The Great Auto Industry Crisis of 2008: History

Doesn’t the human race EVER learn? Why must we continually have to go through the same pains, trials and tribulations that our parents, grand parents and great grand parents went through? Same with the automobile industry. Same with how our nations handle their affairs– economics included. Even politics. Forever, politics.

1928: Times were “Terrific”. The “Roaring Twenties” they called them. After a short, sharp, 18 month long economic recession in 1920 – 1921, where the deadwood and dry brush was cleaned from the U.S. economy by an economic forest fire, new growth came along and prospered.

Even so, Chevrolet had come in at number one, selling 1,193,212 cars against Ford’s slow ramp-up of production of 607,592. Willys-Overland and sub-marque Whippet were third at 315k cars, with Hudson and sub-marque Essex at 282,203 following at number four. The total new vehicle market in the United States was 4,361,579.

Henry Ford finally listened to his son, Edsel, replacing the ubiquitous Model T “Flivver” with a new Model A car styled somewhat like a shrunken Lincoln. Yes, the great Henry Ford nearly destroyed his own nascent auto company with his stubborn demand that no change be made to what had been successful for so long. The Model T was his alter-ego, emphasis on ego. Finally, the market spoke and he at long last heard – at huge cost to his son who possibly alienated his father from that time on.

By August 1929, car sales dropped precipitously – even prior to the Great Depression which began on October 29. Even so, 1929 new vehicle sales amounted to 5,337,087. August car sales gave a warning that nobody heard.

1930 sales: 3,510,178 (a 34.2 percent drop year on year).

1931 sales: 2,472,359 (a 29.5 percent drop year on year)

1932 sales: 1,431,469 (a 42.1 percent drop year on year, a 73.2 percent reduction in sales compared to 1929. An auto market only a quarter the size of four years before).

1933 sales: up 38.7 percent year on year, to 1,447,018. (Still only about a third of the size of 1929).

1934 sales: up 45.5% year-on-year, to 2,669,963 (a 45.5% increase year-on-year). An auto market less than ½ the size of 1929.

The Great Depression dragged on until 1942, only interrupted by the great build-up of war materiel for America’s entry into World War II. Recently, only a year or so ago, people in charge of “The Fed” reluctantly admitted that the actions – or inactions – of their forbearers had not only caused, but exacerbated the Great Depression. “We’re sorry, we won’t do it again.”

So what are they doing now? Pretty much the same lever-pulling “never mind that man behind the curtain” antics that caused the ruination of the nation some 79 years ago. Throwing more paper money into a fire does nobody any good.

And things in 2008 are moving much faster than 1929. We have mountains of cash being thrown into a fire. The bail out with taxpayer money is for the sole “benefit” of the elite wealthy bankers.

Reminiscent of the Titanic, but instead of ladies and children getting the life-boats, it’s first class male bankers passengers, only, thank you – and the rest of you get locked into the hold to go down with the ship. Tough shit. We’re suddenly aware, as a people, that the politicians sworn to protect and “serve” us all have just locked us into a doomed ship and given the life rafts to others.

Are bank holidays next? Iceland’s economy has totally collapsed just within the last few days, the world’s economy is ever more interwoven. Messrs. Smoot and Hawley are ghosts now, but they are likely to begin haunting us again with protectionism rearing its head, further exacerbating the depth, length and longevity of the oncoming tsunami, just as happened in the 1930’s.

Much like our current “choices” between Presidential candidates, we can choose protectionism and certainly wreck our country, or choose a free market and watch it continue to be wrecked as it has been over the prior 40 years, when corporate managers began to decide to export jobs overseas in earnest. Is there a third way?

Yes. Ron Paul and others have been warning about the possibilities of all of this happening, and was ignored or received derision.

The underlying problem? As always, with humanity: a lack of morals. Corporate managers wanting more power and money at the expense of others. Union leaders and members wanting more power, money, less work and more influence at the expense of others. Politicians wanting more of everything and no accountability. Likewise bankers and financiers.

So how will this all affect Detroit, Inc? We’ll surmise about what might be happening very soon, in our next installment.