The U.S. Automobile Industry

The United States recession (which lead to a world recession), began in 1997 and significantly impacted the United States automobile industry during the recession period. The United States automobile industry is still reeling from the effects of the recession throughout the period of economic recovery that continues today. According to Chu and Su, “In this credit-driven recession, one of the hardest hit sectors was the automotive industry, along with the housing and financial markets. Chrysler and General Motors were pushed into bankruptcy; and 276,000 jobs in the automobile and parts industry were destroyed, a whopping 36 percent of the total employment in the sector”.

This paper will focus on the future of the U.S. Automobile industry as the United States recovers from the worst recession we have experienced in the past 75 years. I will provide information on the following topics pertaining to the U.S. automobile industry:

1. Externalities that may shift the supply and demand curve over the next five years.

2. Factors creating value in the industry and factors that will most likely input demand in the future.

3. Cost and supply analysis.

4. Industry trends and factors changing the industry.

5. Potential of supply and demand curve movement over the next 5 years.

6. Market Structure.

7. Porter Analysis on the industry.

8. General Motors strategic considerations using the game theory concept.

Market Externalities

To properly illustrate externalities that may shift the supply and demand curve in the U.S. auto market over the next five years, it is necessary to look at the recent events having affected the U.S. auto industry during the recession and the strides U.S. auto makers have made to recover from near devast...

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... If U.S. auto manufacturing takes a down-turn, the U.S. economy will be negatively impacted and the demand for automobiles in the U.S will suffer.

If GM or other U.S. auto manufacturers fail, there will be greater opportunity for new entrants into the U.S. automotive sales industry. For these reasons, all manufacturers including GM that sell autos in the U.S. should continue to use a cooperative game theory strategy to ensure the industry recovers.

GM should continue to use its technological advantages to create innovative automobiles, but do so cautiously. GM should follow the direction of today’s environmentally conscious consumers who want less expensive, economical automobiles. GM should primarily utilize a cooperative game-theory approach in its sales and marketing strategies in order to stay in sync with the current automotive industry needs.