What Happens to General Motors' Profits When the Economy Tanks?
What happens to companies like General Motors (NYSE: GM) and Ford Motor Company (NYSE: F) when the economy goes south?
Given that the U.S. new-car sales cycle is probably past its peak, it's a question that investors should be asking. New-car sales are very sensitive to economic cycles. And because of the high fixed costs of auto manufacturing, even moderate declines in the level of new-car sales can have a dramatic impact on an automaker's profitability.
There are always buyers who need vehicles no matter how bad the economy gets, of course. Even during the worst of the 2008-2009 economic crisis, people were buying vehicles -- but at a much slower pace than they had been a year earlier:
Source: Fool.com
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