RECENT PROBLEMS IN THE CAR INDUSTRY IN THE USA

Recent Problems in the Car Industry in the USA

Recent Problems in the Car Industry in the USA

Introduction

The market conditions for truck and bus industry have deteriorated during the past few years to a seemingly irreparable extent. The capital and operational cost of commercial vehicles has increased to an alarming limit while the revenue did not increase accordingly. The manufacturing of medium and heavy transport equipment has become an unprofitable business, according to an industrialist. Recent troubles are only the latest examples of how U.S. firms are losing the battle to Toyota, Honda, Hyundai, Nissan (which has had an alliance with the French carmaker Renault since 1999) and European companies in what was once a U.S.-dominated industry (Silke, 2008). The world's largest automotive company was firing on all cylinders in its attempt to reverse its declining fortunes, and saw no reason to change (Silke, 2008). The automotive industry produced a higher level of output in the United States than any other single industry, and this output had been growing. The productivity of the automotive industry can be compared with other U.S. industries in terms of value added per employee. Value added includes the sum of profits, rent, interest, and labor compensation paid within the industry. It is thus a measure of the actual value produced by an industry.

The U.S. Car sales declined in the United States, affecting both US based and foreign car manufacturers. The bridging loans lead to greater scrutiny of the US automotive industry in addition to criticism of their product range, product quality, high labor wages, job bank programs, and healthcare and retirement benefits. The "Big Three" U.S. market share declined from 70% in 1998 to 53% in 2008, global volume increased particularly in Asia and Europe (Shepardson, 2009). 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. The auto industry is still using the same techniques as it did to build the Model T in 1908ing these periods the companies incurred much legacy debt (Silke, 2008).

With sinking sales to job cuts by the thousands, it's no great exaggeration to say that when historians write the history of America's big automotive manufacturers, 2005 will go down as one of their most dreadful years. Most car companies continue to hold the view that having factories running at 100% capacity is the most efficient way to produce vehicles because it allows the manufacturer to minimize the cost to produce each unit. Indeed, overcapacity has long been cited as a problem for automakers worldwide (Jeff , 2009).

That's not to say the American automotive business is in dire straits — on the contrary, it's ...