Financial Performace of the US Automotive Industry - Research Proposal Example

ANALYZING THE FINANCIAL PERFORMANCE OF THE AUTOMOTIVE INDUSTRY IN THE UNITED S ANALYZING THE FINANCIAL PERFORMANCE OF THE AUTOMOTIVE INDUSTRY IN THE UNITED STATES Working title The proposed working title for this research is analyzing the financial performance of the automotive industry in the United States. Introduction The American automotive industry is the second largest in the world producing over 9.6 million vehicles in the year 2013. Only the Chinese automotive industry is bigger producing over 10.3 million vehicles in the same year. The automotive industry contributed up to 4% of the total industrial output of the United States. The United States automotive industry is currently valued at $524 million. The American automotive industry started in the late 19th century. There were a high number of manufacturers in the initial stages of the development of this industry. However, between 1920 and 1930, there emerged three giant car producers in the United States. Chrysler, Ford, and General Motors. The American automotive industry quickly grew to be the largest in the world. A ranking it held until 1980 when it was overtaken by Japan. America regained the top position only to be passed by another Asian country, China, in 2008 (Goyal, Netessine and Randall, 2012). Currently the American automotive industry is diverse, hosting top car manufacturers from all over the world. The market is dominated by General Motors who, Toyota and Ford, who have a market, share of 18%, 14%, and 13.5% respectively. Other notable manufacturers include Chrysler with 12%, Nissan 9% and Honda 8percentage. Hyundai, Kia, Subaru and BMW also own a collective market share summing up to 15%. Manufacturers are attracted to America because it offers superior infrastructure and a conducive environment for the production of cars. The automotive industry provides direct employment to over 1.8 million Americans. Jobs indirectly linked to the automobile industry in the United States accumulate to 8 million (Goyal, Netessine, and Randall, 2012). The primary reason for me choosing this topic is that the motor industry in America currently plays a very significant role in quality transportation. Taking this account, it is clear to note the importance of the American Automotive industry to Americans and general car users in the rest of the world. The primary aim of this research is to shed light on the financial performance of the American automotive industry. This research will seek to uncover recent financial results of key car manufacturing companies in the United States. The study will also analyze and interpret relevant aspects of finance in the American automotive industry. This research will also aim to find the main reasons for improving or dropping financial results in the industry. The study will examine how companies have managed to cope with challenges faced by the American automobile industry (Goyal, Netessine, and Randall, 2012). The objective of this research is to provide information on how the American automotive industry has performed financially in recent years. The financial challenges faced by motor industry players and how they deal with the challenges. Information created from this research will be valuable in advising motor industry stakeholders on how to deal with financial challenges. The findings will be utilized to help prevent poor financial performance in the motor industry. Literature review There are a good number of studies and surveys conducted to reflect on the financial results, challenges, and trends in the American automotive industry. McAllinden, Hill, and Shweicki. (2003), argue that the success of the American automotive industry is as a result of the popular use of motor vehicles in America. The study reveals that cars are ever present in the life of most American citizens. An attribute that contributed to America breaking a record in 2002 when it produced the highest number of cars after world war two. The number of vehicles produced in 2002 in America was 12.3 million units. A feat that has since not been repeated by any other country. The American automotive industry reached a peak value of $344 billion in the year 2002. The top performing car models were Ford F-series, Chevrolet Silverado, Toyota Camry, and Honda Accord. The Ford F-series sold 813,701 units, the Chevrolet Silverado sold 652,646 units, and Toyota Camry sold 434,145 units while the Honda Accord managed to gunner 398,980 sales. This research will look to build on this and existing findings in an effort to expand information linked with the fiscal performance of the automobile industry. Factors that contribute to high performance in the automobile industry will be among the particular components to be examined in this research. The American automobile industry was on the receiving end of the economic crisis that hit America between the year 2008 and 2010. Freedman (2010) argues that one of the fundamental reasons as to why the American automobile industry was hit hard is because of rising fuel prices. There had been a fuel crisis between 2003 and 2008. Batalio and Schulz (2011) coincide with the study as mentioned above by clarifying that the American car buyers switched to buying imported cars. The three main American manufacturers that are Chrysler General Motors and Ford produced vehicles that consumed a lot of fuels. Due to rising fuel prices, most people in America could not afford to drive these fuel-guzzling cars. Consequently, American vehicle owners resorted to importing smaller and fuel efficient vehicles from Europe and Japan. Hausman, (2012) reveals that the situation of the American automobile industry got even worse when the credit crunch hit the United States economy in late 2008. Quite a number of car loan defaults adversely affected the three main American car manufacturers. Due to the above factors, the collective market share of Chrysler, Ford, and General Motors declined by 17%. The original market share of 70% reduced to 53% in 2008. According to Taylor (2008), General Motors made losses accumulating to $51 billion. Due to these challenges, both General Motors and Chrysler filed for bankruptcy in the beginning stages of 2009. It was during this season that Chinas automotive industry surpassed the American automotive industry. This paper will be aiming to create information that will contribute to a better understanding of factors that led or can lead to a drop in the financial performance of the automotive industry. Despite the significant losses, the American automobile industry has recovered and is poised to grow even stronger. Klier and Rubenstein (2013) point out that the three major American car manufacturers have regained financial strength. United States is of the resurgence of American. Klier and Rubenstein (2013) further reveal that the United States federal government lent up to $80 billion to both Chrysler and General Motors to facilitate restructuring. This paper will also examine this and other ways that the American automobile industry used to regain their financial performances. The research process Defining the problem I will conduct this research with the primary objective of uncovering the financial performance of the automotive industry in the United States. The research will be concerned with the factors that affect the financial performance of companies operating in this sector. This study will also assess the type and extent of impact each factor has on the financial performance of firms in the automobile business in the United States (Bryman, 2012). Determining the research participants The research will involve relevant individuals operating in the American automobile industry. The three major companies in the American automobile market that are Chrysler, Ford, and General Motors will be the principal participants. The research will involve the examination of financial results of the three companies from the year 2005 to 2014 (Bryman, 2012). Determination of the research methodology Qualitative methods will be utilized when conducting this research. I will develop a semi-structured interview which will be used to source information from selected correspondents. The main target contributor will be financial department heads of Chrysler, General Motors, and Ford. Financial analysts from the three companies will also be interviewed. Information derived will be supplemented by internet-based research. I chose to use a semi-structured interview because of the following reasons: • the semi-structured interview gives respondents the freedom to express their views in whatever manner they like. This led me to drawing more information about the topic. • Semi-structured interviews facilitate comparison of qualitative data derived from different respondents (Bryman, 2012). Data collection Data will be collected through conduction of interviews with selected correspondents. Secondary quantitative data will be collected by examining financial reports of the selected companies. The quantitative data will be analyzed and presented by use of bar graphs. The work plan below summarizes the research process: Activity Scope Timeframe Identification of secondary quantitative data sources Interment searching, magazine reviews and company reports will be examined. One day. Collection of qualitative data Data will be collected from selected data sources Two days. Analysis and reporting of qualitative data. Data will be analyzed and presented in bar graphs. One day. Preparation of semi structured interview. A questionnaire and interview process will be developed. 1 day Administration of interview Selected respondents will be engaged in the interview 3 days. Qualitative data comparison and analysis. Data from the interview will be analyzed. 1day. The following timetable shows how the research will be done: Day 08.00 – 12.00 13.00 – 17.00 Monday Chrysler finance HOD interview Chrysler finance analyst interview Tuesday General Motors finance analyst interview General Motors finance analyst interview Wednesday Ford finance analyst interview Ford finance analyst interview Thursday Data comparison Data analysis. Reference list Battalio, R., & Schultz, P. (2011). Regulatory uncertainty and market liquidity: The 2008 short sale bans impact on equity option markets. The Journal of Finance, 66(6), 2013-2053. Bryman, A. (2012). Social research methods. Oxford university press. Cooney, S. (2011). Chinas impact on the US automotive industry. DIANE Publishing. Cusumano, M. A. (2013). Manufacturing innovation: lessons from the Japanese auto industry. Sloan Management Review, 29. Goyal, M., Netessine, S., & Randall, T. (2012). Deployment of manufacturing flexibility: An empirical analysis of the North American automotive industry. Available at SSRN 2077659. Hausman, J. (2012). What was bad for GM was bad for America: the Automobile Industry and the 1937-38 Recession. Unpublished manuscript, University of California, Berkeley. Katz, H., McDuffie, J. and Pil, F. (2010). Crisis and Recovery in the U.S. Auto Industry: Tumultuous Times for a Collective Bargaining Pacesetter. First Ed. Klier, T., & Rubenstein, J. M. (2013). Restructuring of the US Auto Industry in the 2008-2009 Recession. Economic Development Quarterly, 0891242413481243. McAlinden, S. P., Hill, K., & Swiecki, B. (2003). Economic Contribution of the Automotive Industry to the US Economy–An Update. Ann Arbor, Michigan: Centre for Automotive Research, fall. Sako, M., & Helper, S. (1998). Determinants of trust in supplier relations: Evidence from the automotive industry in Japan and the United States. Journal of Economic Behaviour & Organization, 34(3), 387-417. Taylor, A. (2008). What next for General Motors. Townsend, J. D., & Calantone, R. J. (2014). Evolution and transformation of innovation in the global automotive industry. Journal of Product Innovation Management, 31(1), 4-7. Read More