Now that gasoline prices are receding, lack of credit to finance new car sales has become Detroit’s number one problem. In September, US auto sales reached a 15-year low with sales of cars and light trucks falling by 27 percent to 964,000.
There was some good news, however, when President Bush signed off on a $25 billion loan package that will help automakers retool their plants to build smaller, more efficient vehicles. Congress also passed a tax credit of $7,500 for the purchase of Chevrolet’s upcoming electric Volt.
There are many strings attached to the loan package, however, and sales of the Volt are still two or three years away. In the meantime, sales of cars are falling so fast that unless the credit problem is turned around soon, Detroit’s automakers may not survive in their current form long enough to take advantage of the new loans and credits. European automakers are now asking the EU for loans similar to the one granted by Congress.