An “Economic Analyst” Blog

It looks like the France government will help the troubled auto industry by giving Renault, Citroen and Peugeot a total of five or six billion euro.

So, the companies will have a little more money, but I do not think the real problem will be solved. When there are no customers, the companies cannot survive even if the state gives them money. OK, they do have customers, but their number decreases every month. And getting money from the state will allow the companies to cut prices, allowing more people to buy a new car.

But, most people are not interested in buying cars now. They just want to keep their jobs! If they have some money, they think it is better to save them for the time when they’ll lose the job instead of spending them on a car. If someone gets a loan to buy a car now, his or her IQ must be pretty low!

The US Senate decided not to “invest” billions of dollars in the US auto industry. Therefore, GM, Ford and Chrysler are now close to bankruptcy. Also, about three million people are about to lose their jobs.

Now, it looks like everybody hopes Obama will do something about this early next year… I very much doubt it.

2008 Nobel price winner Paul Krugman claimed that the US auto industry will probably dissappear due to “geographical and economical dynamics”. In other words, soon enough, nobody will want to buy American cars. They need too much fuel, don’t they?

Under these circumstances, European and Asian car manufacturers might just survive… Or, maybe, less people will buy expensive cars and, over the next years, only cheap cars will be sold. Will we drive cars “made in China” in five years? Or maybe 2000$ cars “made in India”?