Another auto company bankruptcy has set alarm bells ringing that the US economy could be heading toward a repeat of the 2008 financial meltdown.
By BEN SHIMKUS, US CONSUMER REPORTER
This time, the trouble isn’t mortgages — it’s car loans, which have never been bigger at $1.7 trillion. That’s not as high as home loans were in 2008, but experts warn it could be enough to trigger a domino effect reaching mortgages.
More Americans are stretched thin, earning less in real terms and struggling to make ends meet, forcing lenders to hand out riskier loans just to keep car sales alive.
Millions are already behind on subprime car loans, which experts say could be the first warning sign of broader debt problems and eventual mortgage defaults.
The warning signs are stacking up. First Brands, a manufacturer of filters, brakes, wipers, and lighting systems, filed for Chapter 11 bankruptcy on Sunday night.
Its collapse comes just two weeks after subprime auto lender Tricolor Holdings went bankrupt and shut down, and follows June’s Chapter 11 filing by Marelli, a supplier for Nissan and Chrysler.
Experts told the Daily Mail that these bankruptcies are another part of an auto industry flashing danger signals that could spill into the broader economy.
Record-high car prices, ballooning consumer debt, and tariffs have analysts drawing comparisons to the run-up to the 2008 financial crisis, when banks flooded the market with risky housing loans that Americans couldn’t afford.