U.S. automakers fall victim to economic crisis

October 10, 2008 5:14:15 PM PDT
The banking industry is at the center of the financial meltdown in the stock market, but the auto industry is also hard hit by the economic turmoil.

Car sales have plummeted. General Motors stated that the company is facing unprecedented challenges. Ford also has an uphill battle as it tries to weather the credit crisis and stock market decline.

Both companies have responded by streamlining production, taking tough measures to avoid going bankrupt, which, they say, would be worse for the economy.

General Motors saw its stock plunge to less than $5 per share. The company was once valued at $50 billion. Now, it's value is $2.6 billion, less than it was in 1929.

" Wall Street's been making a clear statement. We don't have much confidence that GM can turn profits anytime soon. Throw in a recession, throw in a credit crisis, stock plummets, credit ratings go bad. There's a lot of fear in Detroit right now," said DePaul University's Joe Schwieterman.

GM is likely to announce money-saving measures like production cuts and plant closures, but the company stated that filing for bankruptcy is not an option.

Just recently, Ford announced that nearly 800 people will lose their jobs in November at the stamping plant in Chicago Heights, Ill.

"GM is fighting. Ford is fighting to try to turn things around. They need some good news, and it's sure not coming out of Wall Street right now," Schwieterman said.

With U.S. auto sales down an overall 13 percent, compared to this time last year, and with less people getting credit to buy a car, the belt-tightening is being felt across the board.

"I'm at the bottom of the chain, you could say. So, if they don't do business, it trickles down to me because the used cars don't get traded in and on and on, " said used car salesman Robert Glowa of Glowa Auto Sales.

Glowa has sold used cars at his lot on Western Avenue for 44-years, but he is considering retiring because fewer customers are coming in, and he's spending less on advertising to bring the customers in.

"The little guy getting stomped," Glowa said.

Industry analysts expect further declines next year and some slowing in other regions around the world, adding pressure on GM and other U.S. automakers.


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