The US automobile market after the crisis: back to business as usual or birth of a new industry?

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Type de publication:

Conference Paper

Auteurs:

Bruno Jetin

Source:

Gerpisa colloquium, Paris (2011)

Mots-clés:

Automobile demand, crisis, finance companies, households, income, inequalities, public policies, US

Résumé:

The US automobile market after the crisis: back to business as usual or birth of a new industry?
Bruno Jetin
The US auto industry has suffered its worst crisis since the thirties. Since the spring of 2010, it is recovering progressively. GM and Chrysler emerged from bankruptcy as new slimmed-down companies with fewer brands, plants, workers, less debt and market share. It seems that the new “medium three” (GM, Ford and Chrysler) are now making profit in a market of 11 million vehicles sales a year in the US not only by selling high-margin light-trucks but also low-margin compact cars, among them hybrid cars. They have repaid their loans and have gone public again, a move that gives the government a way to progressively sell its stake in the companies' stock. They also seem better prepared to cope with the new gas price hike for they have changed their product mix to emphasize more small cars and fewer sport utility vehicles. But behind these goods news there are still factors of fragility. The US economy is recovering slowly and unemployment stays at a high level contrary to the previous recessions. A new jobless recovery as after the dotcom bubble burst in 2001 seems under way. The structural problems that have led to the crisis have worsened. Family income has dropped, poverty has risen and many have lost their health insurance. In this context, the rebound of the automobile market is no doubt fragile. The temptation is strong to use the traditional recipes such as indebtedness. Banks and captive finance automobile companies have started to issue loans more actively. Subprime auto credit is back. More than 859, 000 new cars were sold to consumers with a subprime credit rating in 2010, according to CNW Marketing research. Banks and auto loan makers are flushed with money and are making large profit on new loans since the policy of “quantitative easing” of the FED has lowered interest rates to nearly zero. GM has spent $3.5 billion to buy AmeriCredit, an auto subprime lender company, precisely to reap profits from this lucrative debt market. Another reason is to increase sales by lending to customers with a questionable credit rating. The danger is to be dependent again on bad loans to increase car sales.
Our contribution will analyse these contradictory tendencies. In a first part, we will analyse the structural fragilities of the recovery on the demand side. In a second part, we will present the public policies and firms’ strategies in favour of hybrid cars and their impact on the product mix.

Texte complet:

The US automobile market after the crisis: back to business as usual or birth of a new industry?
Bruno Jetin
The US auto industry has suffered its worst crisis since the thirties. Since the spring of 2010, it is recovering progressively. GM and Chrysler emerged from bankruptcy as new slimmed-down companies with fewer brands, plants, workers, less debt and market share. It seems that the new “medium three” (GM, Ford and Chrysler) are now making profit in a market of 11 million vehicles sales a year in the US not only by selling high-margin light-trucks but also low-margin compact cars, among them hybrid cars. They have repaid their loans and have gone public again, a move that gives the government a way to progressively sell its stake in the companies' stock. They also seem better prepared to cope with the new gas price hike for they have changed their product mix to emphasize more small cars and fewer sport utility vehicles. But behind these goods news there are still factors of fragility. The US economy is recovering slowly and unemployment stays at a high level contrary to the previous recessions. A new jobless recovery as after the dotcom bubble burst in 2001 seems under way. The structural problems that have led to the crisis have worsened. Family income has dropped, poverty has risen and many have lost their health insurance. In this context, the rebound of the automobile market is no doubt fragile. The temptation is strong to use the traditional recipes such as indebtedness. Banks and captive finance automobile companies have started to issue loans more actively. Subprime auto credit is back. More than 859, 000 new cars were sold to consumers with a subprime credit rating in 2010, according to CNW Marketing research. Banks and auto loan makers are flushed with money and are making large profit on new loans since the policy of “quantitative easing” of the FED has lowered interest rates to nearly zero. GM has spent $3.5 billion to buy AmeriCredit, an auto subprime lender company, precisely to reap profits from this lucrative debt market. Another reason is to increase sales by lending to customers with a questionable credit rating. The danger is to be dependent again on bad loans to increase car sales.
Our contribution will analyse these contradictory tendencies. In a first part, we will analyse the structural fragilities of the recovery on the demand side. In a second part, we will present the public policies and firms’ strategies in favour of hybrid cars and their impact on the product mix.

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