Obama gets tough on US auto industry
on March 30, 2009

autosannMar09.jpgThere had been speculation that President Obama’s mid-West background might tempt him to take a soft line on the troubled automotive industry. But his comments on Thursday that there has been “a lot of mismanagement of the auto industry over the past several years”, suggested this was unlikely. Today’s news confirms it:
• GM’s CEO has been fired, along with some other Board members
• GM has to provide another business plan within 60 days as a pre-condition for further funding
• Chrysler have been told to finalise the merger with Fiat within 30 days, if they wish to receive further funding
• The threat of bankruptcy still hangs over both companies
The core issue is summarised in the above chart from TheChartStore. US auto sales are currently at an annualised rate of just 9 million units. During the 2003-7 boom period, they averaged almost double this amount. Even in the 1991 recession, they only dropped to 12m units.
The new President’s tough line suggests that he, like the blog, does not expect a quick, V-shaped, recovery back to 2007 levels.

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  • Matt
    March 31, 2009

    Is the blog not slightly shocked and concerned that the new US administration has forced out the CEO of a major corporation?
    Would it not be better in the long run to let the failing business fail, and spend government funds on safety nets and re-training for those left unemployed?

  • Paul Hodges
    March 31, 2009

    Matt This is an interesting topic, and one to which I plan to return at the weekend. The blog has remarked several times that the zeitgeist is changing eg http://www.icis.com/blogs/chemicals-and-the-economy/2008/03/northern-rock-carlyle-now-bear.html ,and this is yet another example. Thanks for the question – what do other readers feel?

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