FINAL_GROUP_PART_Exam - Explanation of the Operating...

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Explanation of the Operating Environment and Industry Trends In a struggling auto industry and a weak macro economy, GM and Ford, two traditionally successful auto makers have seen their businesses come under immense pressure. There are numerous interworking national and international factors affecting the viability and long term health of their businesses. The American consumer continues to get weaker. There are renewed concerns over the American consumer’s ability to purchase vehicles. Gas prices are up dramatically, with a ~40% Yr/Yr gain (Bloomberg). In addition, it has become more difficult for dealerships to provide credit financing from their vehicle purchases ( Kwas Dealer Digest ). Consumers are also feeling squeezed from higher food prices, lower housing values which could hurt their financing for automobiles, the sub-prime mortgage housing crisis, and a lagging stock market. In addition, economic reports from the week of 2/11/2008 indicate the American consumer confidence index which measures the mood towards the economy has hit a point which in the past has signaled a recession.( Economists anticipate a looming recession and further economic downturn. In addition to the deteriorating consumer mood, there is data suggesting bubbling housing pressures, which could mean rising stagflation (slowing growth with rising inflation). A more recent data measure showing that New York State factory activity hit a new five-year low, another indication of a recession. Adding to worries of a downturn are the renewed inflation fears indicated in a recent Labor Department survey showing U.S. import prices rose 1.7 percent in January, fueled by higher prices for oil. ( Automakers should expect stable or shrinking national vehicle sales.
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This test prep was uploaded on 02/01/2009 for the course AEM 323 taught by Professor As during the Spring '09 term at Cornell.

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FINAL_GROUP_PART_Exam - Explanation of the Operating...

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