CEOs usually don’t get paid for gloomy forecasts. It’s their job to instill at least a modicum of stockholders fantasy. If two of them paint a dark picture the same day, take note. Reality will surely be darker.
Speaking at a meeting held in Riyadh, Saudi Arabia, Renault & Nissan Jefe Carlos Ghosn said that worldwide sales of all new cars will likely drop 14 percent to 55 million units this year, the Nikkei (sub) reports. The Nikkei: “His projection means that new-car sales, which slid 9 percent last year, will take an even steeper tumble in 2009. Ghosn also predicted that it will take at least seven years for global new-car sales to recover to their peak level of 69 million units, seen in 2007.” Ghosn expects that the current economic slump will drag on:
He doesn’t see new-car sales to improve worldwide until 2011. Again: He was not speaking for Nissan or Renault. He was giving his assessment for the worldwide industry.
The same day, Toyota told the Nikkei (sub) that the company expects group sales to fall to slightly over 7 million vehicles worldwide next fiscal year, 7 percent less than the forecast for fiscal 2008 and down more than 20 percent from the peak marked in fiscal 2007. Japanese fiscal years go from March to March. The Nikkei: “Toyota has already said it expects to suffer its first postwar operating loss in fiscal 2008. A further decline in sales could cause the automaker’s earnings to deteriorate in fiscal 2009, forcing it deepen production cuts.”
Toyota has a global output capacity of slightly below 10m vehicles. 7m units is a capacity utilization of 70 percent, way below the usual break even point of 80 percent.
These announcements jibe with predictions made by Volkswagen that 2009 will be worse than 2008.
Again, keep in mind that these forecast are global. As far as regions go, some will be hit harder, some softer. For the U.S. and Europe, the forecasts imply an even worse 2009 than 2008. For the BIC nations (Russia is out of the BRIC game for the moment) the outlook may be a bit brighter. Same goes for companies. Some may get away with brakes smoking. Some will go over the cliff.
Also, I apologize that the usual WAS will be spotty this week. I’m filing these stories between meetings. B
Over the next few months, I’ll watching Toyota very closely.
Given that they are going to be working at 70% capacity, something has got to give. They cannot run like that for too long. They’ll have to either:
a) find further cost cuts (i.e cheaper interiors, etc). This would be bad because they are trying to get their reliability back on track and they can’t really do that on a budget.
or
b) take the plunge and announce job cuts.
I know they don’t want to do “option b”, but if they carry on like this for too long, Toyota will be in trouble.
There is another way Toyota could survive without doing either of those options.
Spend their time and resources on securing their suppliers from bankruptcy, wait for one or more of the Detroiters to fail and hope that the “dead cat bounce” will pick up the slack.
This is an EXTREMELY risky move.
How will this play out?
Just a quick note Katie-I follow reliability surveys fairly closely and Toyota has not
been showing any overall signs of losing there grip.
They problems they have tend to get media (and opposing fanboy) attention but they fix them quickly. Last years CR scores for the Tundra V8 and Camry V6 got a lot of attention. This year those scores were greatly improved but very few noticed.
Toyota does make mistakes (and is usually boring) but the only major that is their peer in reliability is Honda.
Annecdotes and internet noise do not constitute a trend.
Just some thoughts.
Bunter
I predict a Toyota Bankruptcy.
You know, sometime, eventually. Maybe civilization will collapse, but first there will be a Toyota Bankruptcy.
There were announcements made yesterday of layoffs of over 70,000 people worldwide. 70,000 in one day! If anything, these forecasts of new car sales are too optimistic. This is a result of globalization: Iceland government fails, UK nearly insolvent (debt obligations in the trillions but bank holdings in the billions), US insolvent but thanks to the massive Fed Reserve Ponzi scheme is somehow still working, rumors of China devaluing the yuan by 33% (look into the riots happening now over layoffs; imagine when people realize 1/3 of their wealth has vanished), social unrest in Mexico straining its military to near collapse.
No one is safe—except the bailed-out-bankers—and the last thing on most peoples’ minds is a new f’n car.
How many billions does Toyota have stashed away? Isn’t it somewhere around $30 billion? So even if Toyota runs a 70 percent, they could do it for quite a while.
Toyota is going to go bankrupt?
Lol. That’s just when you get a government loan guys!
He doesn’t see new-car sales to improve worldwide until 2011.
Optomist. I think 3 years is a minimum. Given the fecklessness of our leadership (old and new), I am thinking more like 5.
Katie, Toyota can do “c)” instead. Kind of like what my wife saw when she was a young teenager in the UK during 1973. (Of course, that was done because oil imports had been cut and the UK economy tanked).
Put the factories on a 3 or 4 day workweek, no overtime, no layoffs. Everyone shares the pain. Add on top of that a cut in hourly/salaried pay only as a last resort (except for the upper management which already has taken a cut – unlike Detroit execs who won’t do a thing other than – was it Ford’s Mullaly taking a $1 salary?) Good on him.
As for when the rebound in the global economy will be. Well, we aren’t finished sinking yet, so what remnants of the Titanic pop back to the surface is an as yet unknown.
Looking at the history of the Great Depression, though, I can tell you (again) that 3 years into the depression, cars sales went to 1/4th of their pre-depression high. For “now”, that would be 4.25 million cars. Except that “then”, most cars were bought with cash. “Now” almost all cars are bought with loans. So that figure of 4.25 million new cars (which would be more than catastrophic to the US and global auto industry, to say the least) may be OPTIMISTIC for 2010 or 2011.
My “guess” as to when the Greater Depression will end? You sure you want to read this?
I don’t think it will end any more than the Great Depression ever really ended. Remember; even during the depression, folks saved and bought with cash and lived within their means. The only way we’ve been able to “suppose” we are doing “well” in the economy since that time, is to print pretend money and lend it to one another in the illusion of adequacy and prosperity. You can’t TRULY be properous by borrowing, repaying and paying interest on loans. Only the richest come ahead, and that indeed, is what has happened gradually and increasingly quickly, since the depths of the Great Depression.
Band-aids will be put over bleeding stumps where limbs used to be and we’ll limp along on one leg with one crippled arm, as a global economy, after several years of total chaos and anarchy places us into a one-world government run about as effectively as Zimbabwe is right now.