On Friday, oil prices rose to an all-time high of $78.40 a barrel. In addition to that, some energy market analysts have said that oil could touch $100 a barrel implying a future U.S. gasoline price of $4 a gallon.
Therefore, if gas prices continue to remain that high Rebecca Lindland, auto analyst with consulting firm Global Insight predicts ‘consumers changing their buying habits. One of the things they may do is just stay out of the market altogether’.
On the same line, Global Insight’s Lindland approximates that for every $10 increase in price of crude oil, overall U.S. annual vehicle sales would contract by 200,000 to 400,000 units. There is also the fear of auto sales downturn of the kind that the auto industry has not seen in more than a decade.
In the first half of 2006, overall U.S. vehicle sales were trending at near 16.6 million units, down from 16.9 million last year. Bob Schnorbus, chief economist at J.D. Power and Associates believes:
At $4 per gallon, we might not see a recession but we might see growth slowing enough to cause an auto recession or a down cycle.
Kevin Tynan, analyst with Argus Research predicts:
At some point ... it won’t be a matter of buying something smaller, it will be a matter of not buying anything at all.
Therefore, if such cyclical downturn resurfaces then GM and Ford are ones to lose out most. Both companies have announced plans to downsize– cut some 60,000 factory jobs and shutter two dozen plants to adjust to their loss of market share leading to an enormous loss for the employees and the company as well!
Via: Reuters
