W4.1 - Higher interest rates generally have had an indirect effect on the auto industry by eventually braking overall economic growth slowing the

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Higher interest rates generally have had an indirect effect on the auto industry by eventually braking overall economic growth, slowing the creation of jobs and eroding consumer confidence, which in turn makes people less eager to spend $20,000 or more for a new car or truck. This indirect effect is greater than rising rates on new car loans or on dealer borrowings to pay for new vehicles. Dealers said interest rates would not have much impact on car buying unless they hit double digits. Five years ago, buyers could pay 12 percent interest; today they can easily find financing for much less. At Star Hickey Ford in Detroit, for example, a customer buying a $19,000 Taurus could expect to pay about 8 percent interest, with $1,000 down -- yielding payments of about $385 a month for four years. An increase of half a percentage point, dealers argue, would translate into only a few extra dollars a month. Reference The auto industry isn't afraid of higher interest rates, yet. By James Bennet , Published: Monday, April 11, 1994 http://www.nytimes.com/1994/04/11/business/market-place-the-auto-industry-isn-t-afraid-of- higher-interest-rates-yet.html After a Surge in Vehicle Sales, Executives Predict a Moderation By Keith Bradsher Published: Tuesday, May 14, 1996 http://www.nytimes.com/1996/05/14/business/after-a-surge-in-vehicle-sales-executives-predict-a As compared to GM and ford Toyota have better engineering system, using simple concepts like chief engineers with real responsibility for products, concurrent and simultaneous engineering practices, and sophisticated knowledge of capture methods. Because of that I would like to say that they have better cars. GM's failure was partly due to legacy expenses such as the high cost of
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This note was uploaded on 07/26/2010 for the course MBA MBA 5002 taught by Professor Drhahn during the Spring '10 term at South Georgia College.

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W4.1 - Higher interest rates generally have had an indirect effect on the auto industry by eventually braking overall economic growth slowing the

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