THE auto industry cannot avoid being affected by the global financial crisis. After the collapse of a slew of financial institutions, job cuts and production stoppages have become a major theme for western car makers over the past few weeks. In China, the demand for cars has declined alarmingly since August, and business conditions in China are raising concerns for the future. But industrial analysts say the worsening international financial turmoil will not have a major effect on China's automotive industry. The nation's economic fundamentals remain healthy and will help to sustain the growth of auto consumption in the current low market penetration. In the United States, the slowing economy and dwindling auto sales have prompted the Big Three car makers - General Motors Corp, Ford Motor Co and Chrysler LLC - to rethink their financing. GM has announced plans to cut 9,000 US workers and produce 40,000 fewer vehicles while Ford was also forced to cut car loans because of the fall of Lehman Brothers. The latest news is that Chrysler and GM are in talks for a possible merger that may spark a new round of reshuffling for the global auto market. Sales of Japanese car makers were also hit. Toyota has reported sales tumbled 32.3 percent to 144,000 units on the US market last month, the lowest level since July 1987. The same thing happened in China in August, when sales showed their first year-on-year decline at 6 percent since February 2005. This continued in September as domestic auto makers sold 1.4 percent less vehicles as the global financial crisis deepened from US to European markets. Auto makers like Chang'an Ford Mazda Automobile followed the cooling demand and cut contracts with temporary labor. Toyota also reduced production in its Chinese plant in Guangdong Province. "A decline in asset values - in real estate and the stock market - is hurting consumer confidence and buyers' willingness to purchase big ticket items," says a report from Automotive Resources Asia, a consulting affiliate to JD Power. The report also hinted that the economic prosperity would be further damaged as China's competitiveness in exports declines because of a strengthening yuan and the close economic ties built with the US could threaten to impede the progress of China's economy. "We believe there is downside risk to our 2008 forecast of 5.95 million passenger vehicles and 2.95 million light commercial vehicles, and for an up-market in 2009," it said. Compared to foreign car makers, home-grown car makers face more challenges as the financial crisis leads to less demand in overseas markets.
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