(Yesterday, we talked about Gneral Motors and Chrysler in our Auto Maker Shakeup Series Part Three)
Economic issues are not merely a U.S. Government problem. The rest of the world is feeling the heat of what is a global economic crisis.
Auto sales have plummeted in Europe over the past several months, while growth in Asia — especially in the previously booming markets of India and China — is beginning to slow. As a result, every car maker in the world is suffering.
Several extremely profitable car makers are feeling the heat. The global auto market “appears to not have reached the bottom yet,” according to Hans Dieter Poetsch, the CFO of Volkswagon. Our car accident lawyers are concerned about the consequences of cost cutting by auto makers on the safety of car drivers on the road.
To cut costs, production value is often the first to go, leading to more car accidents caused by defective auto parts. We do not want to see car accident statistics go up as a result of an economic struggle.
Let us now take a look at some European car makers that are feeling the pressure, like us all, to make ends meet in Part Four of our Auto Maker Shakeup Series.
Global economic problems have affected some less than others, and German car maker Volkswagon is doing better than most. After starting out the year on a high note, Volkswagon saw its profits dip by 20% in the final quarter of 2009. While this company is still making money, it is a part of a growing trend of car makers that are learning the ill effects of a global recession.
“Based on the extremely weak business at the beginning of the year, earnings will not reach the high levels of previous years,” VW said in statement.
If this trend continues, it is very likely that VW will have to cut costs in the future. Again, as car accident lawyers, we hope that those costs do not, in any way, lead to a decline in the quality of any auto parts. Economic problems should never be reason to put car drivers’ lives in danger of an automobile accident.
The Munich-based BMW AG sustained a rare net loss of $1.24 billion for the fourth quarter of 2008, and its full-year net profit fell 90% according to a report out of the Wall Street Journal. BMW was hit especially hard in the U.S., which is its biggest marker for car drivers.
To cut costs, BMW laid off 7% of its workforce in 2008. The luxury auto maker is also planning on overhauling its U.S. strategy, with goals set on profitability instead of sales volume. This last overhaul seems to be a smart move.
Saab and Volvo
These two Swedish auto makers are each in dire straits according to the Wall Street Journal. Saab Automobile AB is saying that it will lay off nearly 20% of its work force, while Volvo Cars are freezing worker salaries and scaling back on its production. Volvo recently received 400 million in Euros from the European Investment Bank (EIB) for projects that aim to increase fuel efficiency while also decreasing carbon emissions.
Meanwhile, Saab is giving notice to 750 workers at its Trollhattan plant in western Sweden that they will be laid off. These job cuts are believed to be necessary for Saab to receive its own EIB bailout loan. Owned by another auto maker in dire straits (GM) that’s looking to cut costs, Saab is trying appeal to investors in the hopes that it can continue business when GM severs its ties with the Swedish company.
Russian Auto Makers
According to another article in the Wall Street Journal, the Russian government has promised to pay out over $1 billion to its ailing car industry. One of the main benefactors of this bailout is Russia’s top auto maker Avtovaz, which had avoided any layoffs thus far.
“That is an expensive feat,” Prime Minister Vladimir Putin told a group of Avtovaz employees. “General Motors has fired 34,000 people.”
Hopefully, the bailout will serve Avtovaz better than the U.S. government bailout did to stem the losses of General Motors and Chrysler.
Summation of European Car Makers
There is now concrete proof that the world is not immune to the economic troubles in the U.S. As the world has grown increasingly smaller due to the internet and cell phone technology, car makers around the world are feeling the same effects.
Tomorrow, we will take a look at some Asian car makers in Part Five of the Auto Maker Shakeup Series.
Please contact us for a free consultation with an experienced car accident attorney — we speak both English and Spanish — at (800) 655-6585. Click here and you may also submit your case for a Free Review. No fee if no recovery.