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Automotive Industry In Crisis

When people consider rising oil prices they tend to only consider the added expense that is coming out of their pockets. However, the truth is rising gas prices affect a lot more than just personal expenses, they can close down entire companies. The automotive industry for example, is in crisis due to decrease auto sales. The fourth major bankruptcy to hit the U.S. automotive industry in the past 13 months has sent additional shockwaves through an already troubled sector that is in ?chronic crisis", according to industry analysis from global trade credit insurer Euler Hermes ACI.

Dana Corp., an auto parts supplier with $9 billion in revenue, filed for Chapter 11 bankruptcy March 3, marking the fourth major automotive industry insolvency since February 2005. Previous insolvencies were Tower Automotive (February 2005, $3.2 billion in revenue), Collins & Aikman (May 2005, $4 billion in revenue), and Delphi Corp. (October 2005, $29 billion in revenue). Euler Hermes ACI Risk VP and Automotive Risk Industry Manager Tony Clary said the Dana insolvency again confirms that the auto industry is one of the most challenged in the U.S. marketplace.

In 2005, automotive companies had a challenging year. Along with the increase in competition among the auto makers, the tastes of the U.S. consumer are continuing to change in response to economic pressures, such as the rising cost of gasoline. Consumers are now looking for specific products ? shifting from the larger SUVs and trucks to cars that are more fuel efficient ? and this has forced most manufacturers to take a hard look at their product lines.