Auto bankruptcy will worsen the economic crisis

We can't ignore the huge economic significance of  the automobile industry, writes London-based CNN correspondent Richard Quest

CNN correspondent Richard Quest"The customer can have any colour he wants, so long as it's black," Henry Ford said about his Model T in 1908. It was the car that gave birth to the mass produced automobile and is credited with putting America on the motorised road.

Today car manufacturers around the world would more likely say, ''The customer can have anything at all, so long as they buy a car right now.'' If there is one industry, besides banking that has become the touchstone of the crisis it is the automobile industry.

The numbers we received last week show the disastrous state of the industry. In Europe car sales dropped 17 per cent in the first three months of the year. In the United States annual sales are likely to be 9.5 million vehicles, the lowest level since 1982.  Around the globe, the car companies are screaming at governments for billions of dollars to keep them going.

Some governments like Germany have introduced car scrapping incentives; get rid of your old car and receive a grant to help buy a new one. It boosted German car sales dramatically after it was introduced. France and Italy also have similar schemes.
 
Everyone's watching General Motors to see if it will file for protective bankruptcy. In Australia GM owns the venerable marque Holden. In Europe and Asia Opel is a household name and in the UK Vauxhall has 15 per cent of the market.

Throw in Saab, Hummer, Cadillac and the Chevy to the mix too and you start to see why the old saying, ''as goes GM so goes America'' might be adapted to incorporate other parts of the world in the weeks ahead.

Even though President Obama wants the merger of Italy's Fiat with Chrysler to go ahead, Fiat has set pretty strong terms before it would take on the US albatross.