Start with this: Automotive News [sub] reports that FoMoCo is set to out-produce cross-town rivals General Motors this year. This according to auto industry analysts IHS Global Insight. “Ford will rank first with North American production of 1.9 million units, a 17.7 percent decrease from 2008, IHS said. GM, which is shutting most of its plants as it braces for a possible June 1 bankruptcy, will build 1.7 million vehicles, about half as many as it did last year.” A fifty percent production decline. Whoa. And what’s with the probable on the GM C11? AN should’ve saved the modifier for GM’s projected production; it’s entirely possible they won’t even build that many. Especially if/when Nissan/Renault buys-up the bits. As you might imagine, “new” Chrysler keeps on slipping, slipping; into the man-u-re . . .
Chrysler’s projected 903,191-unit output will be a decrease of more than half. Honda Motor Co. will replace Chrysler in the No. 3 slot by producing 1.1 million vehicles, and Toyota Motor Corp. will finish fourth with 904,262 units built, IHS said.
Keep in mind, this is North American production. All these automakers are importing cars from abroad. But the bigger picture is just as bleak as the zoom in.
The projections reflect the cuts IHS made last week to its industrywide outlook. The new forecast, 8.4 million units, is a reduction of another 156,000 units from last month’s estimate. The forecasting firm is expecting a 32.9 percent decrease from 2008 production of 12.6 million units. Low production reflects poor U.S. sales, which have fallen 37.4 percent through April.
Now, sales. And oh man, GM and Chrysler are taking a hammering. J.D. Power & Associates says US May auto sales declined about 35 percent (compared to a year earlier). So far. Automotive News [sub] also reports that IHS Global predicts that Toyota will edge out GM as America’s number one car brand/brands sometime next year. GM will hold its title this year with a 17.9 percent share. In ’09, Toyota’s projected 17.6 percent share will top GM’s 17.3 percent.
And while you’re in husker du mode, someone on this website predicted a Seasonally Adjusted Annual Rate (SAAR) of eight million units. IHS Global Insight reckons I’m off by a million. But we both agree: it’s going to get worse. And stay worse.
Seasonally adjusted annual sales rates, which fell from 15.4 million units in February 2008 to 9.1 million a year later, will not improve much this year, the forecasters said. Last month, SAAR had improved to 9.5 million units — and that’s what it will average for the year, they said.
Annual sales won’t match 2007 levels until 2013, [IHS director of North American automotive research George] Magliano said. But that won’t represent a full recovery, as a rising population of U.S. vehicle operators will reduce the number of sales per driver.
Said Magliano: “Essentially, what we’re looking at here is something that falls further and doesn’t come back” all the way.
The money that will be made by the companies that are left when the market finally turns around (and it will) will be obscene….
Of course, it does no good to build vehicles if you don’t sell them. How will these production numbers drive the sky-high inventory levels?
And what is the bailout dollars per vehicle calculation for GM & C, something like $28k per vehicle?
Eeks.
At some point, sales will creep upwards because a certain number of cars leave the “fleet” every year due to accidents and just plain wearing out/having something major go kerfluey.
In WWII, the US only ceased car production in Spring 1942 and renewed it by fall 1945, yet by spring 1945, the lack of civilian trucks was so critical that the War Dept. started assigning military trucks for release for civilian sale.
Of course, that was back in the day when the typical car only lasted 6 to 8 years at best, and even at 5 or 6 years, might have required a rebuilt or replacement engine. 100,000 miles was the province of extremely stout and ultra-reliable cars (given excellent care) such as the Reo Flying Cloud (discontinued in 1936). Reo also built trucks so built “extra-tough” cars.
Nowadays, the AVERAGE age of the US car fleet is over 9.2 years, almost 9.5 years. Shockingly, this is 2 years OLDER than Eastern (ex-Communist) Europe’s average car age.
This tells me that eventually, car sales will move upwards. Even if it is in that most magical 2012… (tongue in cheek). Isn’t “everything” going to happen “in 2012”?
I think that there were about 9 million cars produced in 1955. That’s when the population was only half as much as it is today. They were called “the right cars at the right time.”
Unbelievable.
“when the market finally turns around”
and the Cows come home.
Yes, of course sales will creep back up – but back to 14, 15 or 16 million? Bah. Laughable.
The amount of de-leveraging that will slowly take place in the US economy is staggering. You’re going to witness consumer spending contract by a good 20%, minimum, by the time this is all said and done – and that will be years (hello Japanese economy).
Credit? Ha – gone. Jobs? Ha – gone. Disposable income? Remember when people had it?
Do not underestimate the current environment, friends. Yes, sales will creep back up because someone will always need to buy a car, but those ivory tower economists who think we’ll be back at 15 million a year are smoking some damn fine weed.
The scrap rate has been around 10 million per year while sales have been around 15 million per year during the middle of this decade. I think the market is going to be digesting the (tens of?) millions of excess cars for a few years to come.
Cars last a lot longer than they did in 1955. Galvanized steel has almost eliminated rust. Cars can be kept running forever at lower cost than buying a new car. So we no longer need as many new cars. Which is good.
menno said:
Nowadays, the AVERAGE age of the US car fleet is over 9.2 years, almost 9.5 years.
Does this account for people just buying new cars, or does it also account for those buying used? I figured the average age would have already been over 10 years.
Every few months IHS ratchets its predictions lower, it seems. I guess that’s one way to later claim you were accurate.
Why is no one fining the IHS and all these other rating and “prediction” companies when they are always so wrong?
IHS(pred ~65% correct) is how it should be written i.e they have been 65% accurate in their past predictions?
That means you can ignore them or listen to them depending on their posted track record ?!!
“sutski, May 22nd, 2009 at 6:02 am: Why is no one fining the IHS and all these other rating and “prediction” companies when they are always so wrong?
IHS(pred ~65% correct) is how it should be written i.e they have been 65% accurate in their past predictions?
That means you can ignore them or listen to them depending on their posted track record ?!!”
“ronin: May 22nd, 2009 at 3:21 am: Every few months IHS ratchets its predictions lower, it seems. I guess that’s one way to later claim you were accurate.”
Yep.
A year ago, I went to an IHS symposium in Germany, some of the biggies were there Magliano, Lapham, Harbour-Felax, etc. I was looking for ammo to underpin my memo to our BOD that both Chrysler and GM would be illiquid by the end of 2008 and that our favourite market would collapse and contract…
Unfortunately, I found no cover for my “extreme” views, unfortunately the market did tank, but fortunately, I won a bet (on the GM illiquidity topic) and got a nice dinner out of it, and got to add (in addition to contract & business development) market monitoring & analysis to my business card…
hreardon is right. And who in their right mind would want to buy all those Toyotas that are sitting on RoRo vessels (shipping industry term: Roll on, Roll off) anchored off the port of Long Beach, CA? Those cars have engines that will be sitting idle for more than 1.5 years. Would you want to buy an engine like that?
All those Toyotas on RoRo vessels??
Aren’t the vast majority of Toyota cars meant for the US consumption are produced here, in the US and Canada?
Go try to find a Japan made Camry or a Corolla on your dealer’s lot. You’ll have to go through many, many cars before you spot one if any.
“Why is no one fining the IHS and all these other rating and “prediction” companies when they are always so wrong?”
Because then they can’t buy a new crystal ball?
Suppose that the economy turns around, and soon.
Suppose that the car companies figure out how to sell Obamamobiles at a profit, and soon.
Suppose that the general public wants to, can afford and will buy 10-12 million Obamamobiles, and soon.
Will the Congress and the Administration allow Big Auto to make obscene profits? What will be the effective tax rate on said obscene profit? Who gets dibs on the obscene profits?