A New Day Has Come in the Automotive Industry

In times of prosperity, the saying “What’s good for GM is good for the country” was popular. But is it still current when the world is immersed in crisis and General Motors, the icon of the automotive industry, is filing for bankruptcy with $82.3 billion in assets and $172.8 billion in debt? Taking into consideration the gigantic amounts of money that the U.S. government has already funneled into rescuing Chrysler and GM makes it an interesting question.

President Barack Obama thinks that this saying is still true. However, one should wonder if the authors would be pleased with the current interpretation of these words. Keeping alive the concern which has gigantic debts had no economic justification so the controlled insolvency of the both concerns and their temporary nationalization is the only chance of recovering at least part of the budget money.

American companies were ruined by a lack of foresight. They mainly produced huge, non fuel-efficient cars that have been the symbol of the American automotive industry for decades. The impudent trade unions (the biggest, UAW, is going to cover half of GM’s $20 billion obligation towards the medical trust fund, formerly paid exclusively by GM) were also a factor, as was the economic crisis. This has discouraged Americans from bigger investments, as well as by rising gas prices, which are especially painful when using gas-guzzling engines.

The growing power of Fiat, the bigger aspirations of Volkswagen, the downfall of GM, and the arrival of Canadian Magna will totally change the world’s automotive industry. China is growing into the leader of car manufacturing and Asian markets are rescuing the producers from ultimate collapse. Companies from this region are reaching the European brands and wish to give them new qualities. For example, the Indian TATA acquired Jaguar and Land Rover.

The crisis is going to make a few brands vanish into thin air and change the balance of power on the market. The Russian Opel and Indian Jaguar are the beginning of a massive reshuffle. We must start getting used to it.