HAS

THE

CREDIT CRUNCH
THE

INDI AN

AFFECTED

AUTO INDUSTRY?

U.S

1|Page

DR.NIKUNJ PATEL AND DR.RAKESH SONI

2|Page

Acknowledgment I would like to express my gratitude to all those peoples who support me to complete my research. I deeply thankful to my supervisor, Professor John Adams who gave me guideline, encouragement and expertise support during the research, without which I might be lost several time. I would like to give special thanks to Mary Raetz from Automotive News, Lisa Mataloni from Bureau of Economic Analysis and Staff of Federal Reserve Board (FRB) who responded me through email and provided me essential data, without which this research would not be possible. I am also thankful to my all module professors who make me capable to understand this research. I would like to thank my family who have extended their blessings from back home and believing in me. Finally I would like to thank all those Friends who have directly or indirectly been there to support and encourage me in this research project.

3|Page

THE TEBLE OF CONTENT CHAPTER : 1 Introduction 1.1: Introduction......................................................................................... 1.2: Aims and Objective ………………………………………….................. 1.3: Significance of the study ……………………....................................... 1.4.: Research questions …………………………………………................ 1.5: Organisation of the study……………………………………….............. 1.6: Key Words.........................................................................................

Page no

6 7 7 8 8 9

CHAPTER: 2 Literature Review 2.1: History of recession vs. Automobile industry in U.S....................... 2.1.1: The financial panic of 1907.................................................. 2.1.2: The Slowdown of 1929......................................................... 2.1.3: Saving and Loan crisis in 1980........................................... 2.1.4: Gulf crisis in 1991................................................................. 2.1.5: Mild recession of 2001......................................................... 2.1.6: Credit crunch........................................................................ 2.1.6.1: The credit Crunch during 2007................................. 2.1.7: View of other Researchers................................................... 10 10 11 12 12 13 14 15 16-23

CHAPTER: 3 Research Method 3.1: Research method …………………………………………................. 3.2: Secondary Data.............................................................................. 3.3: Primary Data................................................................................... 3.4: Limitation........................................................................................ 3.5: Data analysis method applied in the study..................................... 24 24 24 25 25
4|Page

3.6: Description of Methods................................................................... 3.6.1: Sample data comparison method........................................... 3.6.2: Multiple regression method..................................................... 3.6.2.1: Descriptive statistics..................................................... 3.6.2.2: Correlation test............................................................. 3.6.2.3: Model of summary........................................................ 3.6.2.4: Coefficients................................................................... 25 26 29 29 30 31

CHAPTER: 4 Data Analysis 4.1: Analysis of GDP vs. GM sales since 1980 to 2008.......................... 4.2: Sales comparison of GM, Ford, Chrysler and Toyota...................... 4.3: Sales Changes of Big Three............................................................ 4.3.1: Sales changes of Big Three from 1980 to 1986 vs. GDP.......... 4.3.2: Sales changes of Big Three during 1989 to 1991 Vs. GDP...... 4.3.3: Sales changes of Big Three from 1992 to 1995 vs. GDP......... 4.3.4: Sales changes of Big Three from 1996 to 1999 vs. GDP......... 4.3.5: Sales changes of Big Three from 2000 to 2008 vs. GDP.......... 4.4: Multiple regression analysis............................................................. 4.4.1: Descriptive Statistics: Mean and Sta. Deviation for Test 1 and 2...................................................................................... 4.4.2: Correlation Statistics............................................................... 4.4.3: Model of Summary: R, R2,Adjusted R2................................... 4.4.4: Coefficient Value of Test 1 and 2............................................... 4.4.5: Prediction with Standardized Beta value for Test 1.................... 4.4.6: Prediction with Standardized Beta value for Test 1.................... 50 53 55 58 59 32 34 36 37 38 39 40 41 45 45

CHAPER 5: Conclusions and Recommendations....................................... . Suggestions for further study..................................................

61 65
5|Page

Bibliography...............................................................................................

66

APPENDIX Appendix: A - Multiple regressions Test........................................................ A.1: Table of GM Descriptive statistics for Test 1 and 2............. A.2: Table of GM Correlation for Test and 2............................... A.3: Table of GM Model of Summary for Test 1 and 2............... A.4: Table of GM Coefficient value for Test 1 and 2................... Appendix: B - Multiple regressions Test........................................................ B.1: Table of FORD Descriptive statistics for Test 1 and 2........ B.2: Table of FORD Correlation for Test and 2.......................... B.3: Table of FORD Model of Summary for Test 1 and 2........... B.4: Table of FORD Coefficient value for Test 1 and 2.............. Appendix: C - Multiple regressions Test........................................................ C.1: Table of Chrysler Descriptive statistics for Test 1 and 2.... C.2: Table of Chrysler Correlation for Test and 2....................... C.3: Table of Chrysler Model of Summary for Test 1 and 2....... C.4: Table of Chrysler Coefficient value for Test 1 and 2........... Appendix: D- Multiple regression Test......................................................... D.1: Table of Toyota Descriptive statistics for Test 1 and 2....... D.2: Table of Toyota Correlation for Test and 2......................... D.3: Table of Toyota Model of Summary for Test 1 and 2......... D.4: Table of Toyota Coefficient value for Test 1 and 2............. 83 84 85 85 80 81 82 82 77 78 79 79 73 74 75 76

Tables of Data.............................................................................................. Table 1: Sales data of GM, Ford, Chrysler and Toyota....................... 86
6|Page

Table 2: Sales changes in %.............................................................. Table 3: GDP Rate of U.S.................................................................... Table 4: Per capital Disposable income............................................. Table 5: Car loan and Personal loan interest rates............................ Table 6: Car prices.............................................................................

87 88 88 89 89

Abstract During 2008/09 U.S automobile industry remained the prime matter of concern for the U.S government after suffering upheaval in the mortgage market and finance sectors. Credit crunch hit hard this industry by high negative result in the sales that never faced before even in the past recessions. The situation became as worse as Chrysler, one of big three faced bankruptcy while world’s second biggest auto manufacturer has to submit the application for the protection of chapter 11 and finally supported and acquired by the U.S government, Ford maintained itself away from the bankruptcy but conditions were hard for it as well. To get the clear picture of U.S auto mobile industry and its situation, the effect of five factors GDP, Car loan interest rate, Personal loan interest rate, Disposable income and prices of car have been analysed through regression method with SPSS software. In this research, the data have been collected through the secondary sources, while some data regarding sale and Interest rates are collected through the email from the automotive news and Federal Reserve Board.
7|Page

The finding of the research shows that among the five variables GDP which represent the Economical condition show the maximum influence on the sales of GM, Ford and Chrysler, means whenever U.S economy dropped, U.S automobile faced decline in the sales. The interest rates are mainly influenced or we can say that reduction of rates had been worthless by the higher credit standard as subsequent effect of credit crunch. Other matters that research finds are the weak quality of U.S car and negative expectations of consumer regarding future state economy and job security became leading factors for disaster in the U.S automobile industry.

CHAPTER: 1 1.1: Introduction The area of my research is credit crunch effect on U.S automobile industry. This term credit crunch has become matter of concern in all over the world in this present time when the most of countries and industries are struggling with this situation of tight liquidity of fund. Credit crunch is the situation in which liquidity problem faced by financial institution due to shortage of fund. Most of all the industries and sectors are affected according to their attachment with finance. Like banking and Housing sector with lax landing and subprime mortgage policies faced the disaster in their business practices. But recently the automobile industry is passing though its worse time due to effect of credit crunch. Like in U.S, many car manufacturers like GM (General Motor) Chrysler, Toyota, Ford, BMW and many big and famous brands

8|Page

reached at the verge of bankruptcy and finally the government has to interfere to save the automobile industry with financial support. During the economical recession automobile sector is being hunted a lot by financial crisis. The figure shows that there is drastic slip down in the sale of cars in U.S. To analyse the credit crunch affect on the automobile industry, the economical factors like GDP, interest rates, disposable income, prices of cars are analysed though the statistic tool to get the clear picture of current situation of U.S automobile industry during the recession.

1.2 Aim and objectives of the research The Aim of this research to find out how much U.S Automobile industry has been affected by the Credit crunch and how automotive manufacturer reacting to avoid the maximum damage by credit crunch. The main intention of this research is to find out the reliable, relevant answers of specific questions like 1. What is present situation of automobile industry due to effect of credit crunch?
2. What is the situation and trend in the car loan interest rates and personal loan

interest rate and how it affects the decision of the consumers?
9|Page

3. What are the situation of U.S GDP and how much it correlates with present

situation of the Auto mobile industry?
4. Is the consumer income affected by the credit crunch and is it shows

subsequent affects on auto sales in the U.S market?

1.3 Significance of the study The area of research is mainly focused on the affects of credit crunch in U.S

automobile industry. In this time U.S automobile industry passing though it’s worse time that attract the attention of the whole world. This study navigates to find out actual financial and business situation of the U.S auto manufacturers which are GM (General Motors), Chrysler, Ford and one Japanese company Toyota. The motivation of this subject is to get more cleared picture of present situation and financial and strategic planning of automobile industry during the economic recession. By considering all element of information, this research will reflect how and how much financial crisis is responsible for critical situation of automobile industry. The involvement of government indicate that there are some social and economical factors from country prospectus are being effected with this industry like employment, related industries, effect on treasury of country. This research will helpful to Car Manufacturers and Dealer to analyse the financial environment. This data will also helpful to the future researcher and business analyses and with academic area like finance, corporate strategy and business management students who will work on automobile industry can use these research to analyse the different automobile company.

10 | P a g e

1.4: Research Questions To achieve the aim and objective, following question have been analysed.

Is the Credit crunch is actual responsible situation of such poor condition of U.S automobile industry?

– What is the correlation between GDP of the country and sales of car?
– –

What is the effect of variation in per capital Disposable Income of U.S, How the changes in the Car loan and Personal loan interest rates are affecting decision of consumer to buy a new car?

1.5: Organisation of study This study is organized into the following five broad chapters:

Chapter one discusses Aims, research objectives, significance of the study, research questions and organisation of the study.

Chapter two examines history of US recession and literature that has been written about the credit crunch and U.S automobile industry so far.

11 | P a g e

Chapter three explains research method that includes the research design, sample size, sampling technique, data collection and processing techniques, limitations of the study and their solutions.

Chapter four examines and interprets the collected data and findings in relation to the objectives of the study.

Chapter five describes conclusions and recommendations.

1.6: Key Words S&L (Saving and Loan), ICS (Index of Consumer Sentiment), Big Three (GM, Ford and Chrysler), Test 1 (1980 to 2008), Test 2 (1998 to 2008), PCDI (Per Capital Disposable Income), IV (Independent Variables), DV (Dependent Variable), DI (Disposable Income)

CHAPER: 2 Literature review 2.1: History of recession vs. Automobile industry in U.S U.S automobile industry is the one of the crucial part of the U.S economy. The history of U.S shows that there are almost perfect correlation between GDP and Automobile industry. As analysis of history of U.S recession shows that whenever there was difficult time with economy, automotive has experienced negative effect in their business activities. During 19th century U.S economy strapped in the

recession sever time, but major stoke were panic of 1907, Greater depression of
12 | P a g e

1929, saving and loan crisis in 1980, Gulf crisis in 1991, Mild recession of 2001 and Credit crunch of 2007. These all recession time period and its effect on U.S automobile industry have been described below 2.1.1: The financial panic of 1907 The history of financial sector and economy show that banking and panic are linked since this system has existed. If we looked in the past in 18 th century there was 11 times (, 1819, 1837, 1847, 1857, 1873, 1884, 1890 and 1896) and 19th century faced 18 time financial panic which included the major slowdown in 1907, in which U.S stock market lost half of its values and national bank of north America was collapsed and this become the main cause of creation of federal reserve system in 1913 in U.S (Jon Henley, 2007). The panic of 1907 created the stress for many small company which running on the credit from many small bank and with collapse of these banks they gone close(William berg,). But this panic proved good for some car companies like GM which was founded by William Durant in 1902, he got the opportunities to buy many small car manufacturing companies to acquire the giant form. 2.1.2: The Slowdown of 1929 The slowdown of 1929 is considering as granddaddy of modern financial crisis and was biggest shock after First World War for the U.S and whole world when investors sold 16,410,030 shares in the market and almost $14bn was wiped out. In 1933 due this slowdown, the most of banks of America were collapsed. This dying economy leads high level of unemployment and financial upheaval (Jon Henley, 2007). This was really critical time for not only automobile industry but all industries were affected by this Hugh meltdown. The figures of U.S automobile sales shows that
13 | P a g e

even after panic of 1907 and First World War in 1918 there was constant increment in car sales, but in 1929 with the Wall Street crash the production dropped as gravity term or straight down. The production during this year was previous years due to lack of demand. (Automobile Lyceum) three time less than

Automobile Lyceum

2.1.3: Saving and Loan crisis in 1980 In 1980 U.S economy was hit by savings and loan crisis in which more than half saving and loans had failed, so it lead the one of the biggest banking collapse after great depression of 1929 (kimbely Amadeo). During the S&L (Saving and Loan) crisis, due to the high rate of unemployment and uncertainty in the financial market the U.S car sale was remained low than previous year. According to survey of Douglas R Fox in 1980 the total passenger car sale was 9.2 million in the
14 | P a g e

comparison of 11.00 million for 1979 and the main reasons those he noted were uncertainty about job security, instability in financial market and concern about future income because many manufacturing plant were getting close. The FRB 1981 (Federal Reserve Bank) indentified that there was the weakness in consumer loan at the large commercial bank and that may be also one reason of decline in the car sale. 2.1.4: Gulf crisis in 1991 In 1990-91 U.S again strapped in recession which is known as Gulf crisis, in 1987 stock market crashed by 22.6% and high jump in oil price and decline in oil production due to war between Iraq and Kuwait, other side sudden fall price of raw material started making situation critical for U.S economy (Francois Dupuis,2008). Moreover still U.S was not out of S&L crisis with the failure of 745 saving and loan associations and other strong economy like Japan and Sweden had faced the recession during this period. The corporate profit fall 12% in the first 6 month of 1990 along with high increment in unemployment (White and Gordon, 1990). According to data from FRB show that the year 1991 was quite disappointing for the automotive industry where the total vehicle sale (including trucks) was 11.25% lower than 1990. The total retail car sales was 9.5 million and 8.4 million for years 1990 and 1991 which show sale contraction due to recession.(FRB report 1992). 2.1.5: Mild recession of 2001 The 21st century had started with quit difficult time for the U.S economy, in 2001 after 10 years U.S economy again hit by recession from march 2001, the unemployment touched past nine month higher rate at 6.4% and federal budget shows the deficit of $257 billion in the comparison of $295 billion surplus of 2000
15 | P a g e

(Nick Beams 2003). The real investment was down by almost 11%, Federal Reserve reduced in the interest rates to support the economy (Watkins and Alley, 2001). According to Kavin L. Kliesen (2003) the reasons of recession in U.S economy were boom and bust in equity market of U.S, the real GDP went down because of contraction in output, net real export went down by 10% and the attack of 11 September 2001 shake the confidence of business environment with GDP and property loss of $90 billion. (Paul E. Polzin)

Now if we see the history of automobile industry from the start of 20th century During 2001, the U.S economy was in recession but this recession considered as mild in the comparison of past recession. In spite of recession there were sustainable sales of motor vehicle of 8.4 million (not included stuck sales) which remained just 0.2 less than previous year. 2.1.6 Credit crunch The term credit crunch basically express the situation when lenders are more concern about risk and increase interest rate or stop lending to make them safe from defaulters. This situation generates contraction in availability of money or loan from
16 | P a g e

banks and financial institution. Actually credit crunch is period of mild recession when money is stuck in the debt and not easily available for lending purpose. Many researchers have given their thoughts and understanding regarding the situation of credit crunch. Bernanke and Lown (1991) say the credit crunch as a decline in the supply of credit that is unusually large for a given period of the business cycle. Credit normally decreases during a recession, but an unusually large contraction could be seen as the credit crunch. Wallace, Avis, and Smith(2008) say exactly the credit crunch is a situation when borrowing money comes at a higher interest and borrower has to pay higher cost. In 1994 Kaufman explains back in the 1960s, I have introduced the term ‘credit crunch’ to explain a sudden shortage in the flow of credit. In the recession normally credit level or availability get reduced but when that level reached at high intensity then it become the situation of credit crunch. Owens and Schreft (1995), explain the term "credit crunch" has originated in the unusually tight credit situation that prevailed in the U.S in the late summer of 1966, when it was very difficult for the borrowers to obtain loans at any price. After the post-war, U.S suffered three periods of Tight Credit: the spring of 1953, the fall of 1957, and the last of 1959. These periods were known as “credit squeezes” or “credit pinches”. The credit crunch of 1966 was stared after strong economy boom as 2007. Albert E. Burger (1969) has explain that how expectation about rising demand rise, price level and make tighter labour market became cause of high capital spending. High demand of money in the market forced government to bid aggressively for fund and

17 | P a g e

this condition increase the pressure on financial intermediately and security market and these circumstances lead the shortage of money and result was credit crunch. 2.1.6.1: The credit Crunch during 2007 Over current years, the term ‘credit crunch’ has become very common in the U.S and globally. In this situation banks and lenders suddenly reduce the availability of credit or loan to minimize their risk. In this circumstance banks and other lenders also increase the cost of acquiring credit and also increasing interest rates. The main causes of credit crunch were Lax and subprime lending in the mortgage market. The subsequent effect were drop in the property prices, meltdown in the economy, billion loss by the Bank and financial institutions, lender loss their confidence and stop lending to reduce the risk of default, money circulation freeze in the economy and this condition lead for financial disaster in U.S and then all over the world. This situation proves one thing that if U.S get sneeze than global economy get flu. (BBC News, 2007) About the situation of U.S automobile, Year 2007 was the start of very struggling year for the U.S automobile industry while big three of Detroit faced the Hugh losses due to the weak economy. In this year the oil prices touched the amount of $100 per barrel, notable reduction in consumer spending and brake down of housing and mortgage market. The ill feeling about future financial market forced the many buyers to delay or stop new vehicle purchases. During 2007, the total vehicles sales in the united state were 16.14 million units which showed drop by 3% than previous sales (Kevin Krolicki, 2008). 2.1.7: View of other Researchers

18 | P a g e

Michael Feroli( June 2009) argue that U.S automobile industry might by rebound more stronger as happened in 1980 when automobile achieved high demand growth after meltdown of 1980. She also argues that cars and trucks are more durable than 1980 is may be the causes of reduction in new demand. Mark Edmund (Jan. 2009) expressed that it easy to blame weak economic condition for the worse condition of automobile industry but quality of the vehicle that built in U.S is also matter of concern. According to, John Casey head of automotive division and director of supply chain, the manufacturer of the U.S built car with 0.95 defects per car while Japanese automaker has 0.9 defects per car, in this way the gap between domestic and foreign product getting close. In U.S there are different criteria for Domestic

and foreign manufacturers for doing business in the U.S market like income tax, GM paid $37.16 billion tax while Toyota paid only $ 7.61 billion. Employee Wages and benefit for the big three is $72.21 per hour while this cost with Toyota is $48 per hour. In this recession automaker are more concern about the contracting the credit availability for the consumer because it directly affects sales. The prices of the gas and, rise in the inflation rates, more tighten terms for the home mortgage influencing the auto loan delinquencies. Fitch Rating, a credit rating agency has identified that rate of late payment of car loan rose to a 10 years Hugh in the America (Roland Jones, 2008). The U.S auto manufacturers are the have deep root in the U.S economy because it play the crucial role in the supply that concern with many other industry like Metallurgy, chemicals, Leather, Electronics, also advertising sector. Automobile industry also deal with Banking and mortgage industry (Chanda, 2008).U.S automotive struggling with some challenges like high competition, some microeconomics challenges like oil prices and supply of it. Whit this economic
19 | P a g e

issues, some accounting standard regarding Other Postemployment Obligation (OPEB) affects vastly to U.S automotive. This Obligations force many companies to reduce the investment in many important activities due to large obligation like retiree health benefits (Anthony Billing, 2007). In 2008, Santini and Poyer had identified that there are dynamic relationship between GDP and motor output with autoregressive spectacle tool. In 2008 PR

Newswire publication released CSM (An auto market forecasting firm) research, according to that as credit crunch and housing downturn will resolve than U.S auto sales will again jump to 17.7 million vehicles by 2014. The high growth of developing countries like China, India and Russia will be the main reason of expansion of car sales at the global level but it will also increases the competition for the U.S automobile industry as well. In CRS report (2005) for the congress stated that, in 2005 U.S automotive industry was growing wall but near to stuck into trouble because after attack of 2001. Big three were maintained the sales at some level by using the intensive but other side legacy cost like paying pension and health care to retirees include the cost of $1500 per vehicle, which was a burden for the big three specially GM and Ford (Cooney, 2005).From the sources of GM The deconsolidation of the GMAC, a finance company under the umbrella of GM and Chrysler, which did the losses of $2.3 billion in the mortgage market gave considerable contribution to shake the financial base of the GM. 2007 was the one of the critical time for the GM when company faced the second biggest loss of U.S history of $ 38,732 million. The total revenue of GM was
$178,199 million out which $112,448 was generated from U.S market which was $171,179 and $129,041 in last year respectively. (GM annual report 2007).

20 | P a g e

Due to crisis in the global financial market in 2008 GM accrued the net losses of $30.9 billion which was of course almost $8 billion less than last year, but continuity of Hugh losses since particularly last two years dragged company at the verge bankruptcy. (GM sales data 2008 and Wert, 2009). In 1995 lown and peristiani argue, the situation of credit crunch is mainly depend on the landing behaviour of large, undercapitalized bank. The Low capitalized banks charge high interest rate to cover their funding cost, otherwise they are not willing to lend. About the auto loan it is considered as secured so this condition reduces the credit rationing. In 2005 Storchmann identified the relationship between oil price, disposable income and car sales. He argue that if the new cars are more fuel efficient and other side oil prices are getting high than it increase the sales of fuel efficient car. Moreover increment in the oil prices influence the fraction of disposable income spent on transportation purpose. While inflation also concern with relation between disposable income and transportation expenditure, if living hood stuff get expansive than consumer have less money to spent on oil or purchase of new vehicle from the disposable income. In 2007 Mcmanus argued that the rising in fuel prices do not affect the sales of the car and light truck but it affect the prices of vehicles. If the car manufacturers wants to avoid the reduction in the sales of less fuel efficient vehicles in the duration of increasing fuel prices than they can accept the reduction in the car prices. About the reliability of car, U.S car are far behind than Asian car. According to consumer report, the average problems found in japans car is 33 per 100 cars while for the U.S car this average is almost triple with 89 problems per 100 cars (Wood 2006). In 2009 B.G Long identified the basic causes of recent reduction in the auto sales were high crackdown on credit by the financial institution, low confidence of consumers, break of mortgage market erase the thought of buying new car from
21 | P a g e

buyer’s mind and remaining work done by the fear of Unemployment in the Consumer’s mind. During the recession federal reserve has reduced the interest rate from 6.5% to 1% but today ability of central bank to used monetary tool is limited than past because it has also consider the inflation rate, weaker dollar rate quite beneficial for the U.S because it can increased the export but it can be

disappointing for U.S partner( Roubini ,2008). About the recession affect on automobile M.B. Zimmerman has given some very nice insight, he said that during the recession except interest rate one more situation affect the sales is ‘Shock’, he define shock as unpredictable factor which may or not affect the economy. Through example of past recessions he explained that in

different situation many factors like oil, inflation, economy of other countries, War, Job or unemployment, consumer sentimental index can play the role of shock. Borade (2009) explained that the cutting job has the direct affect on the buying and investment capacity of individual. More over due to more capitalisations reduce the car buying along with work force reduction, and this situation lead the production capacity stagnated in the lack of demand. Sidney Hill express the view of Julliussen in her article is that the increased import of automotive from other region like Canada Mexico, Europe and Asia become one of the reason for reduction in

production and sales in the U.S. In 2003 Utama explained behaviour of consumer through the explanation of ICS (Index of consumer sentiment). He said that ICS has strong relationship with unemployment and cost of interest and these are basic tradition variables those used in the study of car sales. He also identify that consumer spending is not depend only on ability of spending but also willingness, moreover spending or purchasing attitude of consumer depend on his or her
22 | P a g e

expectation regarding present and future state of economy so if consumer is optimistic than this lead him or her to investment in the durable goods otherwise not. About the credit standard C. Brock (2009) said that auto manufacturers already facing high labour cost and in this situation the car which does not appeal the consumer even though insufficient liquidity (not too much expensive cars) but when environment includes tight credit standard which doesn’t support auto loan than its invite the disaster in automotive industry. About the auto loan GMAC plays the very important role to move the GM, because maximum finance to GM vehicle buyer and Dealers (around 80%) provided by GMAC. Before financial crises, GMAC provided the Auto loan to the customers having the credit score of 621 but after crises U.S Federal Reserve forced GMAC to increase the credit standard for loan up to 700 points. While in U.S, 40% buyers have 700 or more rating, means 60% customers will not able to get the auto finance from GMAC (D.S Stoll, 2008). The borrower with high credit score and with good credit history has obtained the new loan with good terms during the 2008 and also at the lowest historical interest rate (Geffiner, 2008) In the end of 2008, Christie and Midenberg researched that GMAC suffered almost $ 7.9 billion losses since mid 2007 mainly due to record defaults in the subprime mortgage market. The collapse of the GMAC put the GM at verge of risk of losing 40% of 6,500 U.S dealers because dealers were depended on the GMAC for finance until customer buy the car. To save the GM and GMAC, Initially U.S government gave $24.9 billion bailout to the automobile industry in which 17.4 billion allotted to GM and Chrysler, $6 billion given to GMAC which is owned by GM and Cerberus and 1.5 billion for the Chrysler financial. Ford succeeds to maintain its financial condition and according to Government there were no need for any bailout for the Ford Corporation (Kimberly Amadeo, 2009).
23 | P a g e

According to Malone and Groom(2008) explained About the effect of the credit crunch on U.S auto market , the retailers who mainly depended on the finance for their sales in the U.S market, the no 1 issue for them is credit availability. The leasing stopping by Chrysler and than its rival GM and Ford also show the credit crunch effect on this companies because ceasing leasing drawback the Detroit sales by almost 15% to 20%. About the credit standard according to bank survey almost 98% bank had tighten their loan standard for industrial and consumers loan in the U.S market. According to one estimation consumer loan had tighten by 60%, home equity and prime mortgages loan tighten by 50% and 65% had tighten for non traditional mortgages (Rex Nutting, 2009). Through the below graph B.C Briggman (2009) has explained the credit standard situation in the U.S finance market. He analysed that at the end of 2008 the 80% of bankers had tightened their credit standards at the record level of 80% for both large and small firms. In the graph it can be seen that during the credit crunch of 2007-08 credit standard tighten rate was more than provisos recessions 1991 and 2001. He also said this rise was not only high but also rapid, just during 6 quarter the index jump from 0% to 80%.

24 | P a g e

Joson Jia (2008) had analysed the relationship of high credit standard and personal bankruptcy rate in the U.S. He found that 60% of bank had reduced their credit limit. Because of this attitude of banks, many economists and financial analyses has shown their concern, they believes that tightened credit standard policy will negatively affect the consumer behaviours and makes worse the financial stability of the consumers. He also says that right now U.S is in the middle of recession and more and more Americans are struggling with their dept because of losing jobs and other side for the new lending terms( credit standard) getting more hard to get the loan from the financial institutions.

25 | P a g e

The 2005 report of Makinsey global institution about the compaction situation in the U.S auto market says that, during the 1987 to 2002 Japanese, German and Korean auto manufacturers created the significant pressure on U.S automobile industry. During this time, big three lost 10% share of its light vehicles market and almost 21% of their car market share in the U.S. Japanese auto maker are competing with their lean production process to produce high quality vehicle at low cost. While Korean player also became comparative with their low cost efficiency, so competition pressure raised from quality, price and product portfolio for the big three. Steve Schifferes (2007) a globalisation reporter at BBC news said that in the future small car which is more affordable to middle class will lead in the U.S auto industry. About the U.S industry he expressed that since long time U.S has dominant global auto market but in the future the growth in the global auto industry will come from immerging market such as India, China, and also Eastern Europe. In 2007 Rousakis identify that in 1997 big three market share in the U.S market was 57% which was drop from 74% from last 10 years. The main reasons those he found for drawback of big three were quality of big three’s cars, which is not competitive against their competitors. Cost is higher than imported cars, use drum brakes against competitor’s disk brakes. While other side since 1999 some compactors like Hyundai and Kia came out from their poor reputation by offering 10 warranties and other services so this created more competitive environment for the big three.

26 | P a g e

CHAPTER 3: Research Method 3.1: Research Method To analyse the effect of credit crunch on U.S automobile industry. It is essential to examine theoretical research work that has been done previously on related subject. For the research, various sources will be use to collect the secondary data, these data will contain both form quantitative and qualitative information. The study has also used some company’s data like GM, Ford, Chrysler and Toyota to analyse the flow of trend in the U.S market. 3.2: Secondary data All secondary data and information have collected from different sources like articles, journals, news papers, online information(Google), some automobile company`s annual reports, surveys done by Government and privet institutes( FRB, BEA, Makinsey global institute) regarding U.S automobile industry, banks and their lending policies toward car and personal loan. To maintain the reliability and

validity, all the data and information have collected from authorised sources. The most of all articles and journals have collected from the reliable site like Athens, science Directs, library source available in university. 3.3: Primary data

27 | P a g e

For the primary research with automobile industry of U.S, due to geographical and financial issues, it is difficult to conduct face to face or telephone interviews of car manufacturers and dealers, and also not possible to visit different cities of U.S to interview those peoples who relate with automobile industry in limited time period. Therefore secondary data have been used to do this research.

3.4: Limitation There are some limitations of this research. The maximum secondary data have be used because it is quite difficult to contact the managerial staff of these companies for face to face or telephone interview. Other limitation is that because of limited time and financial constraints it will not allowed to visit U.S so whole research will depend on secondary data and information available. 3.5: Data Analysis Methods Applied in this Study To analyse the recession effect on U.S automotive industry, basically two kinds of way or methods have been applied. The First method is sample data comparison method through which it is possible to compare the sales data of all four companies with each other and also those situations faced by these companies during the recession. Other method is a multiple regression analysis which is one statistical tool to analyse the data. At the below the full description is given of this both method that have been used to analyse the data. 3.6: Description of Data analysis methods 3.6.1: Sample data comparison method

28 | P a g e

In the first method, the data of GDP have been analysed with the graph since 1980 to 2008. This graph identify the recession times and its effect on GDP with prime causes of recession like L&S crises, Gulf War, Attack on WTO and Mortgage breakdown in 2007, those already have explained in history of U.S automotive. Further the sales data of GM have been examined with GDP data since 1980 to 2008 in Graph 2. In the explanation of this graph, all up and down of GM sale with economic trend have been coated. The main reason for taking GM as prime sample is, since long time GM is market leader in the U.S and other U.S manufacture also faced almost similar situation and trend in their business. Graph 3 is the sales graph of GM, Ford, Chrysler and Japanese manufacturer Toyota in the U.S market which explains the critical and favourable time for these companies. Graph 4 is one of the most crucial data analyses of all four companies. In this graph data have been achieved with formula shown bellow. This formula which provides basic percentage changes accrued in the comparison of previous year. Present sales – Last year sales Last year sales This graph make possible to analyse the changes happened in sales according to the strength and weakness of economy. By comparing the sales changes of Big Three with each other, it is possible to identify with company affected at what level or more or less than other. Further Graphs 5 to 9 are the basically the part of the Graph 4. In the graph 4, data have been mentioned since 1980 to 2008 which quite long time for analysis. So These data have been divided in particular time zone like graph 5 have coated sales changes data from 1980 to 1986, graph 6 from 1989 to 1991 in which 1991 is
29 | P a g e

× 100

recession year, Graph 7 is about 1992 to 1995, graph 8 explained the time duration of 1996 to 1999 and Last graph contain the last 9 years from 2000 to 2008. These all graphs from 5 to 9 also explained the GDP trend and its effect on the sales so this only difference among Graph 4 and Graphs 5 to 9. The main intention of dividing the data is getting the proper understanding of sales changes and affect of GDP during particular time zone. 3.6.2: Multiple regressions Method About the introduction of Regression analysis it can say that the regression is the one way or one mathematical tool to predict the some kind of outcome by considering one or more predictor variables. In the regression, basically there are two method are being used (1) Simple regression and (2) is multiple regression method. In simple regression only one predictor or variable is used to predict the outcome while in multiple regression the number of predictor variables are more than two. (A.Field 2005) To find out the effect of the Recession on the U.S automobile industry, the data of main four companies GM, Toyota, Ford and Chrysler have been analysed by using Multiple Regression Method. The Unit Sales is taken as Dependent Variable (DV) and other variables like Car loan interest rates, Personal loan interest Rates, GDP, Per Capital Disposable Income and Car prices as Independent Variables (IV) The equation of multiple regression, that used to analyses the data is Y = (β0 + β1X1 + β2X2 + β3X3 + β4X4 +β5X5 ......βnXn) + εi Y β0 X1 Unit Sales intercept (Constant) Car loan Interest Rate
30 | P a g e

X2 X3 X4 X5

GDP per Capita Disposable Income Personal Loan Interest Rate Car Prices

In this equation Y represent the figure of Unit sales, while β0 is the intercept (Constant), basically β is as marginal effect of change in X on Y or influence of X on Y. in multi regression, there are many independent variables, in our case there are mainly five variables, those are Car loan interest rates, Personal loan interest Rates GDP, Per Capital Disposable Income and Car prices. so if we consider X1 as Car Loan interest Rates than β1 is the marginal effect of the X1(Car Loan Rates) on the Y (Unit Sales) and in the same way X2, X3, X4, X5 represent the different variables those mentioned above and same rule applied with β1, β2, β3, β4, β5 which express the marginal effect or slop of all variables. For the analysing the data the Software SPSS has been used to get values of regression of all four companies. In this analysis, the data has been tested twice with different time duration and with some changes in the variables as well. The first regression test (Test 1) has been done with four variables except car prices since

1980 to 2008. In second test of Regression (Test 2) the Data analysed from 1998 to 2008 along with all variables used in Test 1 and car prices in these companies. About selecting car prices, We have select prices of that car which is being part of company since long time and also one of the most selling and successful car in the U.S market like Mustang of Ford, Camry of Toyota, Sebring of Chrysler and Malibu of Chevrolet which is part of GM and also these all cars effective competitors of each other in the price, performance and facilities, so there are not such Hugh
31 | P a g e

deference in the price level of these cars. Moreover, as testing data at different time duration also identify which kind of changes accord after or during particular time duration. Because some time, good performance of past maintain the average in the figure even after present’s week performance of the company. We have considered Unit sales as Dependent Variable and Car loan interest rates, Personal loan interest Rates GDP, Per Capital Disposable Income and Car prices as independent variable. At time testing regression on the SPSS software, some tables of calculation appeared as output. These tables contain descriptive statistics, Correlations Table, Model Summary and Coefficients values which are useful to explain influencing power of IV on DV. The detailed description of these tables is given below. 3.6.2.1: Descriptive Statistics In the table of Descriptive Statistics, the useful calculations are Mean and Standard Deviation. Mean is simple average of the variables, while Standard Deviation shows variance between mean and data points, so small Standard Deviation indentify that data points are close to mean and Large Standard Deviation shows data points are at the distant or far from mean. 3.6.2.2: Correlations This table is about correlation between DV and IV. This calculation shows that the variables are related to each other or not. The positive correlation identify, that if one variable deviate from mean other variable get change in same direction and other side about negative correlation, when one variable deviates from mean than other variable deviates in opposite direction. The value of correlation known as r. the
32 | P a g e

value of correlation must be between -1 to +1. If value of r is +1 than it call perfect correlation and – 1 is perfect negative correlation among the variables. According to statistics, value of r ± 0.1 represents the small effect or less relationship between variables, while ± 0.3 is medium effect and ± 0.5 is large effect or influence of variable on each other. This table also contain the value of Significance (Sig.) and N. Basically significance value express the probability of correlation value being ‘Fluke’ is very low or high. It should be low (infect close to zero). Normally according to Social scientist, the value of Sig. Below 0.05 is acceptable because it statistically being meaningful and indicative of genuine effect of variable. 3.6.2.3: Model Summary Other most important table is Model of Summary this table shows the values of R, R2, Adjusted R2 and Standard error of Estimation. The value of R shows the multiple correlation coefficients, means this value explains the overall effect of all Independent Variables on the DV. The value of R2 identifies, how much variability is accounted by IV on DV. So about this research how much Car loan interest rates, Personal loan interest Rates, GDP, Per Capital Disposable Income and Car prices are accounted for the difference or movement in the car sales in the U.S market. When the value of R2 multiply by 100 the value appeared in percentage. while Adjusted R2 is batter estimation of R2 because there is one pitfall with R2 is that when IV increase in the regression model it increase the value of R2 and this value become artificial when predictor do not improve model’s fit. Here Adjusted R2 incorporates the Degree of Freedom and reduced the predictors which are not significantly effective. (Martin, 2005)
33 | P a g e

3.6.2.4: Coefficients This part of the regression considered as model of parameter. Through this calculation, we get the value of β which is the slop of regression or in other word effect of changes accrued in the value of independent variables. The value of β is used in formula of multiple regressions to predict the effect of IV on the DV. Y = (β0 + β1 (Car loan Interest Rate) + β2 (GDP) + β3 (Per Capita Disposable Income) + β4 (Personal Loan Interest Rate) +β5 (Car Prices) β0 (constant) is intercept of the model, which meaning is when there is no effluence of IV than outcome will be this amount, While β1, β2, β3... reflect the effect of IV. Through the regression test and by putting the expected figure for IV we can predict the outcome of Y. the standardised version of β predicts the outcome by considering value of standard deviation in the calculation. It tell us the number of standard deviation that outcome or DV will change due to change of one standard deviation in the predictor (A.Field, 2005 page no 193). T test is the measure of predictor making effective contribution to the model. If sig. is smaller and larger value of T show the greater contribution of predictor variable.

34 | P a g e

CHAPTER: 4

Data Analysed

4.1: Analysis vs. GDP and GM sales since 1980 to 2008 The figures show that whenever U.S economy influenced by the recession along with that automotive industry was also affected in the similar way. In literature reviewed, the brief description of U.S automotive industry during recession of1907, 1929, 1980, and 1991 and in 21stcentury in 2001 and 2007 have been described. In the below graph of GDP, It can be identify that whenever there was weak time for U.S economy, GDP also dropped during that time. Graph 1 - Data resource: Bureau of Economical Research (BER) . Further the sales figures of GM, Toyota, Chrysler, and Ford have been compared with U.S GDP rate since 1980 to identify, or to get the idea about the situation of U.S automobile industry during recession and boom. First of all, as considering GM as prime sample, the sales data of GM have been analysed along with GDP trend to get the overall insight regarding U.S automobile industry.

Graph 2 - Data source: Automotive news Data Centre
35 | P a g e

According to above graph in 1980, GM sales dropped by 390,774 unites due to L&S crisis when the more than half of saving and loan were failed. This situation was quite similar as present situation of credit crunch when customers and finance authorities loss their confidence in the market. During this period of crises, U.S GDP dropped at below than 0(zero) level of -0.3 and -1.9 in 1980 and 1982 respectively. As effect of this, GM faced 19.6% dropped in their total light vehicle sales in U.S marker but still GM was batter performer than Ford and Chrysler because they faced 28.4% and 21% dropped in their sales. In the similar way from 1983 to 1986 there was economical boom in the in U.S, so we can see the positive movement in the light vehicle sales. These four years was the most crucial for the U.S when GDP rate touch the level of 7.2% in 1984 and remained at high in rest of three years. During this time GM average sales was almost 6 million units in the U.S market almost double than sales in 2008. This duration was also achievement for Ford and Chrysler as well because there was high improvement in the sales. Further up to 1989 there was very slow drop in sales but still sales were more than 5 million units. In 1991 U.S again strapped in the recession while economy was still under the effect of S&L crisis. The GDP rate dropped to -0.2% and as subsequent effect, GM sales disturbed by 12.5% in the U.S market. Since 1997 to 2000 U.S economy grew with almost 4.5% GDP growths but GM sales continued to drop except 8% sales increment in 1999 and we can say that, this was last sales improvement in the sales chart of GM because in further GM faced slow but constant decline in its sales in U.S market. 4.2: Sales comparison of GM, Ford, Chrysler, and Toyota

36 | P a g e

The graph 3 describes the Sales of GM, Ford, Chrysler and Japanese manufacturer Toyota in the U.S market since 1980 to 2008. Through the graph it is easy to identified that the big three (GM, Chrysler and Toyota) faces similar trend in the performance during the recession and boom, Means trend in sales improvement and decline had similar curve on the graph. In other words Ford and Chrysler experienced almost same effect of prevailing condition of economy on their sales performance as GM in the U.S market. Sales in the U.S market

Graph 3 -

Data source: Automotive news

Japanese company Toyota faced quite deferent experience in the U.S market until recession of 2007. The analysis of sale data of Toyota shows that, even being in the U.S market Toyota has maintain its sale improvement in constant way even in economic slowdown like in recession of 1980 and 1991 when big three had faced Hugh declined in sales, in those years Toyota acquired improvement in the market share. Since 1996 to 2006 Toyota’s average sales improvement rate was 8.1% while GM, Ford and Chrysler had constant declined in the sales.

37 | P a g e

As we look at the market share of big three, from the above graph we can identify, what the difference accrued regarding market share of big three in the US market in the present time, in the comparison 10 years before. From the above graph, it can be identify that in 1997 when Big three hold 74% of U.S auto market that reduced to 57% in 2006. In the graph it can be seen that, the orange colour which represent more than two- third market share of big three, year by year replaced by brown colour which represent half to two- third market share of big three. The figure show that GM and Ford has loss more market share, which seized by foreign competitors like Toyota, Honda and Nissan. Other manufacturers in the U.S
38 | P a g e

market also become more competitive by improving their market share from 7% in 1997 to 13% in 2006. So the situations are not easy or smooth for big three as they were before 10 years ago. 4.3: Sales changes among big three Further in graph 4, the changes in the sales of GM, Ford and Chrysler since 1980 to 2008 have been compared. The graph movement show that, curve of change in the sales improvement and contraction was in the same manner, means when GM sales dropped in that time duration Ford and Chrysler also faced the decline in sales.

Graph 4 - Data source: Automotive News 4.3.1 Sales changes of big three from 1980 to 1986 Vs. GDP In 1980, U.S economy stuck in recession and if the sales performance of Ford, Chrysler and GM get analysed than result shows that, it damaged the sales of Ford more than GM and Chrysler. But then, from 1983 to 1986 when again there was boom in the market all of Big Three enjoy high demand in the sales. During this time Ford and Chrysler performed more efficient than GM. In this duration the average improvement of sales of Chrysler, Ford and GM were 21.4%, 16.5% and 11.8%

respectively. Even though with less percentagewise sales improvement, GM was still no 1 in the U.S market. As we compare GDP line with sales change movement of Big Three it shows that all three company’s sales figure follows the moves of GDP in their business performance.

Graph 5 -

Data source: Automotive News
39 | P a g e

In 1987 and 1988 GM sales faced high decline of 16.3%in the sales possibly because of Hugh drop in the stock prices, decline in the national output and increment in the unemployment (J.A Cacy, 1989) but it was not happen with Ford and Chrysler, of course in 1987 Ford’s sale improvement dropped (but not sales dropped) while Chrysler had very nice increment in sales of 5.7% during this year. Year 1988 was like recovering years for GM from last year high decline and had more improved sale figure for other two members of Big Three With almost 8% to 10% sales increment. 4.3.2: Sales changes of big three during 1989, 1990 and 1991 Vs. GDP

Graph 6 -

Data source: Automotive News

From 1989 to 1991 it was again critical time for Big three by leaving behind improved results. In 1989 and 1990 the GDP remained at 3.6% and 1.9%

respectively but against this, all three big three experienced very Hugh declined in the sales as can be seen in above graph. According to J.A Cacy, in this duration stock prices were dropped and due to direct correspondence between stock prices and economy, there should be downturn but because of Balance assessment of economic prospectus like in that duration, there was sharp increase in export specially in industrial products and increase in fixed investment business maintain the economic growth.

40 | P a g e

In 1991 the U.S economy again after 10 years hunted by recession which known as Gulf crisis, but its effect on auto sales could be identified from 1989. In 1991 U.S GDP dropped to -0.2% and as expected trend between GDP and Vehicle sales, there was sharp decline of 11.2% in the automobile sales in the U.S market while GM, Ford and Chrysler beard 12.5%, 13.6% and 11.2% sales drop in U.S market. 4.3.3: Sales changes of big three from 1992 to 1995 Vs. GDP

Graph 7 -

Data source: Automotive New

From the 1992, U.S automotive industry was getting back on the track with 4.5% increased in the sales along with GDP rate of 3.4%. In this year except GM both Ford and Chrysler performed excellent with 11.3% and 13.6% sales increment, while GM was looking still under the effect of last year. In 1993 and 1994 GM also joined the upward trend with ford and Chrysler but still sales improvement rate remained at 6.1% against 19.5% of Chrysler and 11.6% of Ford. Even though with less improvement of 6.1% in sale, GM sold 0.4 million vehicle more than last year, while with almost 10 to 20% improved sales, ford and Chrysler sold 0.3 million vehicle. We have seen that there are similar moment between GDP and sales of U.S Automotive industry that include Big Three as well but In 1995 there was quite inverse trend was found between U.S GDP and sales chases of Big Three. In this year The GDP rate remained at 2.5% which considerably ok but in the comparison of GDP all GM, Ford and Chrysler experience minor decline of 3.5%, 0.4% and 1.8% respectively in sales. The main reasons that auto makers identify were that in spite of healthy growth of economy, the high interest rate, rising rebates, high prices
41 | P a g e

of new cars and other incentives had restrained buyers to avoid or delay the purchase of new car (James Bennet, 1995). 4.3.2: Sales changes of big three from 1996 to 1999 Vs. GDP

In 1996 GM and Ford were still struggling with improvement but Chrysler achieved 13.2% sales compare to last year. In the Duration of 1996 to 1999 U.S economy performed well with average GDP rate of 4.5% so economical factors didn’t seem responsible for weak result of Big three, but still year 1997 and 1998 were quite disappointing for GM and Ford while Chrysler achieved 9% improvement in its sales figures against 6% declined of last year. In 1999 there were quite different story of Big Three. All achieved nice improvement but GM was the Winner of this year with 8.8% increased in the sales in U.S market. 4.3.2: Sales changes of big three from 2000 to 2008 Vs. GDP Now the era starts that almost like disaster for the U.S automobile industry. From this time, the Big Three hardly find the improvement in the U.S market and constant drop in the sales almost break the back of many giant and well establish and most prestigious auto maker of the U.S market.

Graph 9 -

Data source: Automotive News

42 | P a g e

It shows that the 21st century didn’t bring the fortune for the U.S automobile industry especially for Big Three. Since 2000 to 2008 U.S biggest three auto manufacturers GM, Chrysler and Ford constantly reporting decline in their sales in the U.S market except 2004 and 2005 when only Chrysler showed little batter performance but then it again also joined GM and Ford to downward. In year 2000, The U.S economy shows strengthen with 4.1% GDP growth, even U.S automotive industry reported 2.6% increment in the sales but market leader( Big Three) didn’t achieved from those increased sales and reported minored declined in the sales, it seem that they had already entered in the affect of coming weak years. It is quite interesting to compare the Toyota’s situation during this whole period with big three in the U.S market. Year 2001 became one of the worse and terrible years in the U.S history. U.S economy was already struggling with Economy growth, moreover the terrorist attack of 9/11 gave the shock to not only U.S but world economy. Due to this event, U.S GDP dropped to 1% from almost 5% average rate of last five years. During 2001 and 2002 U.S automotive industry experienced 1.3% and 1.9% drops in the total auto sales in United States. Among the big three Ford and Chrysler reported 3 to 9 percentage decline in the sales while GM experienced decline but maintained it to 1% in both years while Toyota achieved 7.5% inclement in the sales in U.S market in 2001. In 2002 as like subsequent effect Toyota didn’t faced decline but only achieved it sales by only 0.9% in the U.S market. In above graph we can identify that even though in 2003 economy was coming back on track, in spite of this Big Three faced continuous decline as last year While Toyota again achieved its progress. Year 2004 and 05 nothing get batter for GM and
43 | P a g e

Ford but Chrysler again show hope of improvement for U.S manufacturers with 3.7% and 4.5% increase in the sales during 2004 and 05 in the auto market U.S. In 2006 one of the places of big three was replaced by Japanese company Toyota with 12.5% improved sales than 2005, this was biggest improvement in sales for Toyota after 1984 when U.S economy growing with 7.2% GDP rate, while 2006 was starting background of coming recession. During 2006, Chrysler had sold 162,328 (8%) units less than last year and 0.4 million units than Toyota in U.S market. In graph 3 we can see that green line was been intersect by purple line of Toyota sales figure. The difference between Ford and Toyota was only 173,859 units which was not as much as big difference as past years and it seem improvement of Toyota in U.S market and decline of Ford place of big three in very short time. From the sales figures of Toyota it can be identify that Toyota has maintained its growth rate in the U.S market and has kept itself away from economical consequences that Big Three were not able to avoid. From the graph beside of Toyota since 1980 to 2008 we can identify that after 1996 Toyota achieved very high and Rocket move toward the success in the U.S market. Year 2007 was the start of disaster for the U.S automobile industry while big three of Detroit faced the Hugh losses due to the weak economy. In this year some estimation of 2006 became true about Ford and Toyota that Toyota takeover the Ford and seized title of second biggest in the Big Three. The oil prices touched the amount of $100 per barrel, notable reduction in consumer spending and brake down of housing and mortgage market generated those circumstances that reflect the insight of recession in the U.S economy. The ill feeling about future financial market
44 | P a g e

that with constant will replaced second

forced the many buyers to delay or stop new vehicle purchases. 2007 was the one of the critical time for the GM when company faced the second biggest loss of U.S history of $ 38,732 million. The deconsolidation of the GMAC, a finance company under the umbrella GM and Chrysler, which did the losses of $2.3 billion in the mortgage market, gave considerable contribution to shake the financial base of the GM. (GM annual report 2007) On May 2007 German company Daimler sold out 80.1% stack of Chrysler to Cerberus capital, which is a private equity group of U.S. Even though the management was getting changed and moving in to the hand a finance company still Chrysler’s sales decline (3.1%) was less than GM and Ford with 5.9% and 12.1% respectively. During the 2008, The U.S economy was completely under the recession which was started in 2007, as result U.S GDP dropped at 0.4% which was lowest level after recession of 1991. During the 2008, in automotive world there were some changes took place and main was, GM loss the title of world’s most auto seller against Toyota at the global level but still it was ahead than Toyota in the U.S market with 2,933,451 units compare to 2,217,660 units of Toyota. GM lost 22.6% sales compare to 2007 and this was the biggest drop after 1974. Due to crisis in the global financial market GM accrued the net losses of $30.9 billion which was of course almost $8 billion less than last year, but continuity of Hugh losses since particularly last two years dragged company at the verge bankruptcy Ford had almost similar position about sales as GM with contraction of 20.1%, with this since 2005 ford was bearing Hugh loss in the U.S market. In 2008 the net loss of ford motor was $11,823 million out of which 87% ($10,248 million) was accrued in
45 | P a g e

U.S market (Ford annual report 2008). About the Chrysler, it was the winner of decline in the sales in percentage wise. Chrysler bared 30 % drop in the sales in 2008, which was highest drop in its own history and drag the company toward bankruptcy. In this time even Japanese companies were not out of range of recession effect on the sale. Toyota experienced 15.4% decline in the U.S sales which was the biggest drop in the percentage wise from 1959 to 2008 since Toyota entered in U.S market.

4.4: Regression analysis The other method that has been used to analyse the data is Regression analysis through the SPSS software. The description of this method has been given under the title of Data analyses method applied. The sales data of four companies GM, Ford, Toyota and Chrysler have test through this method along with some other factors like GDP, U.S per capital disposable income, Car loan interest rate, Personal loan interest rate and car prices and the result is as under. 4.4.1 Descriptive statistics: Mean and Standard Deviation for Test 1 and 2

46 | P a g e

Years The first table is Descriptive Statistics in GM
1980-2008 (29)

Mean

Standard Deviation

the Test 1

4818966.5 672240.55 5 (4.8 million) 4402716.4 5 (4.4 million) 604393.61

regression test, it 1998-2008 (11) mainly explain the Test 2 Mean and of Sta. all
Ford

Deviation variables. mean shows

The 1980-2008 (29) values Test 1 the 1998-2008 (11)

3212838.4 1 3219112.3 6

626499.08

693581.07

average sales of Test 2 GM since 1980 to 2008. according to that the average unit sales of GM is 4.8 million units in Test
Chrysler 1980-2008 (29) Test 1 1998-2008 (11)

1946961.9 7 2223682.3 6

457772.07

313756.52

1(1980- Test 2

2008), while about Test 2(1998-2008) Toyota the result identify 1980-2008 (29) that the average Test 1 sales dropped at 4.4 million units.
1998-2008 (11) Test 2

1330049.4 8 1956477.1 8

571670.46

418411.50

The Mean value of Test 1 is higher due to good sales during 1983 to 1989, which
47 | P a g e

effect removed by Test 2. The figure is being more disappointing of last four year since 2005 when the average sales were 3.7 million almost 23% less than mean value since 1980. Sta. Deviation shows the how much the sales figures are vary or far from mean. The Sta. Deviation of Test 1 about GM is 672,240 units which identify that how many units were up or down than average numbers of unit sales. This calculation dropped in Test 2 at 604,393 units which are better than Test 1, but it need to consider that average sales also drop almost 8.6% in the duration of test 2. The Ford motor looking satisfied because in the both Test 1 and 2, its average sales units are almost 3.2 million which suggest that Ford has successes to maintain its sales in constant way, of course last few years are not in the favour as other specially 2007 and 2008, when sales dropped 2.3 and 1.9 million units respectively almost half of Mean value of Test 1 and 2. About Sta. Deviation it is increased from 626,499 units to 693,581 units which shows that the variation from Mean of units sales increased by 10.7%, which indicate quite matter of concern for the Ford. The reasons behind this might be the decrease of consumer’s interest due to more fuel efficient and small car are available in the U.S market basically high competitive market. According to regression Test 1 and 2, Chrysler and Toyota both companies were very good except 2008.Test 1 states that, Chrysler Mean value of unit sales is 1,946,961 units while Toyota is below of all with 1,330,049 units and that is just because of, up to 1990 Toyota was not as effective player in the U.S market as Today. Test 2 suggests that the mean of unit sales of Chrysler increased to 2,223,682 units with reduction in Sta. Deviation of 313,756 units from 457,772 units
48 | P a g e

of duration of Test 1, which means it more near to achieve its average level of sales. While Toyota has extended its market incredibly, the average of unit sales in Test 2 is 1,956,477 units which is almost 47% more than average sales figure of Test 1.which identify that, where in the time duration of Test 2(1998-2008) GM has loss and Ford has maintained it market share and Chrysler has increased its business with average level, there Toyota evolved as effective competitor for U.S big three. Per capital disposable income The other information that descriptive statistics present is the also mean and Sta. Deviation of other independent variable like mean of U.S per capital disposable income is $19,226.66 in the Test 1(1980 to 2008), while this figure shows high difference in test 2(1998 to 2008) which is $27,290.63. The below both the graph give the idea of PCDI (Per capital Dispersible income) and how much changes happened in it and how much it related to the GDP. The U.S PCDI has constantly increased with 5.21% growth rate. According to correlation test there is not high correlation between GDP and PCDI, but we can identify from the graph of % change in the income that whenever economy was in recession, the increment in the disposable income get slow like year 1980 to 1882 increment percentage dropped from 13.31% to 4.76% and this was the time, when economy struggling with S&L crises. Similar way 1991, 2001, 2005 are the years when increment in the income were slow or dropped against the previous year’s high rate.

Personal loan interest rate and Car loan Interest rate.

49 | P a g e

The car loan interest rates for 48month from Auto finance companies and personal loan interst rates for 24month from Commercial Banks dropped constantly after 1983. In 1980 the interst rate on car and personal loan were both almost similar nearly 15 to 16% which considarably so high in this time specially about car loan. From 1980 to 1991 the avarage car loan interest rate was 12.99% and when you compare this rate with avarage rate since 2000 to 2008 it is 7.62% which almost 40% less than rate of 1980-1991. While personal loan interst rate are still high in the coparison of car loan, but even though it constanlty dropped from 18.62% of 1982 to 11.37% of 2008. Regression Test 1 states that from 1980 to 2008 the avarage personal loan rate is 14.21% while car loan rate is 10.17%, but in the Test 2 there are pretimuch changes like avarage car loan dropped at 7.79% and personal loan reduce to 12.62%. Car price The factor of car price of all four companies has been included in the Test 2. The main reason of shorting the data is, in the present time which car of these companies are most demanded and which can be used as measure of price factor are recently introduced. So data from 1998 to 2008 that been call as Test 2 in this research. From the below graph it can be indentify that average price of cars in the U.S market remained between $24000 to $25000 and after 1998 price trend to be reduced at very slow rate. but among the big three and only Chrysler has show the trend of reduction in the price while other two ford and GM has brought their price from $15000 to $19000 during last 10 years, While Toyota has also increase their price along with GM and Ford but its price increment is being quite slower than GM and Ford.
50 | P a g e

The below graph is basically extended explanation of above graph of car price. The graph states that, the average price of car reduced at rate of 1.14% to 2.60% in most of years after 1998 and this can be because of introduction of new cheap car from the other countries like china and some European competitors. GM has constantly increased price at average rate of 2.51%. Ford is little behind with average 2.28% increment in their car price. Among the big three Chrysler only has reduced its prices especially from 2000 to 2005 at 4.32% but it has increased 7.93% price in 2008. Toyota has kept the balance on the car prices with just average 0.72% increment since 1998 to upgrade its market in united state.

4.4.3: Correlation statistic As we already discuss that in the research method applied section that correlation shows that how much IV are related to DV or are they influencing the DV variable or not?. Here at below, we have correlation test though SPSS software and result shows that some variables like GDP, Car loan interest rate and Personal loan interest rate are high Positive correlated while PCDI and Car prices are negative correlated at maximum level.

51 | P a g e

GDP

Car loan Interest Rate

Personal loan Interest Rate

U.S PCDI

Car Prices

GM Test 1 Test 2 0.501 0.588 0.429 0.408 0.467 0.626 -0.656 -0.840 -0.487

Ford Test 1 Test 2 0.547 0.644 -0.399 0.683 -0.273 0.848 0.046 -0.977 -0.949

Chrysler Test 1 Test 2 0.477 0.830 -0.756 0.621 -0.670 0.811 0.561 -0.847 -0.317

Toyota Test 1 Test 2 -0.078 -0.472 -0.766 -0.561 -0.812 -0.689 0.961 0.915 0.538

In the above table it can be identify that U.S GDP is the most effective and so most high correlation for all Big Three( GM, Ford and Chrysler). In the both Test 1 and 2, it is more than 0.5 mean when GDP goes up Car sales also increase. While Toyota shows negative correlation with U.S GDP particularly in Test 2 is -0.472 mean U.S economy hasn’t effecting Toyota’s sales in U.S market. Car loan has is negative effect on the GM sales because it show positive relation (0.429) between them, means when the car loan rates were high at that time GM
52 | P a g e

sales was high but with drop of interest rate instead of increase in sales it shows drop in the sales of the GM. In the Test 1 ford and Chrysler both show negative correlation -0.399 and -0.756 respectively, which shows when car loan interest rates drop it increased sales of both companies but Test 2(1998-2008) found changes in this trend. The correlation become highly positive which means after 1998 even car loan interest rate dropped with that unites sales also dropped in both companies that we can also identify with graph 3 of sales in the U.S market. About the Toyota both Test 1and 2 shows negative correlation which shows that drop in the car loan interest rate is all time favourable for the Toyota sales. Personal loan interest rate have almost similar situation as car loan. We have tested personal loan interest rate just because of analysing the trend of interest rate and is it shows similar effect on the car sales? Other thought behind including this variable is that if personal loan is available at low rate than, being less concern about financial crisis, customer can think about new purchase of vehicle. It shows indirect effect instead of direct effect as car loan. As analyse of U.S PCDI in above graph, it shows that there are constant increment in the disposal income of consumer but about the relation of income with car sale in the U.S is negative. About GM it is highly negative in both test 1 and 2 with -0.656 and -0.840 which means, the Disposable income of consumer was increasing

constantly but even though, consumers were not buying GM car not only in recession time but since 1980 and particularly after 2000. The U.S consumers are reducing their interest in the GM cars while other side Toyota showing almost perfect correlation with disposable income which is 0.961 and 0.915 in test 1 and 2 respectively, means consumer are spending more on international car like Toyota and Honda’s which also growing its sales with almost 4% since 1998. Among
53 | P a g e

Chrysler and ford, Chrysler shows positive correlation with 0.561 in test 1 which is mainly because of high increment in the sales in 1984, 1985,1993,1994,1996 and 1999 but as we see the result of test 2, it converts in -0.847 which completely negative result about sales performance, basically which reflects the loss of customer’s interest in this car and ford has almost similar situation as GM with 0.046 in test 1 and -0.997 in test 2.

4.4.3: Model of Summery The next table is the Model of summary; this table give us the value of R, R 2, and Adjusted R2. The meaning of this all terms given in the section of research method applied. The actual tables of calculations about these values show in the Appendix A3, B3, C3, and D3 for both the test 1 and 2. R GM Test 1 Test 2 0.819 0.903 0.671 0.815 0.616 0.631 R2 Adjusted R2

Ford Test 1 Test 2 0.824 0.980 0.679 0.960 0.626 0.911

Chrysler Test 1 Test 2 0.865 0.970 0.748 0.941 0.706 0.882

54 | P a g e

Toyota Test 1 Test 2 0.973 0.973 0.948 0.946 0.939 0.892

Above table show summery of value of R, R2 and Adjusted R2 for all four companies. From the above result we can says that about GM multiple correlations(R) is 0.819 in the test 1 while in test 2 it increased to 0.903 which mean there are very high correlation between IV and DV in the both time period. The value of R 2 shows that all IV like Disposable income, GDP, Car loan interest rate, personal loan interest rates are affecting at 67% to the GM units sales. This variables become more influencing in test 2, means after 1998 these variables are giving the contribution at 82 %( 0.815) to predict the GM’s sales which very close to 1. In other words these variable are 82% accountable for the variability in the unit sales of GM or we can also say that, there more 18% other variable which affecting unit sales of GM. Adjusted R2 more generalised value of R2 and this would be expected that there should be less deference in the value of R2 and Adjusted R2. Here with GM Adjusted R2 is 0.611 which is 0.055 less than R2, which means instead of taking the figure since 1980 if we take the figure since GM start its business than variance in the result will be less than 55% or more past or complete figures regarding sales and IV will drive the result to more accuracy. In test 2 the time period is less than test 1 so R2 and Adjusted R2 deference is more that test 1.

Test 1

Test 2

55 | P a g e

Above both graphs allow as to compare the values of model of summery for test 1 and 2 which consider the two deferent times duration and also possible the compare the effect of this IV on the DV of all four companies. In regression test of all Ford, Chrysler and Toyota show the high multiple correlation over 0.80 in the both test 1 and 2, while one interesting thing with Toyota is that in both test its value of R remain at 0.973 which means that, in both time duration all IV variable similar effecting the sales figure of Toyota. This also show that IV variables proves more supporting to Toyota than big three in the U.S market. The value of R2 for the Chrysler and Toyota is higher than GM and Ford in the test 1 that show that all four variables except price were more influencing in the negative or positive way for the Chrysler and Toyota. While in test 2, we can in graph of test 2 above that, the red bar of Ford is slightly above than Chrysler but not exceed than Toyota value of R2(0.948) which mean, the influence of IV on Ford reached at 96% after 1998 which was 68% since 1980. The value of Adjusted R2 for the test 1 for Ford, Chrysler and Toyota is 0.626, 0.706 and 0.939 respectively and these value shows almost 0.04 to 0.05 deference than its R2 value for Ford and Chrysler while for Toyota 0.009 show less variability in the result even though simple of data (duration of research) get extended because high deference shows high level of variability due to chance in the sample in the result, as we discuses in the above analyse of GM. 4.4.4: Coefficients values for Test 1 and 2 According to Andy field the model of coefficient is the parameter of the model. the explanation of different values like value of constant, Beta, standardized coefficient B is given under the title of the Data analysed method applied.

56 | P a g e

The value of B explain the relationship between Unit sales and each predictor (IV), it is also tell us that, at the what degree each IV are affecting the DV. In the table of coefficient of GM in Test 1, the first value that appeared is ‘constant’ which shows that if there will be no effluence of all variables like disposable income, Car loan interest rate, personal loan interest rate and GDP than GM unit sales will be 7,829,505. This figure for Ford, Chrysler and Toyota is 2,205,190, 762,600 and 478,425 respectively. In this figures ford and GM show very high value mainly because both companies show negative correlation with some factors like disposable income which should be positive and with car loan interest rate and personal loan interest rate the correlation should be negative but these factors have positive values. It’s mean not that, the absence of these variables will be beneficial for the GM and ford but its show the inconsistency with trend of GM and Ford with these variables. In the Test 2(1998-2008) this constant value show the Hugh changes for the some companies like GM with -5,024,029, Toyota

-1.255E7( Approximately -12,550,000) and Chrysler with -4333269 value shows that, after all IV along with prices of car become more influencing to the car sales of U.S automotive industry. Of course Ford remain out of this effect with 3,556,168 constant value higher than Test 1 which means inconsistency increased with trend of variable that should be consistent. The value of Bata regarding DI is -78.550 for GM, - 62.632 for Ford, 0.723 for Chrysler and 85.903 for the Toyota. The interpretation of value says that if there is $1,000 increment in the DI, than effect of this increment will be GM and Ford will face the reduction in the sales by 78,500 and 62,632 units respectively while Chrysler and Toyota gain 723 and 85,903 increment in the sales. in the Test 2 situation for the companies doesn’t seem different, as increment in the DI, reduce
57 | P a g e

the sales of GM and Ford by 64,570 and 152,830 unite while coordinating with income factor Chrysler and Toyota increase their sales by 3,642 and 173,533 units which shows, U.S disposable income become more favourable variable for Chrysler and Toyota companies. Car loan interest rate can bring the disappointing result for Ford and Chrysler because test shows that if interest rates decrease 1% even though car sales will decrease by 551,006 and 278,669 respectively, while this situation shows the positive figure for GM and Toyota they will improve their sales by 52,449 and 137,920 units respectively. Test 2 shows that if interest rate decreases 1% all big three faced reduction in the sales by 1,198,433, 2,455,447and 380,462 respectively while for the Toyota improve its sales in this situation. The prediction through personal loan interest rate, it identifies that if personal loan increase than Toyota loss the 157,384 units sales because the value of Beta for Personal loan shows negative value. While this rate decrease than Ford and Chrysler improve their sales by 532,749 and 266,945 units respectively because they have also negative correlation with this rate, while GM faced decline in the sales by 177,713 units even decreased in the personal interest rate due to positive correlation. Test 2 indentify the similar situation as personal loan rate goes up it increase the sales of big three. The one reason of happening that is, personal loan and GDP is highly correlated and GDP reflect the economic situation so when there is boom in the economy and so in that time personal loan usual remained at high rate and boom in the economy drag the sales of auto up because GDP and Auto sales have strong positive correlation.

58 | P a g e

GDP is the variable with which all four companies show the positive correlation which prove the U.S auto mobile industry strongly attach with U.S economy trend. When the 1% GDP increase that it shows the improve the sales of GM by 169,968 units, Ford by 83,971units, Chrysler by 72,610 units and Toyota 11,862 but with Toyota matter of concern is its significant value is 0.476 which is very high to accept because Normally according to Social scientist, the value of Sig. Below 0.05 is acceptable because it statistically being meaningful and indicative of genuine effect of variable. As we also ready discuss that Toyota always keep it sales out of the U.S GDP effect (Economy) except 2008, so Test 2 states that if GDP decrease even though Toyota improve its sales by 8,219 units while it is strange GM and Ford may face decline in the sales if there will 1% improvement in the GDP. The main reason of having this kind of result is, during the time period of two recessions of 2001 and 2007, when the U.S economy was at average level even though GM and Ford constantly losing their market in the U.S. while Chrysler shows expectation of improvement in the sales with GDP rate. 4.4.5: Prediction with Standardized Beta value for Test 1 Other figure that we get in this table is Standardized Coefficient Beta, basically it tell us the number of standard deviation that DV will change as result of one standard deviation change in the predictor. According to using this method if the value of standard deviation of GM increased by one standard deviation for DI which is $7418.244( Appendix A.1) than sales decrease by 0.867 units because std. Beta value is in (-) and sales std. Deviation is 672,240 units, so calculation come at 0.867× 672,240 = 582,832 units. The outcome of this method explains that if DI increases by $7418.24 than Unit sales decrease by
59 | P a g e

582,832 units. If the same method being used for other variables than figure show that the one standard deviation increase of car loan interest rates than GM unit sales increase by 149,237 units. With personal loan interest rate sales decrease by 322,003 units and with GDP rate sales increase by 310,575. The sales Standardized beta and Standard deviation method applied for other three companies than result will be as under. Test 1 Variables Disposable income Car loan interest rate Personal loan interest rate GDP Ford - 464,862 -1,569,380 965,434 153,492 Chrysler 5,493 -793,777 483,865 132,754 Toyota 637,412 392,737 - 285,263 21,723

Above table shows that if the value of standard deviation increased by 1 standard deviation (Appendix B1, C1, and D1) of all variables than effect accrued as above, about DI Ford loss the sales of 464,862 units while Chrysler and Toyota gain improvement in the sale but Chrysler increment is very minor comparative to Toyota. If the car loan interest rate increased by one standard deviation than Ford loss almost 1.5 million sales and Chrysler face the decline of 0.7 million in the unit sales. While in spite of negative correlation between car loan and Toyota sales, increase in interest rate lead the improvement in the sales. Personal loan interest rate increment leads the improvement in the sales of Ford and Chrysler while Toyota experience decline in the sales. As GDP value in the normal Beta, here with standardized value of Beta GDP show minor effect on the car sales. Of course test show that if U.S GDP increases by one standard deviation which is 2.8% for all
60 | P a g e

company than Ford, Chrysler and Toyota increase their sales by 153,492, 132,754 and 21,723 units respectively. 4.4.5: Prediction with Standardized Beta value for Test 2 Test 2 Variables Disposable income Car loan interest rate Personal loan interest rate GDP Price of car GM - 248,406 -1,038,953 1,284,942 87,033 -93,077 Ford -588,157 -212,929 333,693 -8,323 45,082 Chrysler 14,119 -329,759 555,429 91,303 56,163 Toyota 667,367 -381,592 692,890 101,255 11,297

Above table is the calculation with standardized beta and standard deviation of each variable as previous calculation of Test 1.If one standard deviation of DI ($3,846(Appendix A.1)) in being increased than still GM sales will decrease by 248,406 units. With same calculation with other companies Ford sales will decrease by 588,157 units which is more that test 1, which show that after 1998 even DI increased but GM and Ford failed to get benefit of this, While Chrysler and Toyota improve their sales along with improvement in DI. Compare to test 1 when GM and Toyota get benefit even car loan interest rate increase but after 1998 all four companies was affected negatively by car interest rate as it increased by one standard deviation.( Appendix A1, B1, C1,D1). Through standardized Beta value Personal loan inters rate increment shows positive result for all four companies that can be identify from above table, that all companies

61 | P a g e

figure shows positive values. This figure also may influenced by GDP trend as we discuses during the simple Beta calculation. GDP is generally highly positive correlated with unit sales of the all four companies specially for Big three but according to this calculation Ford may experience quite different situation regarding its unit sales compare to GM and Chrysler and also its result of Test 1. After 1998, if U.S GDP increased one standard deviation than it would increased GM, Ford and Toyota sales as shown in above table but Ford can faced 8,323 units decline with improve GDP condition, its mean that in same duration when there was boom in the U.S market Ford had disappointing result regarding its sales like years 2002 to 2006. In Test 2 price variables is one which was not tested in Test 1 because of insufficient data regarding Car price. So with this calculation car price factor tell that if one standard deviation of car price (that every company has different and mentioned in Appendix A1, B1, C1, and D1) is being increased what will be the effect on unit sales of each company. The result shows that even though all four companies have constantly increased their price, as we can see in the graph of Car prices except Chrysler it hasn’t affect the sales of Ford, Chrysler and Toyota but GM get affected by the increment in the sales because it faced decline of 93,077 units due to price increment of its car.

CHAPTER: 5 Conclusion

62 | P a g e

As all previous research show that the environment of recession in the economy has all the time created the significant effect on the industries of any particular countries. Being in the research area, U.S economy and its automotive industry also shows the high correlation with each other that have been examined in the correlation test. As we analysed the data of four companies those are GM, Ford, Chrysler, and Toyota regarding the U.S market. The analysis done with two time zones with five independent variables that called Test 1 and Test 2 as we mentioned in research method applied. The result shows that, along with changes in the economy these all factors also get affected and changes in these factors or we can say variables show significant effect on the unit sales of all four companies. The first result regarding the comparing the sales data and GDP trend and also history of recession of the U.S identify that whenever U.S economy stuck in the recession, U.S automobile industry specially domestic manufacturers faced decline in the sales in the U.S market. This analysis also identifies the similar trend followed by the big three in the recession and boom situation in the market. so this situation prove that, particular condition of the market affect sales figure of all domestic companies and GDP fit best in this criteria like in years 1983 to 1986 and 1992 to 1994 all big three enjoy the high sales increment in the U.S market while opposite side during 1989 to 1991, 2001, 2002 and 2007 when there was weak economy, U.S Auto industry faced declined in the sale. So one clear thing is that when there was boom in the market sales get increased and with ill economy U.S automotive faced the negative result on the sales. The result of regression Test of 1 and 2 give the idea about the effect of the different variables like GDP, PCDI, car loan interest rates, personal loan interest rate, and prices of the car on the auto sales in the U.S market. The Test 1 and 2 show the
63 | P a g e

average sales of Ford are maintained since 1980. GM average sales higher than all other companies but in the Test 2 GM average sales dropped by almost 0.4 million vehicles. While about Chrysler if we forget about the 2008 result it has maintained it average sales though out all years while it’s standard deviation is very close to its mean value but it is not happen with GM and Ford. But after 2000 big three faced the constant reduction in their sales but Chrysler’s declined was slower than Ford and GM. The main reasons those, look responsible for the decline are the high competition in the U.S auto market because as many researchers discussed in the literature review and by analysing the result of Toyota, we can say foreign companies from Japan, Germany and Korea rapidly seizing the market share. The income factor doesn’t seem directly affecting the purchasing capacity of the buyer because research show the constant increment in the U.S disposable income, but at the some level big three has failed to get the benefit of this income factor especially after 2000. The inflation directly affects the disposable income as explanation given by Storchmann in 2005. He said that if consumers living expensive increased or price of living hood stuff increase than there will be remain less amount to spent on transportation cost so that time consumer thing about oil prices and related expenses. About the car loan and personal loan interest rates dropped constantly but both regression Test show negative relationship among big three’s sales and interest rates. The main reason of negative result is constant decline in sales figure for the big three but here the tightened credit standards regarding consumer loan can the matter of concern, because if bank are reducing the interest rate but getting loan from the bank is very difficult due high credit score demand than this situation create the negative effect on the sales.
64 | P a g e

GDP is the variable which include the effect of many micro economical factors like oil price, price index in the market, unemployment and consumer sentiment index that also explained by M.B Zimmerman as shock in the economy. Some time economic expectation lead the consumer to spent the money, If consumer optimistic regarding present and future economical condition than he will show high willingness to spent the money on durable goods. All for companies has constantly increased the price of their car; its effect can be seen on the sales as well specially after 2000. All big three faced decline in the unit sales but according to the predicting value get by using standardized beta value say the even if car price will increased it will lead to the increment in the sale for Ford, Chrysler and Toyota while for the GM this value predicting negative value. Here also oil prices can affect the sales through car price up and down. As Mcmanus argue that if the oil prices increase, against that by reducing the car price company can maintain the sales. About our sample companies, any company hasn’t reduced their prices against rise of oil price, so this situation can be a matter of concern for the consumer and lead to be can be one reason for decline in the sales. Other factors those have create the problems for the big three are high Tax, post payment obligations and quality of their vehicle. The quality of the vehicle direct affects the sales of the U.S manufacturers. According to wood (2005) U.S cars are far behind Japanese and European cars. Among big three two GM and Chrysler owned GMAC so both company faced the Hugh loss accrued due to mortgage breakdown along with GMAC, other than 80% finance was being provided by GM and Chrysler dealer through the GMAC and due to tighten credit standard 40% dealer faced the risk of losing dealership so this situation also affect the sales of GM and Chrysler.
65 | P a g e

In the U.S market most of all variables were being affected by the credit crunch which was the result of mortgage and financial market breakdown, which leaded the tightened credit standard. Because avoid the lending and covering the risk of default banks and financial institutions had increased the interest rates and against this situation U.S government had reduced state interest rate to improve the lending practice but with high credit expectation from the borrowers. In the U.S 60% borrower were not qualified to fulfil this high credit score and this reduce the auto finance from the banks and financial institutions to buy the new car. GDP reflects the effect of inflation and unemployment on the economy and basically it represent all over strong or weak condition of different market of the county. From the GDP data we can identify that during recession GDP went down and in 2007 reason was credit crunch. Other side our correlation test identify the high correlation between GDP and Car sales of all big three, so we can say that U.S automobile industry was affected by credit crunch at country prospective. Recommendations In this time U.S Automobile industry passing though its critical time and as we come to know through analysis, major problems those affecting the U.S automobile industry are cause by weak economy and tightened credit standard by banks and financial institutions. So also the inference of government is necessary to bring back this industry on track. Along the government support, industry need some structure changes in the system to improve the productivity, efficiency and quality.

Government should allow to financial institutions and banks to make quite softer lending standard for the consumer loans.

66 | P a g e

U.S car reliability regarding quality is very low against foreign competitions, so by Increasing the investment in R&D big three should improve the quality of their Vehicle.

If big three not able to reduced price due to high cost associated with production especially labour cost, than they should emphasis on small and fuel efficient cars like Gas- electric Hybrid cars.

Big three should reduce cost of post payment obligation like pension and health care to retirees by labour negotiation with United Auto Workers.

Big three should expand their market at global level especially in the emerging market like India, China, and Russia and also be aware about competitors from these counties.

Suggestions for the further research On the basis of this research and by considering some limitation of this study, some suggestions will helpful for further research

The primary research on this subject by interviewing dealers of all companies or getting information through email and telephone can improve the significance of the study. More variables like oil price, unemployment rate, price index in the U.S, inflation rate, companies own manufacturing cost, advertisement cost can be include in the regression test to analyse the effect of these variable in the car sales

The research have contained only four company, while more companies can be analyse to get more clear picture of actual situation of automobile industry of U.S. THANK YOU

References
67 | P a g e

Andy Field (2005), Discovering Statistics Using SPSS, Second Edition, sage publication, page no 193 Bernanke, B. S., & Lown, C. S. (1991), “The Credit Crunch”, Brookings Papers on Economic Activity, Issue no. 2: p.205–248 Cleveland.com (2006), Detroit's shrinking share of the auto market, on November 25th 2009 http://www.cleveland.com/pdgraphics/interactive/autosales/ retrieved from

FRB (2008), Consumer credit, personal loan interest rates and car loan interest rate, retrieved on October 8th 2009 from http://www.federalreserve.gov/releases/g19/hist/cc_hist_tc.html Gary Krob and Beth Henning (2008) per capita disposable income and personal income retrieved on October 9th 2009 from http://data.iowadatacenter.org/datatables/State/stpcpipcdi19292008.pdf

Kaufman, H. (1994) "Structural Changes in the Financial Markets: Economic and Policy Significance", Federal Reserve Bank of Kansas City- Economic Review, Second Quarter 1994, 79:2, page: 5-15, retrieved on July 22nd 2009 from http://www.kc.frb.org/publicat/econrev/pdf/2q94kauf.pdf Lisa mataloni (2009),The data of GDP, Economist, Bureau of Economic Analysis Retrieved on October 8th 2009 from

Percent change from preceding period (Excel • 25KB)

Mary Raetz, automotive news, the sales data of GM, Ford, Chrysler and Toyota since 1970 to 2008, got the email with link below on September 30th 2009 https://pod51002.outlook.com/owa/WebReadyView.aspx? t=att&id=RgAAAAB3T3JGi6ePR7FP0hBrCQu4BwDybB2KjRMmRY %2byZnNNdRJAAB8EAr1xAABhdnk8XjKJRqSiNTwtMLIvAAAm27lwAAAJ&attid0=B AAAAAAA&attcnt=1&pspid=_1260263584627_992907105 https://pod51002.outlook.com/owa/WebReadyView.aspx? t=att&id=RgAAAAB3T3JGi6ePR7FP0hBrCQu4BwDybB2KjRMmRY %2byZnNNdRJAAB8EAr1xAABhdnk8XjKJRqSiNTwtMLIvAAAm27lwAAAJ&attid0=B AACAAAA&attcnt=1&pspid=_1260263584627_992907105
68 | P a g e

MSN AUTO.COM, Car prices of GM, Ford, Chrysler, and Toyota on October 18th

retrieved 2009

Toyota Camry Research All Models and Prices - MSN Autos
Wallace, J., Avis, M. A., Smith, S. C. (2008),”The Credit Crunch: A Domino Effect” Business Perspectives (MEMPHIS), Bureau of Business and Perspectives Research, University Of MEMPHIS, Winter-Spring-2008, Volume 19, Number 2, Pages 58-63, retrieved on July 22nd 2009 from http://www.allbusiness.com/banking-finance/banking-lending-credit-servicessubprime/10204236-1.html

Bibliography Books Andy Field (2005), Discovering Statistics Using SPSS, Second Edition, sage publication, page no 175 to 207 Gary Koop (2008), introduction to Econometrics, john Wiley & Sons Ltd publication. Page no 121 to 168. Domodar N. Gujarati (1995), Basic Econometrics, Third Edition, McGraw Hill publication Kinnear and Gray(2009), SPSS 16 made simple, Hove: Psychology Press T. Lucey (1992), Quantitative Techniques, Fourth Edition, DP Publications.

Online source A.Field (2005), Discovering Statistics Using SPSS, Second Edition Anthony Billing (2007), finding OPEB liabilities: A proposal for the automotive industry, retrieved on September 4th 2009 from http://proquest.umi.com/pqdweb? index=104&did=1318434321&SrchMode=1&sid=4&Fmt=6&VInst=PROD&VType=P QD&RQT=309&VName=PQD&TS=1252116112&clientId=18443 Automobile Lyceum (2009), US Auto Market May See Great Depression like Collapse retrieved on July 25th 2009 http://www.christonium.com/automotive/ItemID=12366836531213 from

B.G. Long (2009), The Rise & Fall of the American Auto Industry - A Brief History by Brian Long .doc retrieved on December 2nd 2009 from
69 | P a g e

http://pdfdatabase.com/download_file_i.php?file=12906624&desc=The+Rise+ %26amp%3B+Fall+of+the+American+Auto+Industry+ +A+Brief+History+by+Brian+Long+.doc Borade (2009), US Economic Crisis: Impact on Automobile Industry, on December 5th 2009 http://www.buzzle.com/articles/us-economic-crisis-impact-on-automobileindustry.html retrieved from

B.C Briggman (2009), the main street economy, Regional and Rural analyses, retrieved on December 5th 2009 from http://kansascityfed.org/RegionalAffairs/MainStreet/MSE_0309.pdf BBC News (2007), Downturn in fact and figures, The US sub-prime mortgage crisis has led to plunging property prices, a slowdown in the US economy, and billions in losses by banks. It stems from a fundamental change in the way mortgages are funded. Retrieved on December 5th 2009 from http://news.bbc.co.uk/1/hi/business/7073131.stm C Chanda (2008), Wheel of Recession, retrieve on 5 December 2009 from http://yaleglobal.yale.edu/content/world-puts-brakes-rush-globalization-0 Cooney (2005), CRS report for congress, U.S. Automotive Industry: Policy Overview and Recent History, Retrieved on October 25th 2009 from http://ncseonline.org/NLE/CRSreports/05apr/RL32883.pdf C. Brock (2009), Bailout offers auto loan relief, Auto industry secures bailout funding for car loans, retrieved on October 4th 2009 from http://www.mortgageloan.com/bailout-offers-auto-loan-relief-2835 Christie and Midenberg (2008), GMAC adds loan as US injected $6 billion to aid GM, retrieved on October 28th 2009 from http://www.bloomberg.com/apps/news? pid=20601087&sid=aUlUYbxht7PI&refer=home Douglas R Fox in 1980, Motor Vehicles, Model Year 1980, Retrieved October 15th 2009 http://library.bea.gov/cgi-bin/showfile.exe? CISOROOT=/SCB8&CISOPTR=727&CISOMODE=print on from

D.S Stoll (2008), Will US help GMAC revs up Car sales, GM Dealers Snap Into Action, Contacting Prospective Buyers; 0% Financing for Some 2008 Models, retrieved on December 3rd 2009 from http://online.wsj.com/article/SB123064252570542267.html
70 | P a g e

Ford annual report (2008) profit loss of ford in US market retrieved on July 25 th 2009 from http://www.ford.com/doc/2008_annual_report.pdf

The FRB (1981), Consumer Installment Credit, page no 54,retrieved on August 3rd 2009 http://www.federalreserve.gov/monetarypolicy/files/fomc19810818gbpt219810812.p df FRB report 1992, Personal Income and Consumption, page no 17, 18 , retrieved on August 3rd 2009 http://www.federalreserve.gov/monetarypolicy/files/fomc19920205gbpt219920130.p df FRB report 2002, SALES OF AUTOMOBILES AND LIGHT TRUCKS, Millions of units at an annual rate, FRB seasonal page 18, retrieved on August 4th 2009 http://www.federalreserve.gov/monetarypolicy/files/FOMC20020626gbpt220020620. pdf Francois Dupuis (2008) financial crisis: neither the first nor the last A returns on historical crisis of the past 30 years, saving and loan crisis, retrieved on August 5th 2009 http://www.desjardins.com/en/a_propos/etudes_economiques/actualites/point_vue_ economique/pve81003.pdf GM annual report 2007, information about income, loss, retrieved on August 8th 2009 http://bigthreeauto.procon.org/sourcefiles/GM_AR_2007.pdf GM sales historical data of 2008 page no 2, retrieved on August 8th 2009 http://www.gm.com/corporate/investor_information/docs/sales_prod/09_01/q4_press release_0901.pdf Geffiner,(2008), Survey find tougher loan requirement, Most banks have tightened their credit standards this year, retrieved on December 6th 2009 from http://www.lendingtree.com/smartborrower/mortgage-news/tighter-credit-standards/ Henry(2001), Virginia commonwealth university-square and Standardization in Regression retrieved on November 3 rd 2009 from http://www.people.vcu.edu/~nhenry/Rsq.htm

J.A Cacy (1989), The U.S economy in 1987 and 1989, October 22nd 2009

retrieved

on from
71 | P a g e

http://www.kansascityfed.org/PUBLICAT/ECONREV/EconRevArchive/1987/4q87cac y.pdf James Bennet, 1995, Ford seed 1995 auto sales falling below level of last year retrieved on October 22nd 2009 from http://www.nytimes.com/1995/05/10/business/ford-sees-1995-auto-sales-fallingbelow-level-of-last-year.html Jacob Ward (2007), Average car price in US market, October 9th from Average Price of a New Car, 1906-2007 retrieved on 2009

Jon Henley (2007), Show us the money, gardian.co.uk retrieved July 22nd 2009 from http://www.guardian.co.uk/money/2007/sep/19/business Joson Jia (2008), Tightened Credit Standards and Rising Personal Bankruptcy Rate in the U.S. retrieved on December 5th 2009 from http://warrington.ufl.edu/academics/pdbp/docs/proposals/2009_JasonJia.pdf Kimbely Amadeo, saving and loan crisis, what was the Savings and Loans Crisis? retrieved on August 7th 2009 from http://useconomy.about.com/od/grossdomesticproduct/p/89_Bank_Crisis.htm Kevin Krolicki (2008), sales of car in US in 2007, 2007 U.S. Auto Sales Dimmest Since 1998, retrieved August 29th 2009 from http://www.theautochannel.com/news/2008/01/04/074386.html Lown and peristiani (1995), the behaviour of customer loan rate during the 1990 credit slowdown, retrieved on December 2th 2009 from http://www.sciencedirect.com/science?_ob=MImg&_imagekey=B6VCY-3VWC6GR32&_cdi=5967&_user=132448&_orig=search&_coverDate=12%2F31%2F1996&_sk= 999799989&view=c&wchp=dGLbVtbzSkWb&md5=7c4ed36186eead2ae1842fa1277732be&ie=/sdarticle.pdf Martin(2005), assessing the fir of regression model, retrieved on October 26th 2009 from http://www.cscu.cornell.edu/news/statnews/stnews68.pdf Michael Feroli (June 2009), US automakers still spinning their wheels, retrieved on September 8 th 2009 from http://proquest.umi.com/pqdweb? index=4&did=1764791331&SrchMode=1&sid=5&Fmt=6&VInst=PROD&VType=PQD &RQT=309&VName=PQD&TS=1252025071&clientId=18443 Mark Edmund (Jan. 2009), Big three: will the bailout be enough, retrieved on September 8th 2009 from
72 | P a g e

http://proquest.umi.com/pqdweb? index=11&did=1662527411&SrchMode=1&sid=6&Fmt=6&VInst=PROD&VType=PQ D&RQT=309&VName=PQD&TS=1252027111&clientId=18443 Malone and Groom(2008), credit crunch stalls US auto industry, retrieved November 25th 2009 http://www.reuters.com/article/idUSN1528751720080916 on from

Makinsey global institution (2005), Increasing Global Competition and Lab our Productivity: Lessons from the US Automotive Industry, retrieved on th November 29 2009 from http://www.frbsf.org/economics/conferences/0511/4_IncreasingGlobalCompetition.p df Mcmanus (2007), the link between gasoline prices and vehicle sales, retrieved on December 2nd 2009 from http://proquest.umi.com/pqdweb? index=0&did=1275898251&SrchMode=1&sid=1&Fmt=6&VInst=PROD&VType=PQD &RQT=309&VName=PQD&TS=1259811764&clientId=18443 M.B. Zimmerman, A VIEW OF RECESSIONS, FROM THE AUTOMOTIVE INDUSTRY, retrieved on December 6th 2009 http://www.bos.frb.org/economic/conf/conf42/con42_20.pdf from

Nick Beams (2003), US recession declared over but economic problems deepen, retrieved on December 2nd 2009 from http://www.wsws.org/articles/2003/jul2003/usec-j23.shtml Owens, R. E, & Schreft, S. L., (1995) “Identifying credit crunches”, Contemporary Economic, Policy Vol. 13, Issue. 2; pg. 63, 14 pgs, retrieved from ABI/INFORM Global database. (Document ID: 1469160) Paul E. Polzin, (2002), its official: The United States is in a recession the national out look, retrieved on July 29 th 2009 from http://proquest.umi.com/pqdweb? index=5&did=118387899&SrchMode=1&sid=1&Fmt=6&VInst=PROD&VType=PQD &RQT=309&VName=PQD&TS=1247709628&clientId=18443 PR Newswire publication (2008), Global Analysis by CSM Worldwide:; U.S. Auto Sales Will Rebound in 2009 as Opportunities in Developing Countries Grow; OEMS, Suppliers Must Carefully Consider Unique Aspects of Each Market, retrieved th on December 5 2009 from http://proquest.umi.com/pqdweb? index=54&did=1456141341&SrchMode=1&sid=13&Fmt=3&VInst=PROD&VType=P QD&RQT=309&VName=PQD&TS=1259723924&clientId=18443 Roland Jones (2008), Auto sector feels pinch of credit crunch, Loan delinquencies could have an impact on whole economy, retrieved on September 8th 2009 from
73 | P a g e

http://www.msnbc.msn.com/id/23879390/ Roubini (2008), Can the U.S. financial crisis be contained within America's borders? Nouriel Roubini says no--and explains how the contagion will spread, , retrieved on September 9th 2009 from http://www.freerepublic.com/focus/f-news/1980211/posts Rex Nutting(2009), most banks tighten credit standards further, FEB says, retrieved on December 5th 2009 from http://www.marketwatch.com/story/most-banks-tighten-credit-standards-further Rousakis (2007), U.S. car makers lose ground in a hurry to foreign competition, retrieved on December 6th 2009 from http://blog.cleveland.com/business/2007/10/us_automakers_lose_ground_in_a.html Santini and Poyer(2007), motor vehicle output and GDP , 1968-2007, retrieved on December 1st 2009 from http://proquest.umi.com/pqdweb? index=43&did=1582871221&SrchMode=1&sid=13&Fmt=6&VInst=PROD&VType=P QD&RQT=309&VName=PQD&TS=1259721907&clientId=18443 Storchmann (2005), long run gasoline demand for passenger car, the role of income distribution, retrieved on December 1st 2009 from http://www.sciencedirect.com/science?_ob=MImg&_imagekey=B6V7G-4F7Y950-11&_cdi=5842&_user=132448&_orig=search&_coverDate=01%2F31%2F2005&_sk= 999729998&view=c&wchp=dGLzVzzzSkzS&md5=59c64ec19f7b7cf5287a25ac9cc8fae7&ie=/sdarticle.pdf Sidney Hill (2009), speeding car industry: China shows surprising growth in automotive production, retrieved on December 2nd 2009 from http://www.mbtmag.com/article/233163A_speeding_car_industry_China_shows_surprising_growth_in_automotive_producti on.php Steve Schifferes (2007), Globalising the car industry, retrieved 2nd 2009 from http://news.bbc.co.uk/1/hi/business/6346325.stm on December

Utama(2003), MAKARA, SOSIAL HUMANIORA, VOL. 7, NO. 1, THE DEMAND FOR NEW CARS AND THE INDEX OF CONSUMER SENTIMENT, retrieved on December 4 th 2009 from http://journal.ui.ac.id/upload/artikel/02_The%20Demand_Sidharta.pdf William berg, The History of GM - General Motors retrieved July 22nd 2009 from http://ezinearticles.com/?The-History-of-GM---General-Motors&id=110696 White and Gordon (1990), Understanding the gulf crisis, retrieved July 22nd 2009 from
74 | P a g e

http://flag.blackened.net/revolt/awg/gulf_crisis3.html Wert (2009), GM sales and revenue figures, retrieved on 3rd August 2009 from http://jalopnik.com/5160704/gm-reports-96-billion-loss-in-fourth-quarter-2008-lossof-309-billion Watkins and Alley (2001), The U.S recession of 2001 – 02, July 22nd 2009 http://www.sjsu.edu/faculty/watkins/rec2001.htm retrieved on from

Wood (2006), Disrupting the Auto Industry: Potential winners and losers as the cost of vehicle ownership increases, retrieved on September 9th 2009 from http://www.odysseyadvisors.com/pdf/Disrupting_the_Auto_Industry.pdf

Appendix Appendix A Appendix A.1 GM Regression Test 1 and 2

Test 1(1980-2008)

Test 2 (1998-2008)

75 | P a g e

Appendix A.2 Test 1 (1980-2008) Correlation Test

76 | P a g e

Test 2 (1998-2008)

77 | P a g e

Appendix A.3

Test 1 (1980-2008)

Test 2 (1998-2008)

78 | P a g e

Appendix A.4

Test 1 (1980-2008)

Test 2 (1998-2008)

79 | P a g e

Appendix B

Ford Regression Test 1 and 2

Appendix B.1

80 | P a g e

Appendix B.2 Test 1

Test 2

81 | P a g e

Appendix B.3

Appendix B.4

82 | P a g e

Appendix C: Chrysler Regression Test 1 and 2 Appendix C.1 Test 1

83 | P a g e

Test 2

Appendix C.2 Test 1

84 | P a g e

Test 2

Appendix C.3
85 | P a g e

Test 1

Test 2

Appendix C.4 Test 1

Test 2

86 | P a g e

Appendix D Toyota regression test 1 and 2 Appendix D.1 Test 1

Test 2

87 | P a g e

Appendix D.2 Test 1

Test 2

88 | P a g e

Appendix D.3 Test 1

Test 2

Appendix D.4 Test 1
89 | P a g e

Test 2

Table 1 Sales data of GM, Ford, Chrysler and Toyota Years 1980 1981 1982 1983 1984 1985 1986 GM 4,981,841 4,591,067 4,510,186 5,288,208 5,972,971 6,282,975 6,229,178 Ford 2,270,230 2,077,851 2,092,334 2,523,150 3,092,705 3,290,108 3,405,707 Chrysler 1,039,133 1,026,984 1,039,875 1,219,369 1,604,770 1,851,537 1,905,150 Toyota 713,852 711,993 674,554 726,818 822,164 907,111 993,330
90 | P a g e

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

5,213,205 5,511,420 5,106,224 4,934,308 4,319,730 4,397,537 4,666,988 5,015,926 4,841,581 4,743,557 4,713,247 4,548,016 4,947,359 4,875,404 4,824,337 4,782,212 4,666,868 4,617,300 4,416,042 4,028,992 3,789,900 2,933,451

3,459,803 3,751,851 3,579,860 3,317,096 2,867,371 3,192,458 3,562,388 3,818,066 3,800,980 3,843,438 3,816,682 3,885,851 4,028,662 4,010,148 3,764,911 3,409,873 3,247,671 3,098,719 2,953,197 2,716,383 2,386,957 1,907,864

2,012,950 2,208,057 2,004,047 1,698,068 1,507,671 1,713,012 2,047,822 2,203,995 2,164,343 2,450,826 2,303,788 2,510,011 2,638,561 2,522,695 2,273,208 2,205,446 2,127,451 2,206,024 2,304,833 2,142,505 2,076,650 1,453,122

932,445 935,960 945,353 1,058,005 1,010,476 1,023,641 1,033,211 1,088,082 1,083,351 1,159,718 1,230,122 1,361,025 1,475,441 1,619,206 1,741,254 1,756,127 1,866,313 2,060,049 2,260,825 2,542,524 2,620,825 2,217,660

91 | P a g e

Table 2 Sales changes in %

Years 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

GM -19.6% -7.8% -1.8% 17.3% 12.9% 5.2% -0.9% -16.3% 5.7% -7.4% -3.4% -12.5% 1.8% 6.1% 7.5% -3.5% -2.0% -0.6% -3.5% 8.8%

Ford -28.4% -8.5% 0.7% 20.6% 22.6% 6.4% 3.5% 1.6% 8.4% -4.6% -7.3% -13.6% 11.3% 11.6% 7.2% -0.4% 1.1% -0.7% 1.8% 3.7%

Chrysler -21.0% -1.2% 1.3% 17.3% 31.6% 15.4% 2.9% 5.7% 9.7% -9.2% -15.3% -11.2% 13.6% 19.5% 7.6% -1.8% 13.2% -6.0% 9.0% 5.1%

Toyota 11.1% -0.3% -5.3% 7.7% 13.1% 10.3% 9.5% -6.1% 0.4% 1.0% 11.9% -4.5% 1.3% 0.9% 5.3% -0.4% 7.0% 6.1% 10.6% 8.4%
92 | P a g e

2000 2001 2002 2003 2004 2005 2006 2007 2008

-1.5% -1.0% -0.9% -2.4% -1.1% -4.4% -8.8% -5.9% -22.6%

-0.5% -6.1% -9.4% -4.8% -4.6% -4.7% -8.0% -12.1% -20.1%

-4.4% -9.9% -3.0% -3.5% 3.7% 4.5% -7.0% -3.1% -30.0%

9.7% 7.5% 0.9% 6.3% 10.4% 9.7% 12.5% 3.1% -15.4%

Table 3 GDP Rate of US Years 1979 1980 1981 1982 1983 1984 1985 1986 GDP rate in % 3.1 -0.3 2.5 -1.9 4.5 7.2 4.1 3.5 Years 1994 1995 1996 1997 1998 1999 2000 2001 GDP rate in % 4.1 2.5 3.7 4.5 4.4 4.8 4.1 1.1
93 | P a g e

1987 1988 1989 1990 1991 1992 1993

3.2 4.1 3.6 1.9 -0.2 3.4 2.9

2002 2003 2004 2005 2006 2007 2008

1.8 2.5 3.6 3.1 2.7 2.1 0.4

Table 4 Per capital Disposable income Years Per capital Disposable income % changes in Per capital Disposable income Years 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 8,307 9,413 9,861 10,205 11,508 12,002 12,591 13,178 13,519 14,595 15,330 15,681 16,723 6.23% 13.31% 4.76% 3.49% 12.77% 4.29% 4.91% 4.66% 2.59% 7.96% 5.04% 2.29% 6.64% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 18,108 18,636 20,228 20,918 21,923 22,497 24,137 24,724 26,025 26,780 28,919 29,238 30,435 9.26% 2.92% 8.54% 3.41% 4.80% 2.62% 7.29% 2.43% 5.26% 2.90% 7.99% 1.10% 4.09%
94 | P a g e

Per capital Disposable income

% changes in Per capital Disposable income

1993

16,573

-0.90%

2007 2008

31,863 33,656

4.69% 5.63%

Table 5 Interest rates Years Car loan interest rates (%) 14.30 16.54 16.83 13.92 13.71 12.91 11.33 10.45 10.86 12.07 11.85 11.14 9.29 8.09 8.12 Personal loan interest rates (%) 15.47 18.09 18.65 16.68 16.47 15.94 14.83 14.23 14.68 15.44 15.46 15.18 14.04 13.47 13.19 Years Car loan interest rates (%) 8.12 9.57 9.05 9.02 8.73 8.44 9.34 8.50 7.62 6.93 6.60 7.07 7.72 7.77 7.02 Personal loan interest rates (%) 13.19 13.94 13.54 13.90 13.76 13.39 13.90 13.22 12.54 11.95 11.89 12.06 12.41 12.38 11.37

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Table 6 Car prices
95 | P a g e

GM, Chevrolet Ford, Mustang 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 15,670 16,000 16,535 17,150 17,760 18,075 18,770 19,200 16,365 17,215 19,850 16,150 16,470 16,710 17,095 17,475 17,720 18,150 19,215 19,115 19,250 19,650

Chrysler, Sebring 17,065 17,340 19,840 19,910 20,390 20,505 21,145 22,255 20,055 18,445 19,840

Toyota, Camry 16,938 17,098 17,518 17,675 18,970 19,045 18,045 18,195 18,445 18,470 17,700

96 | P a g e

Sign up to vote on this title
UsefulNot useful