Reviving The Auto Industry Where It Is Invented

By Author: Elle Perkins
Total Articles: 36
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The US is known for its creation of the automobile industry. But this industry through the years has been challenged by brands local to Europe, Japan, and in recent years, Korea. Plus thanks to the global economic meltdown that marks 2009, the US car industry is teetering on the brink of collapse. Unless immediate action is done to revive the US car industry, it would not be a far-fetched scenario for it to go down in historical oblivion, which has gone past its better days, if not easily gobbled up by the competition.

But the auto industry finds its strong ally in the US President Obama himself, as he announces in his maiden speech in Congress that "We are committed to the goal of a re-tooled, re-imagined auto industry that can compete and win. Millions of jobs depend on it. Scores of communities depend on it. And I believe the nation that invented the automobile cannot walk away from it."

Top US auto industry players General Motors and Chrysler, in their attempt to avoid bankruptcy and in a more symbolic cause of saving a pillar of the US economy, have already knocked on the US Treasury's door for ...
... a further 21.6 billion dollars in loans. This amount stands on top of the 17.4 billion dollars approved in December to aid the industry in battling the initial symptoms of the economic recession. In the proposal that these companies submitted for the second loan, they unveiled detailed viability and stability plans, giving caution that inaction on the need of propping up the auto industry would summon higher costs in the long-term.

Among the elements in the viability plans of GM and Chrysler include slashing 50,000 jobs, closing plants and streamline its car brands. If approved, this would stand out as the largest bailout in the 100-plus-year history of the US auto manufacturing industry. Ford, the other pillar of the Detroit Big Three, seems to be luckier, weathering the economic storm so far, with theor own cash funds. However, should the Treasury make a favorable decision to the appeal of GM and Chrysler, it remains to be seen whether the public's lukewarm reception for a loan grant would turn for the better. Should Treasury however reject the plea, analysts say that there is reason to believe that the US auto industry might continue spiraling down.

Global Insight for example predicts that after falling 18 percent to 13.4 million vehicles last year in the steepest decline in 29 years, US auto sales are expected to fall by at least another 22 percent in 2009 to 10.4 million vehicles. Since the end of World War II, this figure represents the lowest per capita output of the US car industry.

But Obama qualifies that while the auto industry indeed need a huge amount of help, where they are today are brought about by years of "bad decision-making and a global recession that have pushed our automakers to the brink. We should not, and will not, protect them from their own bad practices." What seems to be needed is an agreement on helping the ailing industry while making them more accountable and prudent in their financial decisions. The US Treasury may also be forced to allow at least Chrysler to fail however, if creditors will not put their thumbs up to a debt for equity swap and if the United Auto Workers union be made to cooperate on making major concessions on wage and health care costs.

Besides, what threatens the industry the most, say analysts, is the long-term viability of how long it would take for global auto sales to recover and how far auto sales fall in the coming months.
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