The situation has gotten so bad for parts suppliers, that even USA Today has an article describing the industry's abysmal conditions. After chronicling the travails of supplier bankruptcy poster child Plastech, the story notes that times will be tough for everyone in the biz. "I can't in my 21-year history in the auto industry think of a time when it's been more difficult than this," wails Laurie Harbour-Felax of consulting firm Stout Risius Ross. "More Chapter 11 filings are imminent in the next three to six months." The wide load of industry pressures: weak demand, rising commodity prices, increased overseas competition, tightened credit and cost-cutting pressure. Craig Fitzgerald, a partner at Plante & Moran, predicts that 50 percent of small and midsize suppliers will go out of business in the next five years, either selling out or shutting down. This is gonna get rough. I mean, rougher.
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During my 41 years, I’ve at least caught on to the fact that the economy is cyclical. Yes, times will be tough and tougher for everyone, but the economy will eventually bounce back. It always has, even after the Great Depression, and I believe it always will. I can remember the first oil embargo of 73/74, the stagflation of the mid 70s, the second oil crisis of 79/80, the recession of 80/81, the recession of 90/91, 9/11, etc. My point is, the world didn’t come to an end and we’ll get through this one too.
I am an AirCare fixed wing pilot, flying patients to and from hospitals and clinics throughout the SouthWestern United States. My job isn’t secure either. As the price of Jet A rises along with all other carbon based fuels, hospital based air ambulance services will get cut as a money losing luxury.
This AA strike should take out a whole bunch more part suppliers.
Will the last person out of Michigan please turn off the lights?
Where have I heard that before?
Oh yeah, it was the early 1980’s.
Yes. Cyclical.
But then, sometimes cycles end.
Haven’t seen much work going on in any steam engine manufacturing facilities “just lately”.
The only wooden horse-drawn buggies now being made are made by hand by the Amish.
The article should clarify “Part Makers who have Detroit 2.8 as their principal customer are in trouble”.
The falling US dollar and easy access to the US market SHOULD allow these part makers to increase sales to other car makers. Even automakers with plants in Europe and Japan might find that they can get quality parts from the US for less than they can make them at home.
dastanley – True, there are cycles. This time it isnt coming back. This time its game over and there are too many factors to list. In other decades we had much to fall back on, including manufacturing, which peaked in 1977 and has been in a downward spiral ever since.”Back then” everything we buy was’nt made in China, and RCA, Zenith, GE, Westinghouse were household names. Today they are just that, names bought by foreign corporations. Remember IBM, I mean Lenovo, the chinese computer maker? Do you understand how much interest is owed on the national debt? People who do not know what the federal reserve is, much less what they are doing will march blindly into economic slavery as you can see around you right now. Remember 2 years ago when everyone was parroting “real estate never goes down”. Look how they were suckered, especially when they committed the deadly and stupid sin of borrowing against perceived equity for frivolous spending. The real estate market wont come back because people dont have money and are losing their jobs every week as every thing is outsourced as fast as it can be. Want to see a third world economy? hang out 3 years. Credit card companies are implementing drastic policy changes. Why you ask? They know people are in deep and want to cover their a***s. Ever hear of “pay day loans”? These places are all over just like dollar stores, another sad sign of the times. Like Burgess Meredith said, “its over rock”
seabrjim,
Well, we can always hope for that asteroid hit or even a gamma ray burst (GRB) like I saw on Mega Disasters on the History Channel. Then our problems will be over. It seems like the world is stuck in a mucky swamp of depression. Maybe someday a real disaster or calmity will happen and they can say “See, I told you so!”.
I remember that Y2k was supposed to send us back into the dark ages. But nothing happened, except I made a lot money as a computer analyst.
seabrjim,
Your post only proves my point. The economy happens in cycles – pick up a history book or watch History channel or Discovery.
Yes, real estate is down today, but it’s all about perspective. Real estate has been “down” before but will come back as it has recovered in the past. The mere fact that the population of the US is growing and that land square mileage is the same, or slowly eroding from our coasts, will only cause valuations to bounce back. Maybe not tommorow, but some day. It’s all about the perspective of history – ask any adult over 30 and they will most likely agree.
Yes, there’s that word again – cyclical.
The same applies to the economy as a whole. Even though the economy is cyclical, it may not look the same in a decade or five. Just like today’s economy doesn’t resemble the economy of The Great Depression era or the recession of the 70s.
But as long as there are humans that want to consume things like food, clothing, housing, transportation, etc, there will always be other enterprising humans that are willing to provide those things for a profit – hence an economy.
Cheer up, in 9 months it will be Christmas again! Maybe Santa will bring you a present.
These people that produce the things we consume dont live in our country, hence we dont have the jobs.What good is a product you cant buy because you dont have a job? Improving the economy cant be done by the fed printing more money. That is the reason our federal reserve note is worth 1% of what a dollar was in 1913. By the way, a note is an affidavit of obligation. Also, did you ever wonder why the silver, gold, nickel, and copper have been removed from our coins? Detroit has operations set up in third world countries to benefit them not you. They know whats coming.
One thing I’ve noticed is that TEOTWAWKI is taking a lot longer than many pundits predicted. There is a capacity for sudden change, but I think we’ll have a lot of years with a few people guessing right and getting richer, while everyone else makes do with less and less.
For example, here’s a website devoted to energy shortages around the world:
http://www.energyshortage.org/
Today’s headlines:
Cameroon: Emeutes de la faim: Contradictions et cacophonies gouvernementales
Chile: Chilena Copec duplica importaciones de diésel para junio-octubre
China: Sinopec Group Cuts LPG, Propylene Output to Boost Gasoline, Diesel Supply
El Salvador: El FMLN admite escasez de diésel y denuncia “boicot”
French Polynesia: Further talks expected to resolve French Polynesia fuel strike
India: Low on fuel and no sign of deal, N-power plants take a hit
India: IEA urges residential sector to improve energy efficiency
India: Mumbai May Escape Power Cuts as Reliance, Tata Buy Electricity
Iraq: Oil Rises Above $108 as Iraqi-Pipeline Fire Cuts Supply to Export Terminal
Northern Marianas: Rotating power outages due to cylinder problems
Pakistan: Generators and UPS batteries selling like hot cakes
Pakistan: Trade deficit to increase due to load shedding
Pakistan: Your electricity bill just went up 10%
Paraguay: Estaciones de servicio reciben gasoil a “cuentagotas”
Paraguay: Escasez de gasoíl tiene en la incertidumbre a empresarios
Republic of Congo: Incompétence et chaos dans les entreprises étatiques et publiques
Senegal: ALERTE – Premiers signes d’une pénurie énergétique
South Africa: Electricity on the brain
South Africa: You will be shed
Zambia: DJ Zambia Has Fuel Reserves To 2nd Week Of June – Government
Zimbabwe: Makoni: Fixing Zim could take a decade
seabrjim- you are absolutely right. Some commentators think that a country can exist making software and printing money. They probably also consider Ron Paul a weirdo, when he talks about 10 trillion dollar debt, no dollar backed by gold or dying manufacturing. Americans, you have to understand, if you import more 800 billions than export it is added to debt. So every single dvd player or car is bought on debt money, because you don`t make with your own fingers enough items that would cover the difference of the consumed amount. So , one day you will have to pay it back, but if you haven`t been exercising strong muscles( manufacturing) there is no way, you will ever have a strong economy or real money to pay the debt. Looking at an average American physical health, or their educational situation, i do not foresee any hope whatsoever. I have been wondering, how come a nation like China, has been working their asses off, making every single item in manufacturing, while US has been doing just the opposite. Spending more, manufacturing less.If someone remembers, i talked about economy collapse already 2 years ago, probably noone noticed.
Jusisb – what we discuss on this website, the economic troubles and trickle down problems of suppliers, are but a microcosm of what is going on right in front of us. Most of us believe what we are told on the tv. “All is well!” The unemployed have their troubles buying a car, but wait till the retirees get the “Enron” treatment in the next 3 years. That will make believers out of everyone. And we on this website wonder why Chrysler is putting together $50 dollar interiors….dont talk to me about the national debt, american idol is on!
Our economy is in deep shit. This is a fact, and the debt is outrageous, but no president will ever get nominated for saying “I’m going to tax the hell out of everyone so we can crawl out of this hole” even if it is the solution we need.
The devalue in the dollar will correct some of the outsourcing of jobs. As the dollar drops, it becomes cheaper to keep the jobs here and even bring ones back. Same with manufacturing. China just raised the min wage and began “stricter” enforcement of worker’s rights. Eventually, thanks to increases in costs in China, and decreases in the value of a dollar, it will make it cheaper to employ Americans again. It is cyclical. As new industries begin to emerge (new nuclear plants, solar cell and nano technologies) new jobs will get created. The problem with the current situation is that our economy is half based on credit and not real money. How hard is it to understand? You can’t spend what you don’t have. Banks have been licking their lips over stupid people for years and now it’s coming back to bite them in the ass because now people can’t pay back what they borrowed.
Another problem is speculators. People buy resources (oil, energy, gas, etc.) on the expectation that the price is going to increase and then they will do anything to guarantee that it increases, thus you get the crazy home prices and oil prices. Eventually the demand will go down and prices will have to drop. Right now, the cost of refined gas and homes in much of the country are inflated by at least 50%. In the next year the refining capacity of the US is going to nearly double with 5 new refineries going on line (the first new ones in over 20 years). Unless the oil companies purposely reduce production, the price should not stay where it is as supply will increase. Same with houses. The supply greatly outweighs demand currently, but prices are not dropping very quickly because people have the perception that what THEY own is worth more even though it is not. It is an increase in cost that is not sustainable and will eventually burst.
The one positive that I think is helping to hold up our economy is how many other country’s economies are tied into ours. If we fall, so goes much of the world.
And so castles made of sand fall in the sea, eventually
– Jimi Hendrix
The biggest problem is, no one wants to hear about the problems, we only want to hear good things. No candidate would ever win if he said “I’m going to tax the shiat out of everyone so we can crawl out of the hole we dug ourselves into” even if that is what we need.
No politician is going to cut spending, especially for pet projects and pork. It’s too bad Ron Paul is labeled crazy, because he’s the only one who wouldn’t have spent us under the table. I don’t really know Obama’s take on economic plans, but McCain sure loves the big business, as does HillDog. We are SOL and there isn’t much we can do.
The one thing holding the economy up right now is the fact that many countries economies are closely tied into ours. If we fall so do they. That won’t be the case forever though if the bad news keeps coming. I think the loss of value of the dollar will help to bring jobs back in though. As the dollar goes down, the cost to outsource jobs becomes higher. It’s too late to prevent a recession though. It’s coming and people are going to have to learn to live without the luxuries they thought they were entitled to with their credit cards.
And so castles made of sand fall in the sea, eventually
– Jimi Hendrix
Meh.
We have all the food and all the guns. If things ever got that bad we’ll just take what we need when we need it.
I may be overly cynical, but I’m not too worried about long-term economic health until we run out of guns and food.
I guess I just don’t think that manufacturing is as important as intellectual property. That’s the main reason I’m not too keen on the increasing pivotal rold Communist China is playing in the market, especially in the car sector. They obviously don’t care about all the copyright infringement lawsuits that have been filed, and don’t plan to do anything about it. Still, it makes no sense being good at making things if there’s no idea of what to make…or marketing effort to get it sold…or person to actually sell it. Manufacturing is but a part of the process, and glorifying it is just holding on to the past, which is never a good thing.
The longer you avoid the surgeon , the deeper his knife will cut.