Obama gets tough on US auto industry


There had been speculation that President Obama’s mid-West background might tempt him to take a soft line on the troubled automotive industry. But his comments on Thursday that there has been “a lot of mismanagement of the auto industry over the past several years”, suggested this was unlikely. Today’s news confirms it:

• GM’s CEO has been fired, along with some other Board members
• GM has to provide another business plan within 60 days as a pre-condition for further funding
• Chrysler have been told to finalise the merger with Fiat within 30 days, if they wish to receive further funding
• The threat of bankruptcy still hangs over both companies

The core issue is summarised in the above chart from TheChartStore. US auto sales are currently at an annualised rate of just 9 million units. During the 2003-7 boom period, they averaged almost double this amount. Even in the 1991 recession, they only dropped to 12m units.

The new President’s tough line suggests that he, like the blog, does not expect a quick, V-shaped, recovery back to 2007 levels.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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2 Responses to Obama gets tough on US auto industry

  1. Matt 31 March, 2009 at 2:47 pm #

    Is the blog not slightly shocked and concerned that the new US administration has forced out the CEO of a major corporation?

    Would it not be better in the long run to let the failing business fail, and spend government funds on safety nets and re-training for those left unemployed?

  2. Paul Hodges 31 March, 2009 at 2:56 pm #

    Matt This is an interesting topic, and one to which I plan to return at the weekend. The blog has remarked several times that the zeitgeist is changing eg https://www.icis.com/blogs/chemicals-and-the-economy/2008/03/northern-rock-carlyle-now-bear.html ,and this is yet another example. Thanks for the question – what do other readers feel?

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