Automotive Industry

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�PAGE � Economic Overview �PAGE �1�

Economic Overview: The Automotive Industry

Frank Dolezal, Lorraine Laucella, Kaimin Rivera,

Barbara Robinson, and Christine Sours

University of Phoenix

Principles of Macroeconomics/ ECO 372

Gaminie Meepagala

March 31, 2007

Economic Overview: The Automotive Industry

Trying to predict the future is something that is very important when it comes to any business. Even though the future is unknown, examining many different factors can help to predict what will happen in the coming years. For the automotive industry, future forecasts are very important. Many different factors go into making a forecast. Looking at factors like real GDP, unemployment rate, and the inflation rate are very important when trying to establish a forecast for the future. For the automotive industry factors like the interest rate, auto sales, and oil and fuel prices are also very important. By looking at all of these factors, as well as past and current fiscal and monetary policies, a prediction for the future can be give along with strategies that can be used to deal with any potential problems or opportunities the future may hold.

American automakers are huge contributors to the Gross Domestic Production figures that are reported each year. Every automobile is made from many different parts. The individual parts do not count towards the GDP because they are only parts of another product. The finished automobile is calculated into the figure as it rolls off the assembly line and into showrooms. Automobiles, being a high priced item, and produced in such large numbers, are an important factor in the GDP. When production drops, like it has for General Motors, who just announced that sales have dropped 17% from the same period last year (Associated Press, 2008), it has an effect on the overall GDP.

In comparing one year...