This lengthy piece in the subscriber section of the Financial Times examines the sorry state of the US auto industry. Some of the problems highlighted are:
- supply glut
- prices that buyers will pay are higher than the cost of producing a car
- inability of US producers to compete with Japanese manufacturers on passenger cars
- staggering pension and health care obligations (”GM alone had a $19.3bn gap in US pension funding at the end of last year, approximately equal to its market value. Its unfunded healthcare liabilities are $51bn, slightly more than the combined market capitalisation of Ford and DaimlerChrysler, Chrysler’s German parent.”)
- It is probable that the industry most contract in order for profit margins to be restored, but this is also difficult due to the presence of unions unwiling to agree to job cuts.
