and Nissan experiencing similar difficulties, implementing redundancies and closures throughout their factory plants.
The continual decline in sales witnessed in the auto industry globally has left car manufacturers in doubt as to whether the worst is yet to be seen. “We are looking at a very fragile economy,” said Emily Kolinski, Ford’s chief economists. “I don’t think anyone can say where the bottom will be.”