The Canadian auto industry is closely linked to the U.S., due to the "Automotive Products Trade Agreement and later the "North American Free Trade Agreement (NAFTA), and is in similar trouble.
The crisis in the United States is mainly defined by the government rescue of both "General Motors and "Chrysler. "Ford secured a line of credit in case they require a bridging loan in the near future. Car sales declined in the United States, affecting both US based and foreign car manufacturers. The bridging loans led to greater scrutiny of the U.S. automotive industry in addition to criticism of their product range, product quality, high labour wages, job bank programs. The government-backed rescue of the American auto industry gained the support of 37% of Americans in 2009 according to a CNN/Opinion Research Corporation poll, and it gained the support of 56% of Americans in 2012 according to a Pew Research Center poll. Chrysler was forced into "bankruptcy in April 2009 and GM in May.
While the ""Big Three" U.S. market share declined from 70% in 1998 to 53% in 2008, global volume increased particularly in Asia and Europe. The U.S. auto industry was profitable in every year since 1955, except those years following U.S. recessions and involvement in wars. U.S. auto industry profits suffered from 1971-73 during the "Vietnam War, during the recession in the late 1970s which impacted auto industry profits from 1981–83, during and after the Gulf War when industry profits declined from 1991–93, and during the Iraq War from 2001–03 and 2006-09. During these periods the companies incurred much legacy debt.
Facing financial losses, the Big Three have "idled many factories and drastically reduced employment levels. GM "spun off many of its employees in certain divisions into independent companies, including "American Axle in 1994 and "Delphi in 1999. Ford spun off "Visteon in 2000. The spin-offs and other parts makers have shared "Detroit's downturns, as have the U.S.-owned plants in Canada. Altogether the parts makers employ 416,000 people in the U.S. and Canada. General Motors alone is estimated to have lost $51 billion in the three years before the 2008 financial crisis began. GM is set to reacquire factories from its Delphi subsidiary during its Chapter 11 restructuring.
The 2005 Harbour Report estimated that Toyota's lead in benefits cost advantage amounted to $350 US to $500 US per vehicle over North American manufacturers. The "United Auto Workers agreed to a two-tier wage in recent 2007 negotiations, something which the "Canadian Auto Workers has so far refused. "Jared Bernstein, the chief economist of Vice President "Joe Biden, noted in an interview with WWJ-AM in Detroit that most of the 2007 contract concessions apply only to new hires, while older workers "still benefit from contracts that were signed a long time ago." However, only 30% of parts used by the Big Three employ union labor, with 70% sourced from non-union labor.
"Delphi, which was spun off from GM in 1999, filed for Chapter 11 bankruptcy after the UAW refused to cut their wages and GM is expected to be liable for a $7 billion shortfall.
In order to improve profits, the "Detroit automakers made agreements with unions to reduce wages while making pension and health care commitments. GM, for instance, at one time picked up the entire cost of funding health insurance premiums of its employees, their survivors and GM retirees, as the U.S. did not have a universal health care system. With most of these plans chronically underfunded in the late 1990s, the companies have tried to provide retirement packages to older workers, and made agreements with the UAW to transfer pension obligations to an independent trust. Nonetheless, non-unionized Japanese automakers, with their younger American workforces (and far fewer American retirees) will continue to enjoy a cost advantage.
Despite the history of their "marques, many long running cars have been discontinued or relegated to fleet sales, as "GM, "Ford and "DaimlerChrysler shifted away resources from midsize and compact cars to lead the "SUV Craze". Since the late 1990s, over half of their profits have come from "light trucks and SUVs, while they often could not break even on compact cars unless the buyer chose options. Ron Harbour, in releasing the Oliver Wyman’s 2008 Harbour Report, stated that many small “"econoboxes” of the past acted as loss leaders, but were designed to bring customers to the brand in the hopes they would stay loyal and move up to more profitable models. The report estimated that an automaker needed to sell ten small cars to make the same profit as one big vehicle, and that they had to produce small and mid-size cars profitably to succeed, something that the Detroit three have not yet done. SUV sales peaked in 1999 but have not returned to that level ever since, due to higher gas prices.
In the case of "Chrysler Corporation, compact and mid-sized vehicles such as the "Dodge Neon, "Dodge Stratus and "Chrysler Cirrus were produced profitably during the 1990s concurrently with more profitable larger vehicles. However, following the "DaimlerChrysler merger in 1998, there was a major cost-cutting operation at the company. The result was the lowering of benchmarked standards for Chrysler to aim at. This directly led to the following in Chrysler's case. There was realignment of the Chrysler Group model range with those of GM and Ford (i.e. a skew towards larger vehicles).
The Detroit Big Three had been slower to bring new vehicles to the market compared with foreign competitors. The Big Three have battled initial quality perceptions in spite of reports showing improvements.
Falling sales resulted in the Big Three's plants operating below capacity. GM's plants were operating at 85% in November 2005, well below the plants of its Asian competitors, and was only maintained by relying on cash incentives and subsidized leases. Rebates, employee pricing, and 0% financing boosted sales but drained the automaker's cash reserves. The "subprime mortgage crisis and high oil prices of 2008 caused the popularity of once best-selling trucks and SUVs to plummet. Automakers were forced to continue offering heavy incentives to help clear excess inventory. Due to the declining residual value of their vehicles, Chrysler and GM stopped offering leases on most of their vehicles in 2008.
In September 2008, the "Big Three asked for $50 billion to pay for health care expenses and avoid bankruptcy and ensuing layoffs, and Congress worked out a $25 billion loan. By December, President Bush had agreed to an emergency bailout of $17.4 billion to be distributed by the next administration in January and February. In early 2009, the prospect of avoiding bankruptcy by General Motors and Chrysler continued to wane as new financial information about the scale of the 2008 losses came in. Ultimately, poor management and business practices forced Chrysler and General Motors into bankruptcy. Chrysler filed for chapter 11 bankruptcy protection on May 1, 2009 followed by General Motors a month later.
On June 2, GM Motors announced the sale of the "Hummer brand of "off-road vehicles to "Sichuan Tengzhong Heavy Industrial Machinery Company Ltd., a machinery company in western China, a deal which later fell through.
Effects of environmental expectations and changing product demand
Environmental politics and related concerns regarding carbon emissions have heightened sensitivity to gas mileage standards and environmental protection worldwide. In a 2007 edition of his book "An Inconvenient Truth, "Al Gore criticized the Big Three. "They keep trying to sell large, inefficient gas-guzzlers even though fewer and fewer people are buying them." For example, Japan requires autos to achieve 45 miles per US gallon (5.2 L/100 km; 54 mpg‑imp) of gasoline and China requires 35 mpg‑US (6.7 L/100 km; 42 mpg‑imp). The "European Union requires 47 mpg‑US (5.0 L/100 km; 56 mpg‑imp) by 2012. By comparison, U.S. autos are required to achieve only 25 mpg‑US (9.4 L/100 km; 30 mpg‑imp) presently. Other nations have adopted standards that are increasing mpg requirements in the future. When "California raised its own standards, the auto companies sued.
The Big Three received funding for a $25 billion government loan during October 2008 to help them re-tool their factories to meet new fuel-efficiency standards of at least 35 mpg‑US (6.7 L/100 km; 42 mpg‑imp) by 2020. The $25 billion in loans from the Department of Energy to the auto manufacturers were actually authorized by Congress early this year but not funded. Automakers could use these loans to "equip or establish facilities to produce ‘advanced technology vehicles’ that would meet certain emissions and fuel economy standards; component suppliers could borrow funds to retool or build facilities to produce parts for such vehicles."
Effect of 2008 oil price shock and economic crisis
In 2008, a series of damaging blows drove the Big Three to the verge of bankruptcy. The Big Three had in recent years manufactured "SUVs and large "pickups, which were much more profitable than smaller, fuel-efficient cars. Manufacturers made 15% to 20% profit margin on an SUV, compared to 3% or less on a car. When gasoline prices rose above $4 per gallon in 2008, Americans stopped buying the big vehicles and Big Three sales and profitability plummeted.
The "financial crisis played a role, as GM was unable to obtain credit to buy Chrysler.["citation needed] Sales fell further as "consumer credit tightened and it became much harder for people with average or poor credit to obtain a bank loan to buy a car. During 2007, nearly 2 million new U.S. cars were purchased with funds from home equity loans. Such funding was considerably less available in 2008. In addition, stock prices fell as shareholders worried about bankruptcy; GM's shares fell below 1946 levels. Furthermore, the instability of the job market and individual consumers' finances discourages consumers who already have a working vehicle from taking on a new loan and payments, which affected almost all major manufacturers.
The annual capacity of the industry is 17 million cars; sales in 2008 dropped to an annual rate of only 10 million vehicles made in the U.S. and Canada. All the automakers and their vast supplier network account for 2.3% of the U.S. economic output, down from 3.1% in 2006 and as much as 5% in the 1990s. Some 20% of the entire national manufacturing sector is still tied to the automobile industry. The transplants can make a profit when sales are at least 12 million; the Big Three when sales are at least 15 million.
By December 19, 2008, oil prices had fallen to $33.87 per barrel, but the automobile crisis continued.
- "Corporate welfare
- "Lemon socialism
- "Presidential Task Force on the Auto Industry
- "Too big to fail
- "Effects of the 2008–10 automotive industry crisis on the United States
- "Effects of the 2008–10 automotive industry crisis on Canada
- "General Motors Corporation - Quarterly Balance Sheet GM (NYSE)". Marketwatch. Archived from the original on 18 December 2008. Retrieved 2008-12-07.
Total Equity -59,939.00
- Uncertainty in U.S. auto industry puts pressure on suppliers. International Herald Tribune. September 19, 2008. Retrieved 20 November 2008.
- Gas prices put Detroit Big Three in crisis mode. Associated Press June 1, 2008. Retrieved 20 November 2008.
- Hazardous Conditions for the Auto Industry. New York Times, October 1, 2008. Retrieved 20 November 2008.
- "Dan La Botz (November 2008). "What's to Be Done about the Auto Industry?". Monthly Review. Mrzine.monthlyreview.org. Retrieved 2010-05-01.
- "China's Chery Auto aims for 18 pct car sales growth". Reuters. February 16, 2009. Archived from the original on 21 February 2009. Retrieved 2009-02-19.
|last1=in Authors list ("help)
- "State Bank of India offers auto loans at 10% for one year". The Economic Times. February 21, 2009. Retrieved 2009-02-27.
|last1=in Authors list ("help)
- "Tata's Nano, world's cheapest car, on sale in April". AFP. February 26, 2009. Archived from the original on 2 March 2009. Retrieved 2009-02-27.
|last1=in Authors list ("help)
- "Toyota sputters as market shifts". The Detroit News. Retrieved 2010-05-01.
- "Toyota Cuts Back on Trucks". Time. 2008-07-11. Retrieved 2010-04-26.
- Loyalty to Detroit 3 slipping away | Freep.com | Detroit Free Press Archived May 12, 2013, at the "Wayback Machine.
- Vlasic, Bill; Bunkley, Nick (2008-07-11). "Toyota Scales Back Production of Big Vehicles". The New York Times. Retrieved 2010-04-26.
- "Toyota Expects Its First Loss in 70 Years". New York Times. December 22, 2008. Retrieved 2008-12-22.
|last1=in Authors list ("help)
- "Honda confirm immediate F1 pull out". Autosport. 2008-12-05. Archived from the original on 6 December 2008. Retrieved 2008-12-05.
- "Honda slashes profit forecast". CBC News. December 17, 2008. Archived from the original on 20 December 2008. Retrieved 2008-12-22.
- "Canon, Nissan hit by economic crisis". ABC News. December 17, 2008. Archived from the original on 20 December 2008. Retrieved 2008-12-22.
- "Suzuki to Cut Japan Output by Additional 30,000 Units". Bloomberg. December 22, 2008. Retrieved 2008-12-22.
- "Subaru to pulls out of the 2009 World Rally Championship". December 16, 2008. "World Rally Championship WRC.com.
- "FHI to withdraw from FIA WRC after 2008 season". December 16, 2008., "Fuji Heavy Industries news release.
- "Toyota slashes profit forecasts amid sales slump". CTV.ca. 2008-12-04. Archived from the original on 2009-02-20. Retrieved 2009-01-12.
- "Toyota, Facing First Loss in 59 Years, Seeks Loans From Japan". Bloomberg.com. 2009-03-03. Retrieved 2009-05-01.
- Neff, John (2008-07-01). "By the Numbers June 2008: Not That Bad Edition". Autoblog. Archived from the original on 10 February 2009. Retrieved 2009-01-12.
- Harley, Michael (2008-07-04). "Hyundai-Kia pass Honda to become world's 5th largest automaker". Autoblog. Archived from the original on 7 February 2009. Retrieved 2009-01-12.
- "Hyundai-Kia overtakes Ford to become the fourth biggest carmaker | Hyundai Car News". sgCarMart. Retrieved 2010-05-01.
- Joseph, Noah (2009-08-18). "Hyundai-Kia overtakes Ford to become world's 4th largest automaker — Autoblog". Autoblog.com. Retrieved 2010-05-01.
- "Page expired - MSN Money". News.moneycentral.msn.com. Retrieved 2009-05-01.
- "Best Global Brands List | 2009". Interbrand. Archived from the original on 29 April 2010. Retrieved 2010-05-01.
- "Hyundai Motor, Kia to Freeze Some Wages, Cut Output (Update)". Bloomberg.com. December 22, 2008. Retrieved 2008-12-22.
- Oh Young-jin; Kim Hyun-cheol (2008-12-25). "Tech Leak Pits Union Against Ssangyong Owner". The Korea Times. Archived from the original on 23 January 2009. Retrieved 2009-01-12.
- Germany's Steinmeier Calls for EU to Rescue Ailing Car Industry. Deutsche Welle. Retrieved 19 November 2008.
- Mathieu Rosemain (March 18, 2014). "European Car Sales Jump 7.6% as Price Cuts Help Renault". Bloomberg.
- "Peugeot Citroen cuts 2,700 jobs. BBC News. 20 November 2008". BBC News. 2008-11-20. Retrieved 2010-05-01.
- "Business | Peugeot Citroen cuts 11,000 jobs". BBC News. 2009-02-11. Retrieved 2009-05-01.
- "Business | Renault sees 78% fall in profit". BBC News. 2009-02-12. Retrieved 2009-05-01.
- France and Germany pledge auto aid. Associated Press, November 24, 2008
- "France to announce recovery plan for auto industry". The Seattle Times. 25 November 2008. Retrieved 2016-07-28.
- "Fiat extends temporary plant closure programme". reuters.com. 2008-12-16. Retrieved 2008-12-26.
- ["dead link]
- "Chrysler Plans To Sell Nine Fiat-Based Vehicles by 2014". Edmunds.com. 2009-02-19. Retrieved 2009-05-01.
- "Business | Fiat and Chrysler create alliance". BBC News. 2009-01-20. Retrieved 2009-05-01.
- "Business | Fiat reports big fall in revenues". BBC News. 2009-01-22. Retrieved 2009-05-01.
- "BASIC INDICATORS OF ORGANISATIONS BY KIND OF ECONOMIC ACTIVITY "MANUFACTURE OF TRANSPORT MEANS AND EQUIPMENT"". Federal Statistics Agency. 2010.
- "Car import curbs have Russians on streets". Financial Times. 2008-12-21.
- Parfitt, Tom (22 December 2008). "Protesters beaten as anger grows at Russian car import tax". Moscow: The Guardian. Archived from the original on 14 January 2009. Retrieved 2009-01-12.
- "Controversial higher tax on Russian car imports comes into effect". RIA Novosti. 2009-01-12.
- "Russia's car sector stalls, but foreigners still investing". Russia Beyond the Headlines. 2010-06-05.
- "Avtovaz in profit thanks to Russia car scrappage scheme". BBC News. 2010-06-12.
- Rozhnov, Konstantin (2010-03-07). "What will save the Russian car industry?". BBC News.
- SEAT adjusts production at Martorell plant Seatcupra.net
- ["dead link]
- Swedish car firms get bail-out. BBC News, 11 December 2008.
- Pagnamenta, Robin (2009-02-18). "Saab may go bust in 10 days, warns GM - Times Online". London: Business.timesonline.co.uk. Retrieved 2009-05-01.
- "Business | Saab aims to survive without GM". BBC News. 2009-02-20. Retrieved 2009-05-01.
- "Car firm in talks with government. BBC News. November 23, 2008.
- "Tata Motors announces bailout plan for Jaguar". CNN-IBN. December 22, 2008. Retrieved 2008-12-22.
- "Nissan plant to shed 1,200 jobs". BBC News. 2009-01-08. Archived from the original on 9 January 2009. Retrieved 2009-01-12.
- "UK car plants most efficient in Europe". BBC News. 2001-06-28. Retrieved 2009-01-12.
- GIBSON, KEN (2009-01-08). "Jobs blow for UK carmakers". London: The Sun. Retrieved 2009-01-12.
- "Optare: Latest News: Press Releases". S261370817.websitehome.co.uk. Archived from the original on January 12, 2009. Retrieved 2009-05-01.
- "Business | LDV told 'no more government aid'". BBC News. 2009-02-23. Retrieved 2009-05-01.
- "Business | LDV says firm has viable future". BBC News. 2009-02-24. Retrieved 2009-05-01.
- Reeve, Elspeth (February 23, 2012).Most Americans Now Think Auto Bailout Was a Good Idea.The Atlantic Wire.
- "Fortune - Detroit's Downfall". Money.cnn.com. Retrieved 2010-05-01.
- Fortune 500.CNN Money.
- Taylor, Alex (2008-11-24). "Fortune - What's Ahead for GM?". Money.cnn.com. Retrieved 2010-05-01.
- "CAW says "no two-tier wages" in bargaining". Toronto, Ontario: CanadianDriver. 2008-03-27. Archived from the original on 8 January 2009. Retrieved 2009-01-12.
- TOM KRISHER and KEN THOMAS – April 2, 2009 (2009-04-02). "The Associated Press: GM readies giveback proposals for bondholders, UAW". Google.com. Archived from the original on 6 April 2009. Retrieved 2009-05-01.
- Silke, Sharon (2005-10-08). "Delphi files Chapter 11 after union, GM talks break down". DETROIT: USA TODAY. Retrieved 2009-01-12.
- Shepardson, David (2008-04-09). "Parting shot: Delphi exec Steve Miller blasts UAW in new book". WASHINGTON: The Detroit News. Retrieved 2009-01-12.
- "Bankruptcy Is Delphi's Trump Card". Bloomberg.
- Henning, Dietmar (17 November 2004). "German auto union head suggests GM cut US costs". World Socialist Web Site. Archived from the original on 15 February 2009. Retrieved 2009-01-12.
- Sloan, Allan (April 19, 2005). "General Motors Getting Eaten Alive by a Free Lunch". Washington Post. pp. E03. Retrieved 2009-01-12.
- Green, Jeff (2006-03-08). "GM freezes pension plans to slash costs". Toronto: globeandmail.com. Bloomberg News. Archived from the original on 15 February 2009. Retrieved 2009-01-12.
- James Daw; Tony Van Alphen (2008-08-02). "GM pension faces huge shortfall". Toronto: TheStar.com. Archived from the original on 15 February 2009. Retrieved 2009-01-12.
- "The not-so-Big Three". CBC News. CBC. 2008-06-03. Archived from the original on 2 July 2008. Retrieved 2008-08-08.
- "Storied Ford Taurus reaches end of line". "Detroit News. 2006-10-23. Retrieved 2007-08-14.["permanent dead link]
- Final Ford Taurus interview. ABC News. 2007-07-26.
- "So long, friend. Ford producing last Taurus next week". Autoblog. Retrieved 2007-07-26.
- "Ford Taurus: Oedipus Wrecks". The Truth About Cars. Retrieved 2008-04-05.
- ALISA PRIDDLE (June 2008). "Chevrolet Volt and Aveo, Pontiac G3 Among Small Cars That Need Big Profits - Car News". Car And Driver. Archived from the original on 3 January 2009. Retrieved 2009-01-12.
- "No happy ending if automakers seek Chapt. 11: economist". Financialpost.com. 2009-04-08. Archived from the original on 10 April 2009. Retrieved 2009-05-01.
- Stoll, John D. (2008-07-30). "GM, Ford Scale Back Car Leases as Era Ends". WSJ.com. Archived from the original on 8 January 2009. Retrieved 2009-01-12.
- Welch, David (September 2, 2008). "The discounting treadmill". BusinessWeek. Archived from the original on 15 February 2009. Retrieved 2009-01-12.
- Tom Krisher (2008-07-03). "Why Honda is growing as Detroit falls behind". SFGate. Associated Press. Archived from the original on 15 February 2009. Retrieved 2009-01-12.
- , MSN Money.
- , New York Times. December 19, 2008.
-  New York Times. May 1, 2009.
-  MSNBC. June 1, 2009.
- Smith, Aaron (2009-06-02). "Who bought Hummer? Sichuan Tengzhong of China". CNN. Retrieved 2010-04-26.
- "Chinese company to buy Hummer from GM - Autos- msnbc.com". MSNBC. 2009-06-24. Retrieved 2010-05-01.
- Bradsher, Keith; Bunkley, Nick (2009-06-03). "Chinese Company Buying G.M.'s Hummer Brand". The New York Times. Retrieved 2010-04-26.
- Gore, Al (2007). An Inconvenient Truth. Rodale. "ISBN "978-0-670-06272-0.
- "An Inconvenient Truth - Online". Climatecrisis.net. Archived from the original on 20 April 2010. Retrieved 2010-05-01.
- "Consumer Reports - $25 billion for Auto Industry". Blogs.consumerreports.org. 2008-10-03. Archived from the original on 20 April 2010. Retrieved 2010-05-01.
- Cloud, John (2003-02-24). "Time-Why the SUV Is All the Rage". Time.com. Retrieved 2010-05-01.
- NYT-Auto Industry Feels Pain of Tight Credit. May 27, 2008.
- "Louis Uchitelle, "If Detroit Falls, Foreign Makers Could Be Buffer," New York Times, Nov. 16. 2008
- Ecuador’s Correa Says He’ll Maintain U.S. Dollar, Bloomberg, December 20, 2008.
- CAR industry news.
- Auto Industry Financing and Restructuring Act.
- Capitalism and the auto crisis.
- Toyota losses highlight global auto collapse.
- GM closes plants in Wisconsin and Ohio.
- Crisis grips German auto industry.
- Thousands of jobs threatened in Swedish auto industry.
- European auto industry in crisis.
- February 2009 Restructuring Plans: General Motors Chrysler