The Relationship of Global Financial Crisis and the Automotive Industry

The global financial crisis is in an ongoing economic downfall that is being felt in most countries. It started in September 2008 when a number of large financial institutions in the United States either suffered bankruptcy or underwent mergers or conservation. Such a crisis not only affects the financial sector but the entire economy and other industries. One of the industries affected by the global financial crisis is the automotive industry.

The financial crisis in the automotive industry started in the latter half of 2008. It began when the industry weakened due to the continuous rise of fuel costs, which was also linked to the 2003 to 2008 oil crises. This prompted automotive customers to avoid buying large sports utility vehicles (SUV’s), particularly those that are made by General Motors, Chrysler, and Ford. Another reason is the current downturn of several financing firms and banks. Most financial companies are becoming stricter in approving car loans, making it difficult for aspiring car buyers to own a car. Wells Fargo cut its auto loan by almost 25%, while Capital One decreased its volume of car loans by over 50%. GMAC Financial Services, on the other hand, is now rigorous on implementing its rules.

In order to save the automotive industry from further crisis, experts and other people involved have given recommendations that will help boost business ventures. One of the suggestions is that the automakers declare bankruptcy. In terms of the government, particularly in the United States, a bailout plan, amounting to $15 billion, was agreed upon between the automotive manufacturers and the government.