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The Sciences

The "future" of the American automotive industry

Gene ExpressionBy Razib KhanMay 28, 2009 6:32 PM

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BusinessWeek, The Tough Road Ahead for GM and Chrysler:

The upshot is that some 30 significant players worldwide are fighting over a pie that has shrunk by more than 30% in the past 12 months. The industry can make about 90 million cars worldwide, but it's selling only about 55 million. Not exactly a forgiving environment for a pair of wounded car companies. That, partly, is why Chrysler's rescue has struck some as misguided. Speaking of the government's decision to save the weakest and smallest Detroit player, industry consultant Michael Robinet says: "We needed to take a patsy out, and we didn't. We may have missed an opportunity. The Japanese, Hyundai, and the Germans will still be here."

I was skeptical of the bailout last fall because I assumed bankruptcy was inevitable. Of course I don't know much about the automotive industry, but numbers like those above aren't hard to find. It seems likely that the government knew that a bankruptcy was coming anyway, so the whole song & dance about the bridge loans were going to make the companies viable was kind of weird, though perhaps there's some "animal spirits" rationale for the soft landing....

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