• Short Summary

    One of the most responsive indicators of the state of a nation's economy is its motor industry.

  • Description

    One of the most responsive indicators of the state of a nation's economy is its motor industry. The general business recession in the United States and Western Europe in the past two years has produced a sharp drop in the demand for cars, and plunged even the biggest and most international motor companies into difficulties.

    More directly, the industry has been hit by the high cost of fuel since the price increases that followed the Arab-Israeli war of 1973. this had the effect of reducing the demand for larger cars, with high petrol consumption, an increasing the demand for small economy vehicles. The slower reaction to this change by the Chrysler Corporation, compared with its two big American rivals. Ford and general Motors, has been one of the reasons for its current financial problems.

    The labour force in the motor industry is so big and so concentrated that no country can tolerate the massive unemployment caused by a drastic cut-back in production. This is were national politics enters the picture. For example, the British Labour government, determined to give priority to maintaining the jobs of 170,000 workers in British Leyland, took control of the corporation in April this year, in exchange for an injection of 1,400 million sterling (2,940 million U.S. dollars) of public money.

    But the position is further complicated by the multi-national structure of some of the biggest producers. Chrysler for instance, finding that its United Kingdom subsidiary was losing money heavily, threatened to close it down unless substantial public money was forthcoming for this operation too. This is why Chryslers were described by the British Prime Minister, Mr. Wilson, as "holding a pistol to our heads" recently.

    On a smaller scale, British Leyland has been doing a similar thing in Italy. Leyland has said it would have to lay off workers at its unprofitable subsidiary, Innocenti, in Milan. The Italian government has undertaken to consider what it can do to try to prevent that happening.

    The motor industries of France and West Germany have both been through lean times, though there are some signs that the worst may be over. Renault, the largest French producer, has been nationalised for thirty years -- ever since the state took it over at the end of the Second World War, because the private owner was alleged to have collaborated with the German Nazis. It has a successful record, both in the home and export markets, and has been quick to appreciate the in the home and export markets, and has been quick to appreciate the demand for economy cars. France's two main private companies, Peugeot and Citroen, have joined forces. Volkswagen of West Germany, which went through major reorganisation and laid off thousands of workers, is also active in the small car market. But the German car industry suffers in the export market from the strength of the German Deutschmark. Many of its cars, for this reason, are proving expensive for the rest of the world to buy.

    The big exception to the general pattern is Japan. although other Japanese industries have not escaped the effects of the world recession, its motor industry is still booming. This is partly due to the success of its export drive; partly to the near monopoly it enjoys in the home market. Japan is a notoriously difficult market into which to import cars; its tough anti-pollution regulations have added to the problems already existing for would-be importers.

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    Reuters - Including Visnews
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