How do economists describe the US automobile industry? The automobile industry is large, varied and important to the US economy. As a nation, the United States spends over $iesel per mile of gas burned to travel to and from work. If oil prices were to rise again, the cost to American driving would go through the roof. This in turn would hurt the US economy as badly as it would hurt or possibly kill, an oil refinery.
By looking at the car makers of the world and the way: they respond to current events, it’s easy to see how the US economy is indirectly affected by the car makers. For example, if oil prices continue to rise, oil producers are unlikely to be able to provide the high-priced gasoline that their customers need. The car manufacturers have to find ways to make their cars cost less, or they will go out of business.
So, how economists would describe the US automobile industry?
They would say that the US is dependent on foreign car makers for its growth and prosperity. Without foreign investment in the US automobile industry, the United States would face a severe shortage of automobiles and a sharp fall in the country’s gross domestic product. Is the US ready for this kind of blow? At this point in our history, it’s hard to say. The Ford Motor Company, for instance, recently said that it was going through a period of layoffs, and perhaps we need to be prepared for a “Car Crisis.”
The other thing: that seems clear is that foreign car makers are worried about the economic downturn in the US. The Chinese are making noises about wanting more exports and manufacturing. The Japanese are also concerned about the same thing. We’re hearing all of this talk and worrying, but what’s really being felt at the other end of the supply chain is: Will the US automobile manufacturers be hit so hard that we’ll start putting all of our eggs in the US basket? Would we suffer a “Car crunch”?
If that were the case, US car makers could face huge losses: How would we get car supplies from these other countries if the car manufacturers didn’t have enough of our stuff? And the car manufacturers themselves couldn’t figure out where to get parts from, either? How could we move all these cars from here to there? The car manufacturers certainly don’t want to build more cars overseas, either, but what country can they take their supply if the rest of the world is building fewer cars?
It’s hard to figure out where to turn in this situation: If we continue down this path, the US car manufacturers could go bankrupt. If foreign car makers take their auto parts and products from America, we will be less competitive. And if the rest of the world continues to get better cars and technology, then we will lose our competitive edge, as well. Is the US going to have to turn around its entire economic engine just to keep itself from losing its auto manufacturing ability?