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“442,241 vehicles were built last month, compared with 1,170,816 in January 2008. The previous smallest month took place during a UAW strike at Delphi Automotive Systems Corp. in July 1998. That month, North American automakers produced 667,074 vehicles. Total U.S. vehicle output plunged 65.6 percent; Canada fell 58.0 percent; and Mexico shriveled by 49.8 percent.” What else do you need to know?
16 Comments on “January ’09 NA Automotive Production Falls 65.6%...”
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I sure the downsizing I was a part of a few weeks back was just the beginning. Its gonna get UGLY in the auto industry the next 6 months. Doesn’t matter how strong your company is, which OEM you work for or supply, everyone is gonna be laying off gazillions.
OK I’m not going to crow about potentially getting it right when I was comparing the possiblity of what we are now going through, to what happened from November 1929 through mid-summer 1932, when new auto sales contracted to one quarter of what it had been.
That would make me a monster.
But it is increasingly evident that those of us who are saying this is turning into a full fledged depression, have, unfortunately, called it.
I think it is too early to say whether we are reaching the depths of the Great Depression, but a look back at how the industry navigated that era is instructive.
The companies that did best were those that played it pretty conservatively. Studebaker went into receivership because its aggressive expansion drive didn’t slow down in time. Nash, in contrast, weathered the Depression quite well (at least from a profitability standpoint) because it quickly adjusted to the new realities (re: extreme penny pinching).
One of the biggest casualties of the Depression was the luxury car market. A handful of legendary brands either bit the dust or were mortally wounded during the 1930s. Some died even after unveiling truly remarkable designs. Great product doesn’t necessarily lead to profitability when there aren’t enough buyers out there.
How does that compare with today? My sense is that the luxury car market is going to get creamed. Those brands that have started to sneak down market and prune their unwieldy range of models will likely do better than those that attempt to tough things out with casual fine tuning. If the past is prologue, the rules of the game are about to shift pretty radically. Which automakers realize this?
Quote Dr Lemming “ My sense is that the luxury car market is going to get creamed. Those brands that have started to sneak down market and prune their unwieldy range of models will likely do better than those that attempt to tough things out with casual fine tuning. If the past is prologue, the rules of the game are about to shift pretty radically. Which automakers realize this?”
I think all segments will suffer nearly equally and if we don’t solve the credit crisis, the lower-priced cars will actually suffer more than luxury brands whose buyers will still have ready cash. As the pressure to lower prices and sweeten the deal increases, once again the lower priced, lower margin cars will suffer the most. However in light of Dr Lemming’s question, I might suggest that the luxury carmakers that will survive and perhaps thrive are the ones that can amortize individual model’s R&D costs over many vehicles…VW-Audi-Bentley does this very well, so does Honda-Acura,Nissan-Infiniti and Toyota-Lexus. Brands that do not do this well are Mercedes and BMW. I don’t think they will go away any time soon, but their cost structures are rather pricey…
While things are bad, this was expected. Many auto manufacturers extended their twice-annual shutdowns into late January. Heck, I think some Chrysler plants are still on double-secret-probation shutdown. And they may not come back.
Assuming the feds ante up and save GM, the real story will be this spring and summer. 10 million sales per year is going to hurt – although deleting GM and Chrysler production would help the others survive.
Depression talk? Really? C’mon fellas, we’re nowhere near 24% unemployment. Let’s keep things in perspective.
It’s gonna get ugly this year, but nowhere near depression level stuff.
If I recall the most recent sales numbers (for the US) the only manufacturers that had sales increases were Hyundai & Kia.
Maybe Joe Consumer finally figured out he’s been overpaying for cars for a long time.
How have we come to this bloody downspiral of car industry? It is quite simple. US has been offshoring and outsourcing and shuttering down all the factories that are high tech and require skilled jobs. An average Joe received about 35 bucks an hour working at an assembly line in detroit. He was the potential buyer of your cars, houses and futons. All the engineers had good salaries. and they too supported with their income local economies, bars, construction companies, their sons and cats including cat shampoo producers.By offshoring all the valuables, low paid jobs are left. Gazillions of uneducated shop assistants roaming trillions of Walmarts with tiny 8 bucks an hour salaries. How on earth do you expect them to buy a Lincoln MKZ? Or a condo?
For example- Vizio. Seemingly american tv manufacturer with only 95 employees. Why? because all the engineering is done in Asia. Vizio is just glueing on stickers. Half of US is occupied with Internet solutions, consolidating resources or other non- value businesses.while you, Americans want to consume real values- real LCDs, real cars that don`t rattle etc. And if you consume , but don`t export accordingly, the debt is rising. And servicing that debt takes away money from education as well. So you become dumbed down, and even less competetive in creating things. So the spiral goes on and on.So is the car industry. If your people are not smart enough to create a chassis, it is imported from germany, and the big salaries for engineering it goes to fritzes, who buy houses, trabants and bratwursts. You can only export consumable items. Who cares if you export some software which is not needed. Soon there will be left zillions of software companies offering online accounting and stuff without actual companies who would buy it…..IBM anyone?
By the way there a is huge difference between growing corn and building cars. The huge difference is expertize. If for some reason you import corn because it is cheaper, then later you can restart corn growing business if prices soar abroad. Once you kill car industry that demands years of expertize and skilled workers- it is gone forever. Thereis no way you will flock together great engineers once detroit goes bust. This is what misinterpreted democracy and a lack of discipline has lead US to……….
The diminishing numbers of car production are just the consequences of it.I wish you guys sometimes listened to me ,seriously! Just because I am young , doesn`t mean that I am discardable:)
Jurisb,
Enjoyed your post. Every generation tends to discredit the following generations as unwise or undisciplined. Yet, America still contains a critical mass of young people who are thoughtful like yourself and, combined with the energy only youth brings, will continue perfecting this Union.
So here are the numbers. At the end of Dec. the bigk three had 99 days of supply. At the end of Jan they had 145, even after chrysler shut down and ford and GM cut back huge amounts. The WSJ says that more plants must be permanently closed by all three of these companies. It is quite obvious that they are still producing more than can be absorbed by the current market. Chrysler has got to be at the bottom of this mess. With no production at all in Jan, they still end up with this huge inventory glut. I think the answer was that they had cars stored everywhere around the plants and they were finally accounted for. In any event, the tea leaves tell me that two smaller domestic companies is what the market can support. We may also lose one or more of the “B” or lesser Japanese brands like Mitsubishi in the process.
If you include the “discouraged” workers, the unemployment numbers are beyond ugly and approaching depression levels. The number of layoffs is beginning to accelerate and take down the rest of the economy too.
http://www.shadowstats.com/alternate_data
Nobody calls it the car bubble but its the exact same thing that happened to housing; cars been handed out like candy to anyone with a paycheck with little regard to whether they could afford it or not.
All of the nattering nabobs of negativism need to go to saturn.com and Rethink! Then walk out with a “Aura Mid-Size sport sedan.”
Shadow Government Statistics may be a well-run website, but do they know that a 2009 Saturn is so much better built than a 1999 Saturn?! Jump at this opportunity to-day! I’ve got your CPI, GDP, and PDF adjusted statistics right ere.
You should Rethink too.
Or not. Unless you’re tracking the M3, which the government decided not to report anymore.
I’ll over a radical point of view… The global automotive industry is a stunning success! (ZERO SARCASM and I’ll back it UP!)
They delivered everything we need and most everything we could dream up. The last problem to solve was how to deliver all the same stuff at cheaper & cheaper prices to maintain market share, which is near the end of all development/production business models for a product. Solving that problem resulted in massive efficiencies and created mass overcapacity. Once the mass overcapacity is reduced, the remaining manufactures can enjoy a stable low margin business of simply replacing units that have worn out.
So what you have now is a very boring industry. 99% percent of folks don’t care about anything other than a nice interior since they have to look at it for a number of years.
The unfortunate issue we have is that all those decades of stunning success also resulted in thousands of families betting on continued success. Now those bets are going bad. Think of the folks that are showing up to the RenCen on Monday morning and how it must feel to know that pretty much nothing that you do today, tomorrow, or the next day will make much difference.
Very sad and nothing they can do about it, after all they (along with their parents and grandparents) WON.
Every one of them is like a war hero coming home… You battled the enemy day and night… you were an Ace pilot that saved thousands of your fellow soldiers from certain death, now you come home to a gutter that needs fixed and some memories.
eggsalad “Maybe Joe Consumer finally figured out he’s been overpaying for cars for a long time.”
How do you figure that out? Even the most profitable car companies struggle to make 6% ROC by building cars. If you try and set up a new business to take on established competitors with 6% RoC you’d get laughed out of the bank, even two years ago.