In a market where General Motors (GM), Ford (F) and Chrysler collectively known as the Big Three were once part of the booming American auto industry, we could be standing witness to one or more of their final days.
On Thursday, CEO’s from the Big Three requested $34 billion in government loans in an effort to avoid filing for bankruptcy. Although declaring Chapter 11 would devastate these brands, as the companies argue, it could spell the takeover of foreign automakers in the United States, and an opportunity for new investments.
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GM, America’s largest auto employer, would likely be the first to go, saying that it will run out of funds by early next year if denied federal assistance. Chrysler is not in much better shape than GM and with a failure of GM and/or Chrysler, control of the market would shift to Toyota (TM), Honda (HMC), Nissan (NSANY), Volkswagen (VLKAY), Ford (F), Mercedes-Benz, BMW and Hyundai-Kia, the New York Times reports.
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Both foreign and domestic automakers saw a worldwide decline as sales fell a whopping 36.7 percent from earlier this year. GM was down more than 40 percent for the second straight month, while Honda and Toyota were each met with some of the worst numbers they have seen in decades.
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This news comes alongside a study by CNW Research which found that more than 80 percent of Americans who intend to purchase a new car would abandon their plans to buy from the automaker they had selected should that company file for bankruptcy. The report also found that resulting sales losses would be the highest for US automakers.
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A lack of concern for developing fuel-saving technologies is perhaps one of the primary reasons for the Big Three’s demise. When Japanese automakers entered into the American market during the energy crisis in the 70′s, their focus was on producing smaller, more efficient, higher-quality vehicles. These same elements remain their strengths today a major advantage considering fluctuating gas prices and an ever-worsening economy.
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One fear, however, is that should the Big Three go under, the auto industry’s supply network could be crippled as well, leaving factories unable to adequately respond to the demands of foreign automakers. GM, Ford and Chrysler together employ about 240,000 workers, in addition to 2.3 million employed by their suppliers. That’s almost 2 percent of America’s workforce, according to estimates.
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Even so, many industry experts believe foreign makers have what it takes to assume rapid responsibility for domestic production and the lives of suppliers. Over time, their new positions would allow them to churn out more and more autos for sale in the US, in order to compensate for the collapse of any one of the Big Three. As of right now we can only speculate on if they will receive that chance, but as the days and weeks progress, it seems that at least GM’s recovery from their current financial situation is looking increasingly slim.
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