Photo: LadyDragonFlyCC via flickr
The Federal Reserve Bank of Chicago recently published a paper titled Detroit Back From The Brink? Auto Industry Crisis And Restructuring 2008-2011.The authors – Thomas Klier and James Rubenstein – review the evolution of the U.S. auto industry, which began to lose market share to foreign imports as early as the 1950s. Foreign makers began manufacturing them on U.S. soil in 1978.
Through the years, the Detroit 3 (i.e. Ford, GM, and Chrysler) remained focused on the profitable light truck category, which proved costly during the great recession as gas prices spiked and demand for these vehicles plummeted. This eventually led to the government led restructurings of GM and Chrysler.
The authors highlight the fact that the U.S. auto industry, which “given up for dead in early 2009,” has made a remarkable return to profitability.
Nevertheless, their charts and data show how much the U.S. has lost to the foreign competition.
The great recession was particularly brutal for the Detroit 3, which relied heavily on the sale of light trucks – minivans, sport utility vehicles, and pickups
Plant closures caused by the Great Recession resulted in the capacity utilization rate decoupling from production. Capacity utilization rates spike particularly at GM and Chrysler following their dramatic restructurings
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