Introduction: Detroit’s automotive business is decreasing in the past few years
According to Jorn it is in the past half-century that globalization has been the prominent pressure that has accelerated change in the world economy (Jorn Pg 12). As quoted in this book it is outlined how the second time salvation of Chrysler from receivership motivated GM and Ford to go for better quality car production. In contrast, its Japanese competitors Toyota made higher sales than Chrysler. Incidentally, there is much more threat to the big three companies in the power (Pg 10).
The effects of the Detroit automotive industry
The BBC report outlined that the drastically affected market than any other in the world is the US car industry. This is because in the last 5 decades they dominated the world. While this situation is bad in the other states of the US in Michigan, the residents are at the brink of demise. Jorn (Pg 15), discovered that donations are being asked for by the Elementary Academy Schools in form of light bulbs, and even toilet paper. Statistically, General Motors (GM) when unable to contain the pressure from competitors ceased to be the usual income generator it used to be. As a matter of fact, in Flint, there is approximately 6000 GM worker considering the initial 100000 in its successful days. One employee confessed to the fact that Flint is known to harbor the highest unemployment rate, poverty, and homeless people (Coleen Pg16).
Ford and Chrysler have up to the recent past in 2006 that they had no other option but to allow others to become leaders in the US auto market. This was consequently followed by huge downsizing, cutting jobs up to 70,000 between them; to lower the losses that have been recently incurred. As early as July of 2002, it was already optional for an auction of cars as this ensured that a certain price would be offered. Approximately 6,000 vehicles were being traded in daily ready for sale through dealers. The newly established auctioneers like Manheim auto auction in Bordentown, N.J., were expected to first handle 80,000 cars in the year of launching but later increase to 100,000 in a year (Coleen, Pg 25).
The car sales decline in the 2005-2006 periods had been due to increased oil prices to a record $3 per gallon. This affected Sports Utility Vehicles (SUVs) sales increasing the sales of small cars. Eventually, Japan’s Toyota’s were gaining an approximate 15% market share that was initially enjoyed by the big three automotive companies. As the only European car manufacturer, its market share drastically shot up from 7.4% to 9.2% by March 2008. Fiat was the only European automaker to see sales growth and its market share rose to 9.2%, from 7.4% in March 2008 (Jorn Pg 22).
Fiat CEO expectation that Chrysler would make out a deal left him without an option but to go for a change in unions where necessary downsizing was called for to cut operation costs and increase revenue. This was, however, looming as a threat to further offers for mergers as it threatened the future of the potential company. The US government while looking into the rescue plans for other companies out to consider regulating the auto industry as it also contributes to the government’s national income (Coleen, Pg 28).
Companies that are likely to experience receivership ought to be given turnaround Chief Executive Officers like Marchionne. This effort was will bring to light the ability to reorganize such firms and enable them to foster ahead in the achievement of their ultimate goal.
Coleen, Blacker (2009). Fiat bucks trends see sales rise; Fleep Houston publishers; Pg 16-28.
Jorn, Martins, Detroit auto show is all about survival: Business Report. Flint local publisher; Pg 12-22.