Auto Industry Turmoil - How Long will it Last?

This year has been tough on the auto industry worldwide, for the most part due to rising fuel prices. The North American automobile industry has been especially hit.

In North America

The biggest buzz seems to have sprung form the Meryl Lynch report, and the idea that they couldn't rule out bankruptcy for the world's largest automobile manufacturer, General Motors. At the same time the company's stocks fell to a 54-year low. And all of it ocurred at a time when GM reported uninspiring sales figures (i.e. 265,937) in June this year.

In order to avoid bankruptcy, GM would need to raise $15 billion in cash as has been said. While the company hasn't responded to the report, but it thinks that it's got enough cash for 2008 and that it would take the required measures if needed.

However, it's not just GM that took the hit, Toyota's sales also came down by over 21%, while Ford's figures showed a drop of 28.1%. For the most part the mechanism seems to be the same, that is lower demand for gas-guzzlers owing to high fuel prices.

Meanwhile in Canada the trend has been replicated with the auto sales plummeting by 5.7 percent from last year to reach 159,500 vehicles in June. The drop is significantly higher than the 0.5 percent fall in May.

In Europe

It seems that the economic downturn and the fuel price hikes have impacted European auto industry too. This could be seen in the drop in the number of new vehicles registered in June. While in Spain the drop was to the tune of 31%, in Italy the registrations came down by 19.5%. However, surprising as it might seem, the German car sales have picked up despite the odds, by 1% in June, and so have the French auto sales, which registered an improvement of 2.1% from June last year.

In Asia

The Japanese auto industry isn't celebrating at all, although it did a couple of days back. If you take away the sales of minivehicles, the sales for June have come down by 3.6% year-on-year to halt at 281,261 units. There's also a sentiment around in North America that many Asian nations such as China, Japan, Korea bolster their auto industries with subsidies, but it's different for the industry in North America. At the same time, one reason the cheap labor in many Asian countries, which is because they don't have a well-unionized workforce, and hence don't demand hefty benefits as is the case in the west.

So How Long is it going to last?

Predictions were made earlier as well, wherein it was said that things could begin to look up for North America by 2009. However given the present trends, some experts feel that for the North American industry revenues could decline in 2008 and 2009. And that we could see increasing losses as the year-end approaches.

Well, forecasts are after all forecasts. While the sun's certainly not expected any time soon, but what actually happens only time will tell.