Posted this on GMI but wanted to put it here too...It is amazing how history repeats itself. The following is a description of how the slowdown of the automotive industry impacted the wider US economy between 1929 and 1932 excerpted from “The Perils of Prosperity: 1914-32, Second Edition.” p. 244-247, by William E. Leuchtenburg. I read this in college, and this passage stuck with me back then, and has been rattling around in my head recently. I think you will see why when you read this. I had to dig the book out and find this to post for you consideration, as it is amazingly relevant to the debate going on right now about saving the Big 3. This is the clearest indicator to me (along with National security) of why we need to save the Big 3, lest we see something akin to this economic cancer in our own times.
“[Between 1929 and 1932]…at the bottom of the Depression…General Motors plummeted from 92 to 8…Developments in the construction and automobile industries foreshadowed what was to come…[slower growth in] Auto manufacturing…after 1925…meant cutting back purchases of steel and other materials; the cycle of events, whereby an increase in car production stimulated the steel, rubber, glass, and other industries, now operated in a reverse manner to speed the country toward a major depression. By 1929, the automobile industry—and satellites such as the rubber-tire business—were badly overbuilt…By 1932, manufacturing output had fallen to 54 percent of what it had been in 1929…All the gains of the golden twenties were wiped out in a few months. By [1932] the automobile industry was operating at only one-fifth of its 1929 capacity. As the great auto plants in Detroit lay idle, fires were banked in the steel furnaces on the Allegheny and the Mahonig. By the summer of 1932, steel plants operated at 12 percent of capacity, and the output of pig iron was the lowest since 1896. Between 1929 and 1932, freight shipments were cut in half, and major railroad systems…passed in to receivership…By 1932, there were 660,000 jobless in Chicago, a million in New York City. In Cleveland, 50% were unemployed; in Akron, 60%; in Toledo, 80%. In Donora, PA, only 277 of 13,900 workers held regular jobs. In the three years after the crash, 100,000 people were fired on the average every week.”
Things are not completely the same today and history never repeats itself exactly, but I thought this was really striking. Almost creepy, really. The behavior of the GM stock price especially is eerily similar to its recent numbers. I think it is pretty clear that a similar destructive ripple effect on related businesses would be seen today if the worst happened to the Big 3.
Episode 33 - Big 3 Back in DC, Silicon Valley Worries About Big 3, Ghosn Says Autos Need Aid - Autoline Daily
Episode 33 is the December 1 episode, second story in is "Silicon Valley worries about automakers". "The San Jose Mercury News reports that Silicon Valley is getting nervous about a Big 3 collapse. Today’s cars use integrated circuits to control just about anything that has a wire running into it. And lots of chip makers in the Bay area are heavily dependent on the auto industry and are worried what will happen to GM, Ford and Chrysler. Let that be a warning to those who say we should not help the Big 3."
