Are smaller cars coming to the US?

I noticed a few reports floating around about a potential partnership deal between Euro auto manufacturer Fiat and the US auto manufacturer Chrysler. A discussion of the possible partnership is discussed in this article.

So who benefits from this deal? According to the article, and my own views, it looks likely that both companies would benefit. Fiat is likely to gain access to US markets and will hold an equity stake in Chrysler, while Chrysler will have access to a small car line-up with little capital invested.

Consider the top-down analysis approach (macro and industry). What is happening in the economy that potentially effects the auto-industry? If we think back to last summer, the media was somewhat fixated on the price of gasoline...

So are smaller cars likely to be in greater demand? If so, who is already in this market?

As a side note, the Treasury is loaning Chrysler $1.5B to support it's financing arm. In this article, the author notes that Chrysler "plans to offer zero-percent financing on several models and expand lending to car buyers with less than ideal credit" what does this tell you about Chrysler's customer acquisition policy? Is this consistent with the current economic climate?

Are glitzy motor shows a thing of the past?

Many companies in the automobile industry announced heavy cutbacks to spending on motor shows. Traditionally these motor shows have been an (expensive) customer courtship activity, but with significant drops in the car market, possibly due to tougher loan criteria, many companies are not going to be engaging in this form of advertising this year. Further details can be found here.

At this time, Congress is currently debating the merits of bailing out the automobile industry, as summary of recent segments of the debate can be found here.

Tough times for retailers 2

This article provides further discussion of consumer sentiment and it's expected affect on retail sales. There are also forecasts for retail sales in this article. An interesting point I noticed in the article, is the effect of tighter credit on retail in the auto industry.

The consumer sentiment index published by Reuters and the University of Michigan can be found here.