How did the Global Financial Crisis Influence the Automobile Industry: Comparison between the US and Japanese Auto Industry

The 2008 global financial crisis was the worst one in seventy-five years and had great negative impact on the economy worldwide. Automobile industry, the pillar to the economic development, was hit most by the recession among the sectors. The purpose of this study is to analyze the financial crisis impacts on the automobile industry and find out strategies to decrease the occurrence rate and the loss if a similar crisis occurs. The study, firstly, describes the impact of financial crisis to the automobile industry in a global view. Mainly, it focuses on the US and Japanese automobile industries. The study uses descriptive analysis and focuses on the US and Japanese Big Three automakers when analyzing the effects of financial crisis. The study reveals the similarities and differences in the US and Japanese automobile industry crisis. The financial crisis caused the tightened bank loan credit term and the drop in automakers’ productions. The financial crisis also led to high unemployment rate, less disposable spending, declined consumer confidence to automobile industry and decreased car sales. However, the US automakers experienced more severe impact by the economic crisis. Due to Job Bank program, American Big Three automakers have higher labor cost than the Japanese rivals, which deepened the US automobile industry crisis. Moreover, Japanese automobile industry relies largely on export and overseas production; and its export amount and overseas production declined dramatically, especially in the US, the main export destination and overseas production country. To face the crisis, there are temporary strategies, such as downsizing operations, cutting brands, closing dealerships, executing large layoff and government financial assistances to relieve automakers’ pressure, and long-term strategies for the further development and reform of automakers and automobile industry. Therefore, the automobile crisis was not only the disaster to automakers, but also an opportunity to seek a new model for the industry