The customer can have any color he wants, so long as it’s black, Henry Ford said about his Model T in 1908. It was the car that gave birth to the mass produced automobile and is credited with putting America on the motorized road.
Today car manufacturers around the world would more likely say, “The customer can have anything at all, so long as they buy a car right now. If there is one industry, besides banking that has become the touchstone of the crisis it is the automobile industry.
The numbers we received last week show the disastrous state of the industry. In Europe, car sales dropped 17 percent in the first three months of the year. In the United States annual sales are likely to be 9.5 million vehicles, the lowest level since 1982. Around the globe, the car companies are screaming at governments for billions of dollars to keep them going.
Some governments like Germany have introduced car scrapping incentives; get rid of your old car and receive a grant to help buy a new one. It boosted German car sales dramatically after it was introduced. France and Italy also have similar schemes. Everyone’s watching General Motors to see if it will file for protective bankruptcy. In Australia, GM owns the venerable marque Holden. In Europe and Asia, Opel is a household name and in the UK Vauxhall has 15 percent of the market. Throw in Saab, Hummer, Cadillac and the Chevy to the mix too and you start to see why the old saying, “as goes GM so goes America might be adapted to incorporate other parts of the world in the weeks ahead.
Even though President Obama wants the merger of Italy’s Fiat with Chrysler to go ahead, Fiat has set pretty strong terms before it would take on the US albatross.
The question many are asking is whether or not the auto industry should be receiving all this help. There are those who believe the car companies have got themselves into this mess, but we can’t ignore the huge economic significance of this industry. Believe me, if car companies start going out of business this crisis will become a lot worse.
Perhaps the best hope in all of this comes from the developing economies of China and India. Last week Volkswagen shares roared ahead on higher sales in China and the Tata Nana has just launched in India and despite the fact it’s available only in red, silver and yellow, Henry Ford would no doubt have approved. At only $2,000 it promises to revolutionize driving in an emerging economy, putting millions of new people behind the wheel.
The car industry may not be what it once was – but make no mistake – it is still a vital part of everyone’s economic life.
Whatever happens to GM, Chrysler, Ford and the rest, I hope your week ahead is profitable.
This week’s Profitable Moment goes to the US banks and banking shares – much better results than expected. They may have lost tens of billions, but hey, you can never really beat a bank!
Richard Quest is a CNN anchor and correspondent who reports on business travel issues. Tune in to CNN International each evening at 1800 GMT to catch Richard’s new show, “Quest Means Business.