Economic Crisis Impact on Auto Industry’s Costs and Sales
Economic Crisis Impact on Auto
Industry’s Costs and Sales
B.W.
Strayer University
Abstract
The 2008 economic crisis negatively impacted the U.S. domestic automobile industry. GM, Chrysler and Ford reported annual operating costs and sales revenues that mimicked the movement of the overall economy from 2005-2010. Until 2009, all three companies displayed a downward trend in operating costs and sales revenues. These two aspects of automobile manufacturers are directly related to one another. As sales levels increase, inventories and production levels must also increase, resulting in higher operating costs. The opposite is true when sales levels decrease. U.S. economic stability determines the profitability level of the industry. Continual economic recovery in areas of employment, credit markets, energy prices and consumer discretionary spending must continue in order for the domestic automobile industry to maintain its profitable growth in 2011 and beyond.
Economic Crisis Impact on Auto Industry’s Operating Costs and Sales
The United States’ domestic automobile industry came to life in 1886. There were thousands of makers involved in the early stages of the industry, but over the one hundred and fifteen years of existence the number of players has substantially dwindled. Intense competition, mergers and acquisitions by the automobile makers led to the survival of the “Big Three” automakers and created the industry as we know it today (Wright, 1996). The three companies in the U.S. domestic automobile industry are General Motors, Chrysler LLC and Ford Motor Company. These companies have survived many tough economic, war and organized labor times throughout their histories. The latest economic crisis of the twenty first century has proven to be nonetheless challenging for the “Big Three” automakers. With the onset of the energy crisis in 2003, these companies began to experience financial implications due to the manufacturing
Industry’s Costs and Sales
B.W.
Strayer University
Abstract
The 2008 economic crisis negatively impacted the U.S. domestic automobile industry. GM, Chrysler and Ford reported annual operating costs and sales revenues that mimicked the movement of the overall economy from 2005-2010. Until 2009, all three companies displayed a downward trend in operating costs and sales revenues. These two aspects of automobile manufacturers are directly related to one another. As sales levels increase, inventories and production levels must also increase, resulting in higher operating costs. The opposite is true when sales levels decrease. U.S. economic stability determines the profitability level of the industry. Continual economic recovery in areas of employment, credit markets, energy prices and consumer discretionary spending must continue in order for the domestic automobile industry to maintain its profitable growth in 2011 and beyond.
Economic Crisis Impact on Auto Industry’s Operating Costs and Sales
The United States’ domestic automobile industry came to life in 1886. There were thousands of makers involved in the early stages of the industry, but over the one hundred and fifteen years of existence the number of players has substantially dwindled. Intense competition, mergers and acquisitions by the automobile makers led to the survival of the “Big Three” automakers and created the industry as we know it today (Wright, 1996). The three companies in the U.S. domestic automobile industry are General Motors, Chrysler LLC and Ford Motor Company. These companies have survived many tough economic, war and organized labor times throughout their histories. The latest economic crisis of the twenty first century has proven to be nonetheless challenging for the “Big Three” automakers. With the onset of the energy crisis in 2003, these companies began to experience financial implications due to the manufacturing
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