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U.S. Auto Industry is in Recession:

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Good Morning Middle America, your King of Simple News is on the air.

U.S. NEWS: Huge breaking news has come in from Carlos Ghosn, the head of Nissan Motor Co. when he said, "Even if the United States is not in recession, its auto industry is."

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Thank goodness we have people such as Mr. Ghosn to analyze the massive data and come up with this startling prediction. However, our King of Simple financial analyst group did the numbers just to be sure Mr. Ghosn had his facts straight...about two years before Mr. Ghosn got the news. Congress still hasn't come around to it. That's why we have signs saying, "Slow Adults Playing" around the D.C. Capitol area.

Let's work out the details of the auto industry with Mikemathics. In 2007 alone, G.M. lost $38 billion and set a new Guinness record for a one year loss. Ford lost $2.7 billion and Chrysler lost $1.6 billion, not counting the multi billion dollar loss that Daimler took when they unloaded Chrysler on Cerberus Capital.

That adds up to $42 billion and change and 07 may reflect back as the good ol' days, if 2008 continues to pan out the way that it's getting started. This financial news is coupled with the fact that GM is offering buyouts to all 74,000 of their remaining union workers. Many auto analysts believe that neither Ford nor Chrysler can continue as stand alone companies.

So taking this all into account, Yep, the auto industry is in trouble and recession is not the word that comes to mind; "depression" seems to fit the situation nicely. And, we can get quick agreement on that fact by asking any number of the more than 250,000 people who have lost their jobs as a result of this conundrum. (The actual number of job losses is much higher than 250,000, due to the ripple effect of those job losses in peripheral industries).

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I'm thinking that the depression in the auto industry is going to ultimately affect the self storage business. It will become cheaper to buy a mega sized SUV to store your stuff in than to rent a storage unit. I'm also envisioning stacking motor homes and selling them as cheap condos.

So how is this all going to shake out? The easy answer is, "not very well." The hard answer is, the auto industry will never be the same. Like general aviation, we have reached the summit in that particular industry, it was nice while it lasted, but the other side of a summit is downhill.

The cost of producing an auto in the U.S., combined with skyrocketing fuel and repair costs, combined with a shrinking dollar and a vanishing Middle Class, is not conducive to the return of the once heralded Big-3. Similar to the buffalo and Studebaker salesmen, that class, as they say, has already graduated.

Those folks in Europe don't actually like riding a motor scooter in the rain sporting their significant other on the rear; they don't have any other choice except walking. Given that choice, roll out the old scooter; we're going for a spin.

You don't have to be an executive from a foreign car manufacturer to determine that the U.S. auto industry is in depression, you only need a little common sense, eighth grade math, and a dose of reality.

The auto industry is nothing more than a symptom of the issues that face all of America's failing economic underpinnings.

Wake up Middle America, it might be a nice day to go look at scooters before they are all gone.

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www.kingofsimple.com
Mike Folkerth is the author of "The Biggest Lie Ever Believed" and is not your run-of-the-mill author of finance and economics. The former real estate broker, developer, private real estate fund manager, auctioneer, Alaskan bush pilot, (more...)
 

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