Global Auto Industry Facing Big Changes

The global auto industry is set to suffer dramatic changes in the wake of the world financial crisis.

General Motors is in negotiations to merge Chrysler, the third-largest U.S. automaker, with Cerberus Capital Management, which owns 80.1 percent of Chrysler, The New York Times said Saturday.

If GM, which is rumored to go bankrupt soon due to sluggish sales, is merged with Chrysler, they will consolidate overlapping car models and share marketing networks, saving up to 10 billion dollars.

No. 2 U.S. carmaker Ford is reportedly considering selling its subsidiaries to normalize management.

According to the Japanese daily Nihon Keizai Shimbun, Ford is considering selling 20 percent of its stake in Mazda to Japanese trading corporations and financial institutions for 100 billion yen (993 million dollars). Ford owns 33.4 percent of Mazda.

Automakers in Japan and Europe are also scaling back their workforce and production. Japan’s largest automaker Toyota early this year began cutting production at its plants in the United States, the United Kingdom and Turkey, followed by a similar move at its Guangzhou factory in China last month.

Mitsubishi Motors is set to overhaul its Illinois factory after reaching an agreement with the United Auto Workers on cuts in pay and employees.

Mercedes-Benz is also poised to cut production by 80,000 units. German automakers including BMW and Audi are also reportedly mulling decreasing production due to declining sales.

Opel, a GM subsidiary, will cease operations for three weeks from Tuesday.

Though Korean automakers are also suffering lower exports due to the financial crisis, they are hoping that the crisis can bring opportunities for further expansion.

According to the Korea Automobile Manufacturers Association, Korean carmakers exported 33,074 units to the United States in August, the lowest monthly figure since 29,487 units in July 2003.

Over the same period, 19,059 units were exported to Western Europe, down 37.5 percent year-on-year (30,507 units). Exports to Latin America also suffered a decline of 15.3 percent.

The global financial meltdown, however, has taken a relatively lighter toll on Korean automakers, as their production of small passenger cars, which are less affected by economic conditions, has higher ratio than those of automakers in advanced economies. The Hyundai-Kia Automotive Group has not curtailed production except at several overseas factories.

For this reason, some expect the domestic auto industry to gain ground in the world market by focusing on small sedans and making forays into emerging markets.

Hyundai Motor President Choi Jae-kook said, “The global auto industry faces difficulty, but this can be an opportunity for us. We plan to increase sales of small passenger cars in Eastern Europe, Middle East, Southeast Asia, Africa and Russia.”