Obama:US Auto Industry "unsustainable" in Current Form

[Mar 27, 2009.]

 

The Associated Press reports President Obama's assertion that the US auto industry is "unsustainable" in its current form, and that major changes must be made if the Big Three are to remain viable. Although President Obama confirms that the US auto industry must be saved, he cautioned that automakers must move beyond making SUV's and hoping that gas prices remain low. 

Sales figures confirm the challenges faced by automakers and consumers alike. During remarks made at his first online town hall meeting, President Obama noted that since the economy flattened, US auto sales have decreased from 14 million to 9 million units. He cited tight credit climate and consumer reluctance to buy big-ticket items when they might lose their jobs. This suggests that unless credit and consumer confidence are restored, the US automakers could experience problems far worse than those created by gas prices.

In more dire news concerning auto loans, credit reporting firm Experian reports that the number of auto loans 60 days delinquent increased by approximately 17% during the 4thquarter of 2008. This could lead to more people with bad credit as defaulted auto loans are reported to credit bureaus.

Auto Loans for People with Bad Credit?

Regardless of their credit scores, many Americans rely on their vehicles for commuting to work and taking care of their families. The notion that auto loans can be restricted only to those with good credit seems counterproductive in the current climate of slumping auto sales. The pro-consumer credit education website credit karma  reports that as of February 2009, the average US consumer credit score is 695. What about all of those people with bad credit who drive cars?

Balancing Risk with Recovery

As financial entities continue to fail or are bailed out by the government, credit providers are finding themselves between a rock and a very hard place. making auto loans to people with bad credit is traditionally viewed as being a higher risk, but it's time for lenders and automakers to come up with financing programs that can help increase auto sales and consumer confidence while minimizing credit risk. A continued stalemate between lenders and bad credit borrowers is one more obstacle facing the troubled auto industry. Any ideas, anyone?

 

About Author:

Peter Andrew has been writing about -- and for -- business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.