Both GM and Chrysler recently, with their operational troubles well-documented, have begun a series of mass downsizing efforts that have left hundreds of thousands of Americans unemployed. It will be very interesting to see what we can make of the car industry from here on out. Will the void left by these large auto companies simply be replaced by another up-and-coming company? Or might there be a David vs. Goliath movement of new, smaller auto companies trying to steal market share from these stumbling giants by selling fuel-efficient cars for low prices? We have already seen a similar situation in the airline business, where the Jet Blue's and Southwest Airlines of the world have seized a considerable amount of revenue from airline giants American Airlines and United Way during their times of struggle.
The Indian car manufacturor Tata has already unveiled their new Nano Car priced at a mere $2500 (http://www.smartcarofamerica.com/hybrids/tata%27s_new_nano_car/).
A similar version of the Nano, the Smart Car, has made its way here to the United States.
I'm not sure, however, that the American cultural ideology of "bigger is [usually] better", recession or no recession, will ever permit for such a small car to take over the industry.
Yet it will be interesting to see where these ailing companies go from here. I'd also keep an eye on the big "electric car" push being bred by the Michigan government, which recently awarded its local car companies hundreds of millions of dollars to begin constructing factories that produce lithium-ion batteries. The goal here is to eventually create cars that run on minimal fuel (below 3% of car's total energy) and instead use a battery to run on electricity.
Chrysler, one of our "powerful cardhouses" coming crashing down, has made a huge push towards electric cars, and plans to launch an entire new line of electric cars by 2010. That is, if they make it that far- according to CNN Money, Chrysler dealerships sold an average of 303 cars last year per dealership compared to Toyota's 1,292 per dealership.
Odds are, based on all the help these ailing car companies have been receiving from the government, that this will be a re-building phase and not a change in direction for the American Automobile Industry. Chrysler will already be backed by Fiat when they emerge from Chapter 11 bankruptcy (an initial 20% investment is expected). And GM, whether or not they choose file for bankruptcy, is already in talks with several companies about having a potential backer to help their re-structuring efforts as well... hopefully that might raise their stock prices a little, as they are currently sitting at $1.14 per share.
It seems the only group that really suffers here are these companies' hard-working employees, who are currently twiddling their thumbs (rather anxiously, I'd imagine) as they await a letter from HQ as to whether their dealership will have their contract extended past its 2010 expiration date.
Is there any silver lining in this entire ordeal?
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What's scary about this is the way the government has decided to "help" GM/Chrysler by taking over about 80% ownership, which means that the investors who have put in their own money only have 20% control. The question isn't will Chrysler make it, but will we? Socialism is on the horizon, and at that point they might just assign us the car we drive. If capitalism isn't allowed to function within its own parameters we can all resign ourselves to a fate devoid of freedom. Is that what our founding fathers wanted?
ReplyDeleteTrue, yet if a company is failing that badly and shows they cannot dig themselves out of the hole they are in, it almost seems like the government has to step in or else why have any type of regulator?
ReplyDeleteAt the same time, who is to say that the government is the right group to step in? I sure would not want the government controlling my bank as they have begun to do.
The amount of different angles you can take on this one are truly endless...