November and December could prove to be the cruelest months for auto industry

November 25, 2008

Speaking of the auto industry, Egil Juliussen, principal automotive research analyst at iSuppli, put together a chart to compare the current economic debacle and its projected impact on the auto industry with past recessions.

In summary, the debacle of 2008 is pretty bad.

A telling statistic is that cars sold per thousand in the US is way down: 43.8 in 2008 (projected) compared to 54.1 in the 1974 recession and 50.4 in 1980.


Current Recession:	2007	2008	2009	2010	2011
Auto Sales (Millions)	16.16	13.3	12.71	13.05	13.54
Yearly Change (%)	-2.4	-17.7	-4.4	2.7	3.8
Auto Sales per 1k People (#)	53.6	43.8	41.5	42.2	43.4

1974 Recession:	1973	1974	1975	1976	1977
Auto Sales (Millions)	14.57	11.54	11.1	13.29	14.86
Yearly Change (%)	7.4	-20.8	-3.8	19.7	11.8
Auto Sales per 1k People (#)	68.9	54.1	51.5	61.1	67.6

1980 Recession:	1979	1980	1981	1982	1983
Auto Sales (Millions)	14.15	11.44	10.78	10.54	12.31
Yearly Change (%)	-8.2	-19.1	-5.8	-2.2	16.8
Auto Sales per 1k People (#)	63	50.4	47	45.6	52.7

Juliussen points out that these projected auto sales are suspect, because nobody can say how the credit crunch will play out and what its impact will be on sales. History may (or may not) give us some guidance. He says "The per capita figures show that the current sales levels are lower than in the previous recessions. To find lower per-capita auto sales, go back to 1961, when only 37.6 autos were sold per 1,000 people. Looking at October 2008 auto sales per capita, it was the lowest of any month since World War II, according to General Motors."

What about a government bailout? Juliussen says it’s unlikely Congress will grant the loans this year, but the Obama administration may be more receptive to loaning money to the Big 3. How would having to wait until 2009 affect US automakers?

"Based on the testimonies, it sounded like both General Motors and Chrysler will run out of operating cash within months or even weeks depending on auto sales. In the worst case, General Motors and Chrysler would be forced to file for bankruptcy before the Obama administration takes over on January 20, 2009. Ford is expected to have enough cash to last longer."

So, November and December auto sales will be a crucial indicator of whether General Motors and Chrysler need to file for bankruptcy.

Juliussen says General Motors sales declined by 45 percent in October and Chrysler decreased by 35 percent, while the overall decline was 32 percent. He’s forecasting an average decline of 35 percent for auto sales for November and December compared to the same period in 2007 to reach the current 2008 auto sales mark of 13.3 million.

Posted by Margery Conner on November 25, 2008 | Comments (3)

December 2, 2008

In response to: November and December could prove to be the cruelest months for auto industry
DL commented:

I question that quality remark just posted and for sure my Honda doesn''t depreciate anywhere near a US car does when I drive it off the lot. Ho-hum GM.

November 28, 2008

In response to: November and December could prove to be the cruelest months for auto industry
Meredith Poor commented:

One thing Americans forget about car manufacturing is that "foreign" car companies, including Toyota, Mercedes, Honda, and BMW all have plants in North America. This is not incidental: the US has a flexible workforce and an infrastructure appropriate for assembling myraid parts from thousands of suppliers on short notice. The population of Japan and Germany are both aging due to low birthrates, and the militant unions in Germany are matched by an increasingly passive workforce in Japan. ~~~ The other countries appropriate for making cars are Mexico and Brazil, which are both subject to corrupt officials, restive labor, and sometimes arbitrary government mandates.

November 26, 2008

In response to: November and December could prove to be the cruelest months for auto industry
Meredith Poor commented:

One thing to keep in mind is that a car lasts longer now than it did in the 1960s and 1980s. A car was worthless after 100,000 miles in the 1960''s, and considered to be at ''end of life'' after six years. There were still plenty of cars built in the early 1980''s that used carburators, i.e. pre-fuel injection and engine management electronics. By the late 1980''s a car might last 150,000 miles, these days it''s 200,000. Theoretically, a properly maintained Prius should last 30 years or 500,000 miles. This is based on the idea of how much of the fuel energy is spent moving the car and how much is spent, in comparison, in vibration, heat, or incomplete combustion.

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