Car Industry is One More of the Financial Crisis Casualties

The car sales are falling so fast that no car companies waited to have such a terrible situation. For the car business it is perhaps the worst hard land that they have ever had. How they get into this nightmare is what I will try to explain in the following paragraphs.

What do we need to cook something similar?

First of all, the companies produced relatively more expensive cars to be bought by the American middle class. The automakers produced these kind of cars because the demand for these vehicles were strong enough. The supply was following the demand, and theorically it was correct in average. The financial crisis showed that no everything was right; the consumers pressed the break pedal suddenly wrecking the American automakers. The business car is very competitive, and nowadays the Asian companies are leading the busineness in my opinion. The Asian automakers were investing a lot of money in more efficient and more affordable vehicles, and these characteristics will make them to better support the current crisis.

Logic Consumer Reaction

Now the American consumers, who have been spending more than they can afford, are decresing their expenses, especially the more expensive ones. For example, houses, cars, jewels, and electronics would be the more affected products. The consumers strategy would be to save money to pay their debts and deal with the very uncertain future.

What do American Automakers have to do?

First, the American companies have to manage to pass the bad weather; they have to cut unnecessary outlays and privileges, reanalyze their objective market, offer a wide variety of options to the market, and improve their competitiviness through a agressive investement policy with the help of new expert partnerts.

Officially, The United States is in One Year Recession

I have known for a while that The United States was in recession, but I have never thought that it began in december 2007. Economists use many indicators to predict when we get into this stage, but many of them failed to assure this in this time. In my opinion, I believed that USA has been in recession since june 2008 because the industrial production still showed year-over-year growth in the first semester of 2008 although the other indicators such as unemployment rate, nonfarm payrolls, and personal disposable income less goverment transfers have given us signs of economic weakness. I was convinced that to be in a meltdown period is necessary to have all components in red.

Misleading Indicators

In june 2008, the industrial production grew zero percent in a year-over-year period, and after this month this variable showed negative values. Other indicadors such as retail and total sales gave me the wrong impression of being still out of this period in the first half of this year. On the other hand, employment indicators and personal disposable income have given the contrary evidence since the end of 2007. In addition, consumer confidence, leading indicators, and house indicators have been drawing this bad picture.

NBER Gave Us the Initial Point, But...

The NBER said today the American economy reached its peak in december 2007, and now the problem is to forecast when it would get its trough. Many economists said this period would last one more year , and I agree with them because the real macroeconomic indicators do not exhibit any recuperation sign yet.