Fiscal Crisis Auto Bailouts

Forgetting recent bailouts and the financial crisis automakers expect unlimited growth

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Irrational exuberance returns as automakers having had one good year in 5 expect the coming years to show double digit growth. Meanwhile the US economy shrank last quarter.

A few years back after the house of cards we called the financial crisis fell we all looked around at one another in the circular firing squad and wondered how we could ever be so dumb as to think we would all keep getting richer next year without actually creating anything more than we did last year. We all decided we would name this “irrational exuberance.”

After the stock market halved its value, General Motors went through bankruptcy, and the housing market tanked, we auto buyers kept our heads down. Even those who could afford a new luxury car were not going to buy one. Who wants to look like the show-off stickin’ it to the little guy? We all held off buying cars for a variety of reasons. Then the government gave us all a bunch of our money if we would simply bring in our old beater and trade up to a 15 mpg truck. Of course we had to trade a 14 mpg truck, but that is what we all call progress. Then we all stopped buying cars again for a bit. Old Betsy finally gave up the ghost this year and off we all went again and we bought new cars. 14 million of us did it. More than most years in modern history.

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Comments

Thanks John, good points. I always hit the roof when I see future projections and the tail-between-legs apologies at the end of the year when numbers haven't been met. I never read anyone asking, who came up with these unrealistic numbers and what were they based on? I even wrote today if the numbers are based on the pre-2008 champagne parties numbers then I can outright dismiss them but if they were made up looking at today's economic quagmire then it seems a few financials gurus should bared from opening their mouths. The lack of humility some carmakers show after having come this close to extinction is dumbfounding, but if you think about it high-ranking officers got off with bonuses and a slap on the wrist, nothing harsh and certainly no lesson to learn. The older I get, the more excited I am about startups and the few mainstream carmakers who truly think outside the box. Thanks, Nicolas
Reg; "bailouts due to coming overcapacity?" That is a leap, based on what? MFG's are deliberately limiting production to keep supplies at demand levels and the price at, or near full retail. Walk into a dealership and try to deal on a new car...Good luck with that these days.

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