Impact of Recession on Automobile Industry


Economic recession redefined the modern economy of many countries including the United States. Its main features included steep payroll decline, sharp contraction with the labor market, dropping of average earnings per hour and so on. The effect of recession has been easily recognized within the automobile industry. The United States, which is the world’s largest producer and consumer of automobiles accounts to mostly 6.6 million direct and in-direct jobs. It had encountered adverse effects due to recession.

When particularly speaking about auto industry, there was a steep drop in the payroll and corresponded to rise in unemployment rate. The unemployment rate further had its effect on the production line of the manufacturing process. It adversely effected a person’s investment capacity. It also effected the global market for the automobiles manufactured, processed and marketed in the United States.

General Motors has faced huge losses. The output in the manufacturing process was deteriorated. In impact with weakened labor and subsequent and natural consumer demand, the salaries though not attractive got doubled. The manufacturing set back has occurred for a long time.

The over-capacity feature of the manufacturing industry in the United States had reduced car buying, and stagnated the productive capacity. According to some analysts, the capacity which would generally be 80% for gaining profit had dropped to 50-60% in 2009. During recession, GM and Chrysler had requested billions from the Federal Government. All the conditions from the recession has slowly developed in the automobile industry. Now the pace of the industry has set back nearer to the normal stage and has been showing quite good results. However when compared to the sales and growth in some Asian countries, the sales in auto industry of the United States is comparatively less. However, it would be soon recovered mostly by 2011.

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