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Home >> Business Analyst Articles >> BusinessAnalyst Career Feature >> Global Effects of the Failing U.S. Auto Industry
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Global Effects of the Failing U.S. Auto Industry

With so much focus on how the major U.S. automakers will affect the American economic market, few of us have given much thought to the global concerns and potential repercussions of any of the scenarios that might play out. There is, however, one man who has his finger on the pulse of the world automobile–market. This man is Koji Endo, a financial business analyst who has spent a considerable amount of time not only researching and predicting outcomes, especially for the Japanese market, but who has some theories on the long–term effects of decisions made in this country.

The U.S. stands to lose over three million automotive jobs as well as a multitude of other positions that are supported by the Big Three automakers. Many automakers, regardless of which company each operates in, share many of the same suppliers. If the Big Three fail, these suppliers stand to suffer major blows, some of which may be fatal to the business as a whole. Further, if any of these suppliers are unable to weather the tough times, the remaining automakers will be forced to find new suppliers or will shoulder the entire burden of keeping the doors open to the remaining suppliers. This might prove to be unsustainable, since the three major American automakers currently provide the largest share of profits for the suppliers; even against Japan’s own contributions. This is where Koji Endo provides insight that is disconcerting at best.

According to Nissan Motor Company, Japan’s third-largest automaker, having the three U.S. automakers in ''severe distress'' has consequences for the entire industry, and certainly for Japanese automakers, since they are making leaps and bounds in their environmentally friendlier car designs. If there is a weaker American climate, the engineering jobs in Japan might face major cutbacks that could last for decades. The reasoning for these concerns is simply due to supply and demand; if Americans, in their attempts to secure affordable transportation, will no longer consider purchasing the more-expensive, eco-friendly vehicles, then there is no competition. No competition means no market. Even though Japanese automakers are faring better financially at this time, they are beginning to feel the winds of change. The Latin American, Chinese, and Indian economies are not demanding new cars, because they know their financial states are often largely affected by U.S. markets. As Nissan said last week, ''This is a global crisis affecting the entire auto industry: no one is immune.''

Even with a worst-case-scenario mentality, how do automotive jobs look for the foreseeable future? As you might expect, it is not as promising, at least in the short term, as other career markets currently enjoy. Still, predictors show at least the ability to maintain close to what the current employment levels are for those in the repair and maintenance occupations. Further, those with the training courses that are sometimes required for auto repairs to fall under the strict warranty guidelines for newer cars, these technical jobs stand to remain in demand. Many of the automobile dealerships expect to keep their heads above water, provided only if solutions are on the horizon for the American automakers with their service and maintenance departments. Of course, this cannot be a long-term solution, but those employed in these roles might find themselves with more job security than the sales force.

Speaking of the sales positions, many used-car dealerships are anticipating more sales since fewer Americans are in the market for new vehicles. In fact, one study shows more interest in the used-car market for those seeking sales positions versus those searching within the new auto market. This might seem obvious, but when you take a step back and consider that there may not even be a new-automobile market in the near future, it is then you realize the impact of the trouble for the U.S. automakers. On a bit of a different spin, those who do choose to purchase new cars within the next six months stand to be drawn in by unheard-of rebate offers, generous incentives, and incredible interest rates. This is expected to potentially bridge the waters and keep the open sales vacancies to a minimum until an acceptable rescue is secured for these automakers.

In the meantime, Toyota has slashed its predicted profits to 5.9 billion through March 2009. This reflects a cut of one-third of previously released figures indicated. They also warn of yet another revision with bigger cuts. Koji Endo warns of alarming signs the Japanese automakers are falling in behind the American automakers. Both GM and Toyota have ceased production in several of their North American plants and this is just the first similarity in what is sure to become a long list. Surprisingly, Toyota and Honda sell more vehicles in North America than they do in Japan and no one is sugarcoating the fact that every automaker in the world is not at an advantage simply because their American counterparts are facing major problems. There is frankly no way to use it as leverage by the competition. To put it in an even bleaker light, GM sold 9.37 million vehicles last year (globally) and Toyota came in just a few thousand units shy of matching the larger automaker’s numbers. After these Japanese automakers worked for decades to lose the conceptions of causing problems by competing for the American dollars in the U.S. market, it has long since been understood that Toyota, Nissan, and Honda are indeed American automakers and as such, have much to lose if things do not improve for Ford, GM, and Chrysler.

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