Automotive Industry in Crisis: Global Shifts and Local Challenges

The global automotive industry is facing a perfect storm of economic and market pressures. General Motors and Ford, the two largest US carmakers, have reported combined losses of $7.2 billion in their North American businesses, with factories shutting down and 30,000 jobs cut. Meanwhile, Asian manufacturers such as Toyota and Hyundai are thriving, with the Japanese giant rapidly closing in on GM's title as the world's biggest carmaker.

Key Takeaways:

• The global automotive industry is divided into three regions: Asia, where manufacturers are doing exceptionally well in profit and sales terms; the US, where producers are struggling on the brink of bankruptcy; and Europe, which is in the middle, making small profits but planning to boost them through cost cuts and sales growth.
• The industry's shift from building a single model in large volumes to a wider range of models in smaller volumes has presented a significant challenge for manufacturers, who must design vehicles that look and feel different while sharing expensive components.
• US carmakers have made most of their profits from sales of petrol-guzzling sport utility vehicles and pick-up trucks, but rising fuel prices and inroads by Japanese companies have hammered profitability.
• Renault, the French carmaker, and Volkswagen, the German giant, are both trying to rebuild their passenger car businesses and expand into new niches.
• Chinese carmakers are trying to design cars to appeal to US and European buyers, and several experts believe that within a decade, they will be able to compete with the rest of the world.
• The European car market is stagnating, with Renault and Peugeot delaying targets of selling 4 million cars per year.
• The European Commission is pushing for expensive technology to cut exhaust emissions, and labor unions in many countries are resisting restructuring.
• Asian manufacturers, such as Toyota and Hyundai, are aggressively expanding into new markets and increasing their production capacity.