American Automobile Industry

While the American automakers were investing in or buying foreign competitors, the foreign automakers continued to establish more production facilities in the United States. In the 1990s, BMW and Daimler-Benz opened SUV factories in Spartanburg County, South Carolina and Tuscaloosa County, Alabama, respectively. In the 2000s, Hyundai and Kia opened plants in Montgomery, Alabama and West Point, Georgia. Also, several of the Japanese auto manufacturers expanded or opened additional plants during this period.
In 1998, Chrysler and the German automaker Daimler-Benz entered into a "merger of equals" although in reality it turned out be an acquisition by Daimler-Benz. Thus the Big Three American-owned automakers turned into the Big Two automakers. However, a culture clash emerged between the two divisions, and there was an exodus of engineering and manufacturing management from the Chrysler division. The Chrysler division struggled financially, with only a brief recovery when the Chrysler 300 was introduced. In 2007 Daimler-Benz sold the company to a private equity firm, Cerberus Capital Management, thus again making it American-owned.
The 2000s began with a recession in early 2001 and the effects of the September 11, 2001 terrorist attacks, significantly affecting auto industry sales and profitability. The stock market decline affected the pension fund levels of the automakers, requiring significant contributions to the funds by the automakers (with GM financing these contributions by raising debt).
In 2005, oil prices began rising and peaked in 2008. With the American automakers heavily dependent upon the gas-guzzling light truck sales for their profits, their sales fell sharply. In addition, during the 2000s, the finance subsidiaries of the Big Three became of increasing importance to their overall profitability (and their eventual downfall). General Motors Acceptance Corporation, the GM finance division, began making home mortgage loans, especially subprime loans. With the subsequent collapse of the subprime mortgage industry, GM suffered heavy losses.