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How are the Top Car Manufacturers Handling the Recession

Auto manufacturers took the hardest hit when the economy went spiraling down in most parts of the developed world. The US auto market which is often considered to be the barometer of economic health and consumer sentiments has seen its most taxing time in the last 3 years with even the major players in the market like General Motors and Ford grappling under the financial woes. Fortunately, government aid and radical management decisions have helped these car manufacturers stay afloat.

The Seven Auto Manufacturers that Were Impacted the Most by the Economic Downturn

The massacre has been uniform across the auto sector with US, European and Japanese car makers suffering equally. While Chrysler, Ford and General Motors had to bear the brunt of the recession stateside, in Europe auto makers like Fiat, Skoda and Chevrolet have experienced their fair share of troubles amidst plunging markets. Although Japanese car makers like Toyota and Suzuki have suffered losses amounting to billions of dollars, they have been slightly shielded due to their stakes in the Indian and Chinese markets.

Government Aid to the Big Two

The problems of these auto makers have been so serious that the United States government had to interfere to prevent companies like Chrysler and GM which were teetering on the brinks of bankruptcy from falling over. Federal aid was granted to two of three major auto manufacturers of the US to the tune of $24.9 billion. The fear among lawmakers was that the demise of these companies would add gravely to the unemployment figure making an already precarious economic situation worse. However, while the bailout package has helped these companies, they have not been able to contribute to the job market in the country.

Administrative Measures that Helped!

One of the conditions of the federal aid was that these auto manufacturers would have to reduce the number of brands that they offered. And in accordance with this term, GM is left with half of its 8 divisions and brands like GMC, Chevrolet, Buick and Cadillac. On the other hand, a majority of the stakes in Chrysler are now owned by Italian car manufacturer Fiat. Apart from streamlining their brands, the companies have also undertaken other drastic cost cutting measures including closing down some manufacturing plants and workforce cuts. Austerity is the name of the game that these companies are playing at this point.

Shielded by the Emerging Markets

While GM does not have a lot of brands in India, the Asian markets; which have not crumbled under the economic pressures, have offered reprieve to most auto makers. However, in order to cater to the Asian consumers, the auto companies will not only have to follow the usual run of the mill management tactics including savvy marketing but also they will have to price their products to make them seem attractive to the segment. Needless to say, the low cost expected is eating into the profits of these companies. However, they are just happy to have a buyer base and are waiting to offset the lower prices in Asia by the anticipated need for vehicles in the developed countries when growth kicks in again.

The Advantage of their Product

Finally, an important consideration is the sheer demand and need for the product that these auto manufacturers are offering. While some cars may be slotted as luxurious acquisitions, an automobile is a bare necessity that most people need to have. Unlike some other products that consumers can do without, a car is required for day to day travel and living in most cities. Add to this the fact that cars have a defined life span beyond which they cause higher losses in the form of increased fuel consumption and maintenance requirements and it’s easy to understand why people are still interested in new vehicles.

Although most car manufacturers are relying on the promise of an economic revival, the fact is that only meticulous planning and beneficial macroeconomic policies will be able to salvage the future of these companies. While cost cutting measures like outsourcing may have worked in the past, in the recent future they have bled the economy of employment and income.  Auto makers and other organizations will have to understand that only employment and income can augment consumption and jump start the economic growth.

With car industries effected by the recession it would a smart idea to compare auto insurance. Many companies could be adjusting their costs in order to increase their sells, making it easier for you to get a better deal on your teenage car insurance, women car insurance, or senior car insurance.

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