Financial Crisis.
The financial crisis struck U.S.A in 2007 which lead to Global economic recession. The financial crisis of 2007 is considered to be the worst economic depression since Great Depression. Financial crisis lead to great decline in consumer consumptions and decline of wealth was reported in million. U.S.A which is an economic engine for the world was facing its worst days which lead to economic slow down globally since America who has the highest PPP was seeing heel coming right to them. It had its worst effects on Financial Institution. Insurance companies like AIG were seeing their business going down the drain. Huge Institutes like Lehman Brothers, Merill Lynch, and Freddie Mac were charged with bankruptcy. A serious decline in wealth was seen to e.g the total home equity which was round about 13 trillion was dropped to 8.3 trillion.
Well lets just say what was mentioned above is just the beginning of this tragic story of financial crisis. It not only had its effects on wealth decline, financial institution, or housing equity but on our favourite thing on planet earth too i.e cars and trucks. Lets discuss the cause of why American auto industry is living on the edge.
1. The main reason to this crisis is the extreme rise in oil demand. The prices shoot up to more than $140 a barrel. This made many people to buy Japanese car which are more economical than the American beast cars having V8 engines. The shoot up in the oil prices made people buy less SUV's and Trucks resulting in a dramatic sales drop of many companies like Ford, Chrysler and GM, since their main target market is SUV's and Trucks. Another reason relating to Energy is that U.S policy was uncertain and America never relied on other energy sources such as LPG gas or ethanol, in fact America government instead of increasing the consumption of ethanol, discouraged it.
2. Cars are usually bought on loans or when people have the money to buy them. When financial crisis struck America many car insurance, banks and student loan consolidation were out of business. Banks had no cash to lend customers money to buy cars. The whole financial institute of America was down on its knees dropping the sales of U.S cars from 16 million to 10 million.
3. Many loyal customer left american cars because Americans were concentrating too much mass production rather than making quality products. American auto maters were lacking behind in technology, while Japense where putting the best technology in. American auto makers acted lousy and knew that American would buy their products any way out of patriotism but that really never happened. With less cash in pockets, customers had no choice apart from buying cheap but yet high quality cars.
4. As already stated above, U.S.A is the economic engine for the world and when financial crisis struck them many economic activities of the world slow downed as they rely on U.S.A's economic growth and condition. As the official recession started in the U.S, the Global economy saw hell coming towards them. There was a sudden slow down globally,with few countries showing slowdown more than 1% or more. As we know that Gm operates in more than 41 countries worldwide. With such economic conditions there were no customers to buy big American cars with Japanese cars around.
Calling 911 wouldn't help this time
Would 25 billion loan to U.S automakers would rescue them from sinking. I don't think so. The U.S companies have to take a huge leap and change alot of their policies. First they have to compete with the Japanese market and make small cars which are fuel efficient and improve their technology as well. And this would be like asking Caterpillar Inc. to make small cute diesel cars. Injecting money would be like floating in a deep ocean, you wont drown but all you can do is survive. Unless America's financial institutes come back to power and the global economy revives back I am not seeing a good future for U.S auto manufacturing companies
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