The statement pretty much sums up how the auto industry feels at the moment. The present travails of the auto industry are not surprising considering auto loans are the second largest liability most people have, the biggest being a housing loan. The carnage brought about by the subprime mortgage meltdown in conjunction with the credit crisis has well and truly rewritten the archives of financial markets. Now comes the second leg of pain, as shrinking loan availability from banks has deterred buyers.
The extent of the problem being faced presently can be gauged from the fact that General Motors has said it might run out of cash before the end of the year. The clamour for a investment bank style bailout has been rising in the US, considering the importance of the big three i.e. General Motors, Ford and Chyrsler to the US economy. Sadly, the present state of affairs are likely to culminate in either one of these big three filing for Chapter 11 bankruptcy protection.
Whether the US government bails out the auto industry remains to be seen, one thing is for sure. The pain is being felt from Detroit to Stuttgart and even Tokyo. Some of the biggest names in the industry Nissan, Toyota, BMW, Honda have all issued profit warnings for 2009. Is there bigger trouble in store? My fear is, should the freeze in credit continue, its only a matter of time before credit cards become a problem area. The credit crunch seems to be easing as Libor has cooled off sharply from the highs, however confidence is a key ingredient which seems to be missing in global financial markets these days. From the way things look presently, we could be yet some way off before things start to improve for the better.
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