Impact of Recession on Automobile Industry

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This essay proposes to investigate the effects of recession on the automobile industry in world specifically in United Kingdom, United States, India and Japan. This includes its effects on employment sector, advertisement sector, Research & Development Sector, Banking Sector and other sectors related to this, the effect on overall economy and the related terminologies thereof. Also, the aim is to the study of effect of recession on downturn in automobile industry due to changes in Trade Agreements between two countries regarding export and import policies of this industry.

‘The National Bureau of Economic Research formally defines a recession as three consecutive quarters of falling real gross domestic product (GDP).’ (Company., 2003). As such there is no perfect definition of recession but as per the past experiences and research the above definition has been brought into limelight. Some economist says that when there is fall in GDP of 2 quarters there arises a situation of recession. There are any times of recession and none of the recessions are alike. If we take recent situation of recession, It has been caused by a shock to the availability of credit, a huge growing up of debt which needs to be unwound and its growing across the entire world. The global economic crisis began somewhere in 2007 and grew up in 2008 shocked most of the countries. Recession which started from USA spread all over the world in few months. There were all the sectors of business which were affected by this recession. The situation started to go from bad to worse day by day. Banks stopped financing to various companies so the working was affected. In return the sales of various commodities started declining as purchasing power began to slow down. There was wide spread unemployment in various sectors of business. Many economists were struggling to find the remedies for this great recession but were not able to find the solution. Thus this crises was becoming a major issue for most of the countries of the world, as in order to protect their economy from falling the crises was to be controlled. Automobiles are vehicles primarily used on roads for transportation. Automobiles have changed the world in 20th Century. The manufacturing, sales and maintenance of automobiles have become key element in the growth of industrial economy. Due to recession Automobile industry was even affected to a greater extend as people tended to spend less and there was less availability of finance also. The auto mobile industry, which is seen as a barometer of the world economy, is going itself into recession, with sales and profits falling down. Manufacturing plants are closing, jobs are being reduced, production being slow down and the share prices of the car companies are fluctuating. The economic meltdown is seen in almost all the industrial sectors across the globe. While the scale of the crash was not explained, so was the response by the Government and Banks in providing and helping to get the financials from the markets and make the industry work again as normal and also to gain back the consumer confidence. The big three car makers Ford, Chrysler and General Motors have been hit by recession even harder than the most of the companies. (Anonymous, 2009) With last year's sudden oil price rises already have started consumers pushing away from the traditional fuel cars to more economical alternatives.

Graph showing Track of US Car Sales in year 2008 and 2009 

(Hurt, 2009)

From the graph above its clear that the sales of car in United States in 2009 has declined tremendously as compared to 2008. There was drastic fall of 95.1% in the sales of Isuzu Motors. Sales of General Motors which was capturing the major part of the market has reduced by 40.4%. This downfall had a great impact on the industry. There was huge loss in General Motors so it started developing new strategies to protect itself from becoming bankrupt. Ford even faced a huge loss due...
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