Once it was the biggest and richest business in the world, supercharged by cheap home-produced fuel, even though few people outside the United States ever contemplated buying an American car.
It’s still one of the biggest (General Motors, the long-time world leader by volume is now neck and neck with Toyota) but it certainly ain’t rich.
In fact the US car industry is bust and has been for years. People have always said it’s much too big to be allowed to fail (being the biggest private sector employer in the US) but fail it might.
The reason is quite simple, GM, Ford and Chrysler carried on making gaz-guzzling sports utility vehicles (SUVs or 4×4s), pick-up trucks (until recently these were actually the biggest-selling models in the States ahead of saloon cars) and executive chariots event though the market was being taken away from them by smaller, more fuel-efficient European and Far Eastern cars.
Essentially this was a marketing cock-up, the biggest in recent history.
The rot began when the oil price began to rise, way before the spike that saw it hitting $140 earlier this year. Although it’s recently slipped back to $70 this is unlikely to save US automakers as too many people have traded down or just stopped driving as much in recession-hit America.
The US government has offered GM, Ford and Chrysler $25bn (they’re a generous lot over there these days) to invest in new models and GM and Chrysler are urgently discussing a merger that will take some capacity out of the market.
All this may help and it still seems inconceivable that either GM or Ford could disappear (Chrysler has been on the brink for decades).
But this might be the endgame for the US car industry and it’s an issue that will be right at the top of the agenda for whichever of Barack Obama or John McCain wins the election.
[Image Attribution: Kmf164]