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April 07, 2010

The new U.S. auto industry

The industry that makes vehicles in our country has gone through an amazing transformation that culminated in bankruptcy of GM and Chrysler, two of the big three. What brought this about?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"I think it is a combination of being unlucky and uncompetitive. The first hit really occurred in the 1970s, when we had the big jump in gas prices, the result of distortions and embargos in the oil market.

"And we already had foreign auto producers here. They were primarily selling small cars; they were a very small part of the market. Our producers really didn't -- had not gotten into the small car market.

"Well when gas prices went up in the '70s everyone wanted a small car. So that was really the start of the movement away from the big three to the foreign producers.

"Then in the 1990s our domestic producers got a reprieve because gas prices went down so they focused on big trucks, SUVs. And so again they sort of ignored the small car market.

"Then we got the big jump in gas prices in the 2000s, and I think this really solidified the position of the foreign producers who then had made inroads not only into the small car market but particularly in the quality.

"So really what we have now is really not the big three. We have what many call the medium three. And then of course we have many, many foreign producers also competing."

Posted by deeshore at April 7, 2010 08:30 AM