Why Are the Big 3 Automakers Losing So Much Money

In recent years sales of three biggest automobile manufacturers have dropped remarkably. These car manufacturers include General Motors, Ford and Chrysler. Here discussed are some of the major factors that contributed in decreased output of car manufacturers in USA that at one time captured the entire automotive industry.

High Labor Costs

USA is amongst the list of countries that have strict laws and regulations for the companies that are dependent upon manpower for their output. Law of USA supports and protects the rights of workers. Due to this reason the salary per hour is high for workers including the ones that work in the above mentioned automobile industries.

Ford and Chrysler Why Are the Big 3 Automakers Losing So Much Money

American law assures workers health insurance as a result these companies are spending huge amount of money by providing health services to their workers. As per recent survey 1600 dollars per hour is being spent on health services of the workers.

Government also makes sure that heavy remuneration is paid to the workers when they retire. Hence the laws which are devised by the government for the betterment of workers is adversely affecting the monetary situation of the automobile industry and resulting in their downfall.

The American law also facilitates the workers by abiding the companies to pay almost 90% of the pay even if the factory stops its production.

Large Bonuses

The next factor that is affecting and damaging the car industry is their top management. The top management is entitled to heavy bonuses in addition to huge salaries that they withdraw on monthly basis.  Expensive management and an even more expensive labor is a reason why three major automobile companies in USA are losing money.

Foreign Competition

One of the biggest problems faced by the three famous automobile companies of America is competition with their rivals in Japan. The Japanese car industry has taken over the entire car market in the world because of their low prices, reliability and decreased fuel cost.

Japanese car industry has focused on lowering the fuel cost and has made vehicles that are fuel efficient. Due to this reason the Japanese car industry has flourished after 1970 when the oil and gas prices started to creep up in the world market whereas the American car industry never focused on producing fuel efficient vehicles.

High Gas Prices

In the 1990’s the sale of the SUV’s was good but then in the world market the oil prices got high and were not in the pocket reach of common people, people started switching to cars that are highly fuel efficient.

The Credit Crunch

When financial crises struck USA, the majority of population lost their jobs and sources of income, this situation alarmed the people and they stopped buying costly American SUV’s and cars, actually what happened is that the debts  increased and the sales decreased as a result of which the American car industry was faced with a huge dilemma.

Above mentioned are a few reasons that took the American car industry to its existing financial situation, which could be easily avoided.

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