Question

What were the factors that led to the 2008 collapse of the U.S. auto industry? What were the steps taken by the federal government to lessen the impact of the collapse? What were the results of these policies? What advice would you give the Michigan Economic Council to avoid future collapses and to move the auto industry into the future

Answer 1

A significant factor was the general recession in the years following the 2007 housing bubble popping. People lost jobs, were struggling to pay bills, and naturally it was not an ideal time to purchase a vehicle.

Another significant factor was the surge in oil prices that came with the economic crisis, and the increased costs that automobile manufacturers faced due to the credit crunch that also came with the crisis. Since a lot of US manufacturers at the time were selling big SUV's, such as Hummers, as their most profitable products, the steep fall in demand hurt the industry immensely. At the time, US auto manufactures didn't offer many fuel-efficient, inexpensive alternatives to choose from. 

The government chose to bail out major US automotive companies, providing large loans in order to help them stay solvent and keep their stock price from tanking. The results were generally positive. Big auto-manufacturers, apart from a couple mergers, survived and were given time to adapt the new market for fuel-efficient, less expensive vehicles. 

I would tell the Michigan Economic Council to adapt ahead and to urge companies to diversify their product line. A major factor that automotive manufacturers can definitely take the blame for is their over-reliance on the sales of expensive SUV's, when oil prices and general market trends suggested that the future was not with these vehicles.