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Unfortunately when the prices of houses began to fall, home owners were forced to hold on to their loans which by 2008 had already reached the point where the interest payments had become exceedingly high. It was at this point that the number of defaulters drastically grew. The average American, especially sub-prime borrowers, succumbed to their debts and could hold on no longer. And finally the bubble burst. This marked the beginning of the global financial crisis in 2008. The economy in the USA had contracted significantly and analysts predicted that it would be worse than the one during the Great Depression of the 1930‟s. Consumer spending suddenly crashed and imports to the USA almost came to a grinding halt. Many of America‟s trading partners, such as Japan, Great Britain, Korea and even Malaysia saw exports shrinking. This resulted in a chain reaction and before long many countries which relied on exports to the USA to sustain the GDP growth would see a contraction in their GDP‟s. Several countries which relied on the financial services sector such as Singapore, the United Kingdom and Switzerland were also badly hit due to exposures to the US sub-prime mortgages and securitizations. By the end of 2008, the global economy got from bad to worse. The automotive industry is of great importance to a nation‟s economy. Due to the automotive industry‟s comprehensive and highly intricate eco-system, a nation‟s economy benefits from a wide range of avenues. Among them is the job creation that it brings about. This comes from the automotive manufacturers themselves as well as the extended network of suppliers, sales network, dealerships, after sales outfits and the list goes on. In addition, the auto industry also has one of the largest economic multipliers of any sector of the U.S. economy, and is sufficiently large that its growth or contraction can be detected in changes in the U.S. Gross Domestic Product. In many states, employment in automotive and automotive parts manufacturing, ranks among the top three manufacturing industries (Cole D, McAlinden S, Dziczek K, Menk, D.M, 2008) The automotive industry also contributes in terms of the Gross Domestic Product (GDP) due to the volume of trade that takes place. This can be seen from the fact that cars are the second largest purchase by a household after a house. In the USA, the sharp decline of the automotive sector leading to huge layoffs had caused a spiral effect which contributed to the Great Depression of the 1930‟s. The current bailout of the Detroit Big Three (GM, Ford and Chrysler) is to ensure this does not happen again. The current global automotive industry is in dire straits. Many car manufacturers across all continents are feeling the pinch. Declining sales, contracting revenues, shrinking profits and rising inventories are a common trend everywhere. Since the automotive industry is very competitive and severely capital intensive, altering the business course could be likened to a huge barge in the middle of the ocean trying to manoeuvre around ice-bergs. Once a course has been set, changing it abruptly is not possible as was the case with the “unsinkable” ship the „Titanic‟ in its maiden voyage in 1912. When automotive OEMs are in trouble, they not only pose a threat to themselves but also to the whole eco-system. Suppliers are not spared and so are the dealers, distributors and even those in peripheral businesses such as logistics, after sales and financiers. Measures to Cushion the 2008 Crisis The Malaysian government has taken some drastic measures over the last few months in the forms of stimulus packages. The first stimulus package of RM7 billion was announced on November 4, 2008. Based on a letter from Datuk Seri Najib Tun Razak that was published in the Wall Street Journal on November 26, Najib stated the following. “On November 4, I introduced a 7 billion ringgit ($1.93 billion) pro-growth stimulus package to implement projects with high multiplier effects, building on the previously announced 5 billion ringgit allocation of existing investment capital to ValueCap, Malaysia's asset management company. UNITAR E-JOURNAL Vol. 6, No. 2, June 2010 79
The stimulus package as a whole is designed to enhance domestic growth and improve market confidence. This package ensures that a larger segment of the population will realize the benefit of productive expenditure from the government. An article in the Business Times published on March 11, 2009 carrying the title “‟Unprecedented move' to avert recession” reported that on March 10 2009, Najib announced another stimulus package, only this time with a much larger quantum. The second stimulus package dubbed the mini budget totalled RM60 billion. Najib said that the large stimulus package was "unprecedented in the nation's economic history" and necessary given the worsening global economy. Following the unveiling of the first stimulus package in November 2008, Najib said that “…without these efforts, the economy faces the prospect of a deep recession”. The second stimulus package has four major thrusts which are to reduce unemployment and increase employment opportunities; ease the burden on the rakyat; help the private sector; and build capacity. Najib also announced the automotive scrapping policy where a customer wishing to buy a Proton or a Perodua may opt to scrap their old cars (10 years or older) and receive a rebate of RM5,000 for it. Global Automotive Industry Scenario The global automotive industry has never seen a worse condition than the one it is currently in today. Currently, the primary news headlines in the automotive industry has been about shrinking demands; planned plant shutdowns, plant closures, and job cuts. Among the top news so far has been the announcement that Toyota has forecast lower profits for 2010 by more than 80%. This is primarily attributed to the rising Yen and the weak global car sales. In Europe, BMW had announced that it had posted a fourth-quarter loss before interest and taxes of 718 million Euros or a 78% decline, primarily attributed to weaker car markets, “risk provisions” and personnel costs. RESEARCH PROBLEM The situation in Malaysia, though not as bad, is still relatively poor. When the economy slows down, consumer spending also reduces drastically, more so on the big ticket items such as the purchase of property, leisure holidays and cars. Due to this correlation, it would be safe to say that the automotive industry is one of a few key indicators to predict the economic health of a country. The number of new vehicles registered is one of the lagging indicators prescribed by the Malaysian Department of Statistics. 1 On this note, it was a clear signal that the Malaysian economy was on a slight decline when the Malaysian Automotive Association (MAA) announced that the Total Industry Volume (TIV) for 2009 would contract by approximately 12.2%. Passenger car TIV (new registered vehicles) in 2008 was 497,459 units, but in 2009, the figure is only 436,800 units. This was compounded when the car sales for the month of January 2009 was significantly lower as compared to the corresponding period the year before. Total passenger car sales for January 2008 was 36,396 units while it was only 30,189 units in January 2009, corresponding to a 17% drop in sales. 1 Lagging indicators tell us what had happened to the economy. It measures the performance of cyclical movements of the leading and coincidental indices – “Malaysia Economic Indicators – Leading, Coincident and Lagging Indices”; Department of Statistics, Malaysia; December 2008 UNITAR E-JOURNAL Vol. 6, No. 2, June 2010 80
Page 1: THE 2008 FINANCIAL CRISIS AND THE S
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Page 7 and 8: large as Toyota, which has a volume
Page 9 and 10: Strategies Employed by Nissan Up un
Page 11 and 12: In this regard, it can be noted tha
Page 13 and 14: would have to bring in the car to t
Page 15 and 16: REFERENCES Bernama News Agency. (Ma
Page 17 and 18: 2007 Model Jan Feb Mar Apr May Jun
Page 19 and 20: This data shows the sales of B-segm
Page 21 and 22: Table 12 Registered Sales of Cars i
Page 23 and 24: Table 16 Registered Sales by OEM fo

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