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The Business Desk with Paul Solman

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Is the Auto Crisis Just a Lack of Demand?

Name: Tycho Toothaker
City & State: Portland, Ore.

car sign; happyshooter via Flickr

Question: I don't understand the auto industry crisis. I infer that it is because we're in a recession, and not many people are buying cars. Is that all of it, or is there something more?

Paul Solman: Are you talking about the U.S. auto industry? In which case, how about decades of low quality products, relative to the competition? How about the fact that the United States, unlike its rivals from Japan and Europe, has no government-run healthcare system, so companies have to bear the cost of health insurance, which they have to pass on to consumers in higher prices and/or lower quality?

If you're talking about the world auto industry, well, at various moments in their history, many industries produce more than the market will bear, at the costs the industry pays in order to produce. That's certainly true of housing in the United States at the moment (and lots of other countries, too). It could well be true of the world auto industry.

But maybe it's just the "recession." Auto sales are down, what, 50 percent in the United States alone? That kind of sudden decline could destroy almost any industry.

-- Posted May 1, 2009 | Comments (3) | Permalink

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3 Comments

Steven Bare said:

I know in the past there has been problems with quality, but are american designs competative now?


 
Patrick said:

Well, it's not only the US. It's everywhere. What I do not understand is, when you need a new car, you need a new car! I think people are only more carefull now, but if they really want to buy something they buy it anyway. When I am walking arround I see a lot of flatscreen TV boxes at the garbage


 
Paul Solman said:

Yes, Steven, American designs (and cars) seem to be much more competitive these days. But reputations take a long time to rebuild. And if the public now has to worry about a brand going out of business, meaning the cars may not be as easy to service...

Patrick: You can make do with an old car a lot longer than a bulky tube TV, especially with the broadast switch to digital and HD. Decades longer, even. Look at the cars in Cuba.


 

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