subject: Vehicle Industry And U.s. Economy [print this page] The motor vehicle is the second most important treasure for most of the Americans after housing. The motor vehicle and parts industries employed 732,800 workers as reported in September, 2008, and the Detroit Three employed 239,341 hourly and salary workers in the United States at the end of 2007. More than 9 million people are employed in the auto industry across the world.
The U.S. automotive industry has always been the largest in the world. The U.S economy directly depends on the automotive industry as the automotive industry contributes to a higher level of output in the United States than any other single industry, and this output had been growing till last year 2008.
The contribution of automotive output to the U.S. GDP was substantial despite structural transform in the overall economy. Many other industries are also related or indirectly relying on auto motive industries. For example, metals industries rely on automotive industry purchases for a substantial share of their production. Thus the U.S economy is powered by the automobile industries for no doubts.
This was all well until the global recession hit the U.S economy. This large scale recession had a hand in automobiles sales reduction and slowly in the automotive industry crisis. Many think that the crisis occurred mainly as a result of bad business practices of the Big Three U.S. automakers. A December 22, 2008 New York times article stated, "For the most part, the so-called auto transplants - foreign-owned car companies with major operations in the United States - have deep pockets and ample credit, and they are not facing potential bankruptcy like General Motors and Chrysler."
The American big three automobile industries, now recently the "Detroit Three" are General motors, Ford and Chrysler. The Detroit Three was destabilized by the rise in the automobile fuels which linked to the oil crises, which automatically discouraged the customers to buy Sports utility vehicles which have low fuel economy.
With the other side of option like fuel economy vehicles like green cars, the sales of the Big three cars declined slowly. The Big three faced criticism for their constant lineups irrespective of the fuel price rise. Eventually the North American customers switched to the high fuel economy vehicles of Japanese and European automakers. The Big Three faced financial losses and so they left factories idle and drastically cut the employment rate.
The sudden crises had impact not only on the US based industries but also on the foreign based automakers.
Employment impacts:
Direct: Reduction in the earnings of the employers due to their job cut at the Detroit Three.
Indirect: Changes in the employment due to cancellation of the purchased inputs to automobile industries.
Spin-off: These include the expenditure-induced effects in the general economy.
If only we could detach the US economy from the automobile industry, the solution to the economic crises would be permanent in my point of view. Its good not to depend on a single big industry always for economic benefit of a country. Why the auto industry fallout should worry us all the time? Does decline in the auto industry production would mean that the countries employment rate should go down? If the auto industry could incorporate the high fuel efficiency technologies in vehicles, it could increase average fuel efficiency to 40 mpg. If the industry converted its entire fleet of new vehicles to gasoline-electric hybrid vehicles, it could give consumers 60 mpg.
If we want a secure and developing nation, we need to kick off the petroleum habit.
