Industry Research

Final Project: Automobile Industry Research

ECO205

Axia College

Kristina Ohama

12/22/2008

It is no surprise that the automobile industry has suffered drastically due to the falling economy. Three of the largest car manufacturers in the U.S. are requiring a government bailout in the form of a government guarantee. A number of Americans have not been purchasing vehicles that are not energy efficient, this due in part to the rise in gasoline which has adversely affected the purchase of larger SUV type vehicles and trucks. Since GM, Ford and Chrysler have a target market of large vehicles that use a large amount of gas, the negative impact has placed a strain on these companies, forcing them to seek outside help. According to the Economist (2008) “The Big Three have been hit by petrol prices pushing towards $4 a gallon, by more demanding federal fuel-economy rules and by the credit crunch wrecking consumer finance. But the federal government came to their aid this week when George Bush signed an energy bill that includes $25 billion in loan guarantees to ease their pain.”

Along with the rising gas prices reducing sales, these companies have also lost their financing capabilities, this due in part to the fall out of the housing market. Many consumers that have strong credit and have been able to borrow in the past are being turned away or forced to put more money down and pay higher payments. All of this due to the lack of financing and loans available, with the housing market continues to take a plunge; many consumers are also losing their vehicles. Many consumers relied on the value of their homes to finance vehicles in the past, with this option gone; the necessity to purchase a vehicle is nonexistent or minimal at that. With a failing economy, new vehicle purchases are not on the list of necessities and are now luxury purchases.

Consumers are being notified through articles and the stock market regarding the economy and the...