The automotive industry crisis of 2008–2010 played a crucial part in the global financial downturn.
With fewer fuel-efficient models to offer to consumers, sales began to slide gradually.
By 2008, the situation had turned critical which highly influenced the prices of raw materials required by the company to manufacture vehicles.
Most notable causes for the automotive industry crisis of 2008–2010
The U.S. Financial Crisis Inquiry Commission concluded that the crisis was certainly avoidable by all circumstances if carefree attitude was avoided. The scenario was caused by the following factors: (Click on each of the factor to know in detail)
Systemic breaches in accountability and ethics at all levels lead to a total failure.
Financial market factors
Due to widespread failures in financial regulation including the Federal Reserve’s failure to stem the tide of toxic mortgages was one of the primary causes.
Dramatic breakdowns in corporate governance including too many financial firms acting recklessly being negligent and taking on too much risk without proper assessment certainly lead to the drastic dire strait situation.
An explosive mix of excessive borrowing and risk by households and Wall Street put the entire financial system and its balance on a collision course with crisis made the crisis take control and predominant in all sectors of automotive industry.
Lack of understanding the financial system
Key policy makers unprepared for the crisis, lacking a full understanding of the financial system they oversaw and being negligent all the way through made it difficult to control the damage.
¤ In the latter half of 2008, a global-scale recession adversely affected the economy of many countries, especially the United States.
¤ Following dramatic drops in automobile sales throughout 2008, each of the Big Three U.S. automobile manufacturing companies namely
General Motors (GM)
Ford Motor Company
requested emergency loans in order to address cash shortages.
¤ A combination of several years of declining automobile sales and scarce availability of credit led to a more widespread crisis in the automotive industry of United States of America as they entered 2009.
¤ By April 2009, the situation had worsened and taken its toil in every automotive sector.
¤ The U.S. and Canadian governments provided unprecedented financial support to allow the companies to restructure their respective companies and stabilize.
¤ While the Big Three U.S. automobile company’s market share declined from 70% in 1998 to 53% in 2008, global volume of manufacturing increased particularly in Asia and Europe.
¤ The U.S. auto industry has been profitable in every year since 1955, except those years following U.S. recessions and involvement in wars.
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