Final Inspection

So Many Crises Bubbling, So Little Time

The world has the jitters, and that can’t be good for the global auto industry, which suffers whenever there’s a lack of consumer confidence. Nothing tightens the purse strings faster than financial and political tensions.

Start with the growing sense of foreboding in the world’s largest markets – the U.S., Europe and Asia – that pummeled stocks this week and sent the euro tumbling to a 4-year low. Worries over saber-rattling between North and South Korea now are fanning the fires caused by the failing European banking system.

Greece’s economy is on the slippery slope, followed by Spain, which received a stern warning from the International Monetary Fund today to consolidate its banking sector and overhaul labor. Portugal and Italy are mere steps behind in their debt crisis.

The reverberations in Europe are threatening to tear the very fabric of the 27-member European Union apart, undercutting projected growth rates just as the region is beginning to climb out of its decline.

Not only has the euro fallen to the dollar, but now the dollar to the yen. And China says there will be no devaluating the yuan to the dollar until the present turmoil subsides.

What all this spells is austerity, threatening to erase the small measure of economic recovery in recent months from the global financial crisis that began in 2008.

Forget any thought of future vehicle-scrappage programs, except for Russia where light-vehicle sales last year plunged 75%.

That’s bad news for Spain, which is pleading with the industry ministry to extend its 2000E Plan, particularly with the impending 2-point increase in value-added taxes that will take the VAT to 18% starting in July.

GM Europe’s recovery is being undermined both by the region’s sales collapse and the refusal of the German government to grant its Opel unit state aid. Ford complains its new-car sales have hit a wall, down more than 17% since 19 European markets ended their buyer-incentive programs last month.

The worry for every market now is consumers’ tepid confidence that sent car sales climbing in the year’s first four months could slip back into neutral or even slam on the brakes as still-fragile economies fight another possible global contagion.

This certainly would damage the steady progress being made by the Detroit Three in North America, and overseas. Yet, there are some measures that could help the U.S. economy.

Keeping oil prices, inflation, mortgage rates and auto-finance charges low would benefit consumers and help prevent another collapse of new-car sales, no matter what the jitters bring.

Discuss this Blog Entry 1

on Feb 1, 2012

The dollar rose against the euro a drop in American consumer confidence pushed traders to seek the safety of the U.S. currency. Several countries use the U.S. dollar as their official
currency, and many others allow it to be used in a de facto capacity. The Eurozone consists of Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, Slovenia, Slovakia, Estonia and Spain, Cyprus and Malta.
Dollar to Euro

Please or Register to post comments.

What's Final Inspection?

WardsAuto editors share insights and observations on the global auto industry.

Contributors

David E. Zoia

As Editorial Director, I oversee much of what goes into WardsAuto.com, enjoying a ringside seat that lets me observe up close just about every facet of the industry worldwide. I have covered the...

James M. Amend

James Amend is an associate editor at WardsAuto.com, covering day-to-day business and product news at General Motors. He also leads coverage of regulatory and environmental issues, as well as the...
Blog Archive

Sponsored Introduction Continue on to (or wait seconds) ×