Question about auto industry profits

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Patti Galle's picture
Patti Galle
Status: Member (Offline)
Joined: Dec 17 2010
Posts: 3
Question about auto industry profits

I am very curios about the fact that the auto industry is posting profits, yet the US economy is plummeting. How is it that they are selling so many cars in this economy? I have a friend who works for Chrysler and they have had two lay offs in the last 3 weeks, each for one week. They were told it was due to a parts shortage. I wonder if it isn't the need to slow production? I do not see people having the resources to purchase cars and wondering why the numbers are so high? Thank you!!

r101958's picture
r101958
Status: Martenson Brigade Member (Offline)
Joined: Aug 24 2008
Posts: 257
Re: Question about auto industry profits

Patti,

  Don't you just love it when you get no feedback/answers at all? I have had the same experience. It doesn't make your questions or observations any less important.....or correct, for that matter.

   In any case, I believe your mind is telling you that something is not correct here or that some salient facts are not shared by the MSM regarding the auto figures. Many figures published are arrived at using smoke and mirrors. For instance they might not state (publish in the headlines) that most of their growth came from sales in China and other overseas venues. They may not state that most of the growth in factory output was from factories outside the U.S. They may not state that any growth in sales here in the U.S. were from gov't purchases (using your tax money) and rental car fleet purchases (tax breaks). Many factoids like these are skipped over because they don't support the 'recovery' perception.

    If you really want to get the answers to questions like these you may need to try to find answers on your own. The above information would be some of the first places I would look. I asked a similar question regarding the diversity in oil prices ('A Question about Oil Prices') in the regular forum. I had to go out and do some research myself and finally yesterday found an answer (Rob Kirby article) that basically seconded the research I had done.

 

Patti Galle's picture
Patti Galle
Status: Member (Offline)
Joined: Dec 17 2010
Posts: 3
Re: Question about auto industry profits

You are very kind to reply and I think you are right,,,,,,,the answer needs to be researched.  Given that, I will look around but I feel like we are being duped (again) by the government who does not want to admit failure after the bailout of the auto industry.  It really does not make sense to me that they could be doing so well and the economy is doing so poorly. 

Marcionni (CEO Chrylser) gave a speech that all was well and even authorized a $700 bonus for each employee.  Hmmmm, I wonder if that is really the parting gift?

Thanks again.

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
Status: Martenson Brigade Member (Offline)
Joined: Jan 4 2009
Posts: 2606
Re: Question about auto industry profits
Patti Galle wrote:

I am very curios about the fact that the auto industry is posting profits, yet the US economy is plummeting. How is it that they are selling so many cars in this economy? I have a friend who works for Chrysler and they have had two lay offs in the last 3 weeks, each for one week. They were told it was due to a parts shortage. I wonder if it isn't the need to slow production? I do not see people having the resources to purchase cars and wondering why the numbers are so high? Thank you!!

Hello Patti -

I have no specific info or links to provide supporting info, but I think you may have overlooked a couple of things here.

Profits don't necessarily imply that Chrysler is selling more cars.  And while generally a downward economy depresses everything (the old rising tide lifts all boats concept - except in the other direction), a company's profits are not necessarily correlated with what "the economy" is doing.

Chrysler's profits could be up because they have cut costs by more than what their sales levels are.  So even if auto sales were down, if they cut costs (hmmmmm, the layoffs perhaps?)  by more than that, they would show a growing profit margin.  

Without a link to your source article I'm only guessing but would agree with you that if the article said auto sales were increasing, and profit (margins) were increasing that would seem incongruous with what is apparently going on everywhere else.

 

Patti Galle's picture
Patti Galle
Status: Member (Offline)
Joined: Dec 17 2010
Posts: 3
Re: Question about auto industry profits

Dear Dogs (smile),

I do not have a source article but this thought came about because Chrysler has 6 or 7 assembly plants.  Although the number varies, the top plants manufacture 1500 cars a day.  I was thinking that if they were producing a conservative 5,000 cars a day, that is alot of cars! 

It just didn't make sense to me that there are that many sales in this economy.  My first (paranoid and conspiratorial) thought  was that they were storing the vehicles someplace.  My reasonable mind tells me this is probably not true but who is buying all these cars??  Consider Chrysler is only one car manufacturer. 

My other concern is that the government would be concerned about advertising the auto industry failing due to the bail-outs. 

I'm just not sure and it perplexes me.

Thanks for your thoughts!

 

 

 

 

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