The Automotive Industry Essay

1111 words - 5 pages

The Automotive Industry Recovery

Prepared for:

Transmittal Letter

SUBJECT: Report Overview

The following report discusses the automotive industry recover from the “Great Recession” that occurred in 2008/2009. Information presented will be the state of the automotive industry before the recession, after the recession, how the industry is doing now and how the future looks for automakers.


The Automotive Industry Recovery 1
Transmittal Letter ii
Contents iii
Figures iii
Executive Summary iv
Introduction 1
Finding 1
Pre-Recession 1
Post Recession 2
How is it now? 3
The Future Outlook 3
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The automotive industry is making a comeback in America but it’s not quite back to its glory. Each year automakers are selling more, making more, and hiring more employees.

The automotive industry in America was a strong force in the economy. Employing over 1.1 million people in a very large supply chain, the success of the industry had great effect spreading across the country. Sales were climbing upward to 17 million vehicles a year, the most ever in the history of the automotive industry (Automotive Industry: Employment, Earnings, and Hours, 2014). Auto makers were heavily relying on the sales of their trucks and SUVs which brought them a 15 to 20% profit compared to just 3% or less on cars.

In 2008, the economies struggle was apparent to the auto industry. Vehicle sales dropped to just 10.4 million vehicles in 2009, more than 5 million less than 2 years before as seen in Figure 1 (Holecek, 2014).
Automotive industry workers lost jobs with employment falling to under 624,000 (Automotive Industry: Employment, Earnings, and Hours, 2014). With the recession and financial crisis combined with the sky-rocketing price of oil, the automotive industry about collapsed. Sales decreased by a dramatic 40% as Americans loss access to credit and car loans. The Bush Administration provided $17.4 billion dollars in bridge loans to the Big 3 for a temporary fix leaving the problem for Obama the following year. In 2009, GM and Chrysler submitted plans to Obama to receive help from the government to get their companies back on track. Obama denied giving money to the automakers initially and urged them to make drastic changes. At this point automotive jobs in the U.S. dropped to 653,000 as a result of sales dropping to 10.4 million vehicles, a 15 year low, ultimately leaving GM and Chrysler to file for bankruptcy. A short time later the “Cash for Clunkers” program was launched which gave $3500 to $4500 in bonuses to buyers for trading in their older vehicles. It is estimated that 35% of buyers would have not replace their vehicles without this program. By the beginning of 2010, both GM and Chrysler repaid their loans to the U.S. Treasury (The Resurgence of the American , 2011). At the end of 2010 into the beginning of 2011, the automotive industry in the United States was back on the up rise and started to see solid increases in sales and employment.


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