A number of analysts have suggested that autos play a much less significant role in the U.S. economy today than they have historically. The data from 2005 would seem to call that conclusion into question.
Motor vehicle production alone contributed -0.6% to 2005:Q4 anemic annual growth rate of 1.1%. The drop in spending followed the classic pattern for the macroeconomic disruptions caused by an energy price shock of a sudden change in the composition of spending, with BEA reporting that although car production was actually up at a 10.6% annual rate in the fourth quarter, truck production (which includes the SUV’s, and accounts for more than half of Detroit’s sales these days) was down 27.3%.
Interpreting these figures is complicated by the fact that third quarter sales were inflated by the summer discount programs, and these sales doubtless also persuaded some consumers who would have purchased in the fall instead to buy earlier. This compounds the already difficult task of separating the cyclical contribution from the seasonal slowdown in sales that we usually see in the fall. If one looks at the seasonally unadjusted number of units sold, domestic light truck sales were 12% lower in 2005:Q4 than in 2004:Q4, and 1% lower for 2005 as a whole compared with 2004.
But autos matter for the American economy well beyond the employment of those who actually produce the vehicles. As noted by SCSU scholars, once you include all of motor vehicles and parts, the contribution of autos to the fourth quarter GDP figures comes to -2.06%; (see BEA Table 1.5.2). In other words, if autos had just held steady (after seasonal adjustment) in the fourth quarter of 2005, the latest GDP statistics would have shown 3.2% rather than 1.1% annual growth.
Nor is it all over yet. I had said that something had to give when General Motors lost $1.2 billion on its North American operations in the second quarter and $1.6 billion in the third. Well, North American operations managed to lose General Motors another $1.5 billion in the fourth quarter. [Figures here correct an error in my original post]
Ford and GM have each announced plans to eliminate 30,000 jobs, and Detroit News reports that GM is in discussions with the UAW on “an accelerated attrition program” that could pave the way for a wave of early retirements in its hourly work force. And the full extent of the consequences from the bankruptcy of Delphi, the largest U.S. auto parts supplier, remains to be seen.
Did we dodge the bullet of the oil shock of 2005? Some have suggested that the bullet hit GM dead on and now, like a character in a bad movie, it’s thrashing about while everyone watches, waiting for it to fall.