Tuesday, June 2, 2009

Is the American auto dream over?

By: Subhadeep Bhattacharjee

It was a sad day in American automotive history when the one of the world's largest automobile company General Motors filed for bankruptcy. It is the third-largest filing in U.S. History. Only beaten by Lehman Brothers Holdings’s in 2008 and WorldCom’s in 2002. The U.S. government has pledged up to $30.1 billion USD to restructure the company and provide the financing for it to emerge within the next two to three months.

General Motors had led the American auto revolution along with its competitors Ford and Chrysler. The auto giant which had given world several marvellous brands such as Cadillac, Opel, Chevrolet, Hummer, Pontiac and Saturn has crushed under its own burden of credit. This downfall was inevitable for GM as the company has been on a continuous down slide since the start of the millennium. The 101 year old company is more than just a brand to the Americas, it a symbol of pride.

Post World War II brands like the Ford and General Motors have always been the flag bearers of the Great American Dream. They have shown to the world the American flamboyancy, the need for speed, the liking for big gas guzzlers and above all the style statement. They have been testament to the aspiration of the Americans to be the greatest superpower in the world. They were America's answer to the Mercedes, the Fiats, the Hondas and the Nissasn.

General Motors is another episode in the chain of events that has hit the American economy as a whole and automotive industry in particular. With Chrysler already having filed for bankruptcy in April and Ford having mortgaged all of its assets in 2006 to borrow money from the market American automobile industry is going through its darkest hour. With sales touching record lows due to the global financial meltdown it has been bumpy ride for the auto makers in the last year in particular.

The American auto industry also faces external threats mainly from Japan and South Korea with brands like Toyota, Hyundai, Nissan and Honda faring better in the market. One reason why brands like GM have had slump in the last decade has been the change in markets. Buyers around the world are moving towards energy efficient cars a fact that most American brand were in denial of. The flamboyant gas guzzlers are no longer popular with the American masses who at one point of time did not care about fuel bills as long as it made a style statement.

Another thing that hit the American auto industry was freezing of demands in the domestic markets. The markets in North America which accelerated the growth of the GMs and the Fords has seen freezing in sales in the last two decades. It is not surprising that operations of General Motors and Ford in countries like India has been a complete different story. In fact GM India is one of the rare subsidiary for the auto giant whose books are in still in green.

The bailout by the government will surely save the lives of thousands of workers in these companies. It is too early to write off brands like the GM and Chrysler and they surely will not land up in the history books of automobile engineering. But the bailout also means that the American auto dreams will never be the same again.


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