Auto MK.com » Earnings/Financials » Autoline on AutoMK with John McElroy

Autoline on AutoMK with John McElroy

DaSnIpE

Newbie

Rank: 1

Send P.M.
Buddy
Offline

1^# A A A Post at 6-8-2008 10:30 Show author

Autoline on AutoMK with John McElroy

THE BIG THREE COLLAPSE

Ooof! May sales were like a punch in the stomach, especially to the Detroit Three. It's been nearly three decades since we've seen their sales collapse so dramatically.

Last month the annualized sales rate of the American market, including all automakers, fell to only 14.2 million units. That means if sales keep on going like they did in May, the industry will only sell 14.2 million units this year. Remember, as recently as 2006 this industry sold over 17 million.

That drop off of nearly 3 million vehicles translates into the equivalent loss of:
12 assembly plants
6 engine plants
6 transmission plants
5 stamping plants
Dozens and dozens of component plants

That also translates into an estimated loss of about 65,000 jobs. In only two years time!

John McElroy is host of the TV program "Autoline Detroit". Every week he brings his unique insights as an auto industry insider to AutoMK readers. Follow the jump to continue reading this week's editorial.

And it's going to get worse. I believe the rate will drop under 14 million units when they close the books on June sales. That's because the inventory of small cars was cleaned out last month.

Hybrid sales really prove this point. Last month sales of all hybrids fell 28%, even though the overall market only fell 14%. Sales of the Toyota Prius were down a whopping 40%! The reason they're down is that you just can't buy them. There are virtually no more hybrids in inventory, thanks to a global shortage of nickel-metal hydride batteries.

Even though automakers are scrambling to boost small car production, that will take months to get going. And in any case, an increase in small car production will not be enough to offset the drop in sales of trucks and SUVs.

As a result we're seeing a realignment in the standings. As reported earlier on AutoMK, the "Big Three" have a combined market share of 45%, less than half the market. More specifically, last month Honda sold more vehicles than Chrysler. I guess it's safe to say the $2.99 gas-card pitch isn't working. It seems pretty likely Honda will emerge as the fourth largest automaker in America by the end of the year.

And Toyota came within 11,000 vehicles of catching GM last month. I believe it's only a matter of time until Toyota becomes the Number One automaker in the American market. If not this year, probably next.

The market is changing so fast it's enough to take your breath away. For decades, the best selling vehicle in the U.S. has been the Ford F-series, closely followed by the Chevrolet Silverado. But in May they slipped to 5th and 6th, respectively. Now topping the sales charts are, in order, the Honda Civic, Toyota Corolla/Matrix, Toyota Camry and Honda Accord.

Wall Street is once again raising the specter of bankruptcy for General Motors. It's all about cash flow. With such a precipitous drop in sales and production they're worried GM is running out of money. I wouldn't be at all surprised to see GM go back to the UAW asking for more concessions, probably a postponement of the $35 billion it has to pour into the voluntary employees' beneficiary association (VEBA) that was to pay for the health care of its UAW employees.

It's a pretty grim picture. And it certainly is going to get worse.

###

Last News:

1-8-2009 11:04 Scion xB Release Series 6.0 priced, coming to 2009 NAIAS Read...
1-8-2009 11:04 Austrian design students envision range of KTM concepts Read...
1-8-2009 11:04 Bush administration defers CAFE decision to Obama Read...
1-8-2009 11:04 KORS Design imagines Fisker Karma S \ Sunset\  Concept ahead of Detroi ... Read...
1-8-2009 10:57 Putting V8s In Volvos Is Like Eating Peanuts: Future Drag Race Car Plucked From ... Read...
1-8-2009 10:57 CES: Ford Upgrades Sync With Turn-By-Turn Navigation Read...
1-8-2009 10:57 Spy Photos: 2010 Porsche 911 GT3 RS Caught With Its Pants Completely Down Read...
1-8-2009 10:57 Spy Photos: 2010 Jaguar XK Spied Prowling English Countryside Read...
1-8-2009 10:57 Commenter Of The Day: Urban Blight Edition Read...
1-8-2009 10:57 The 1978 Datsun Stanza: Proving Australian Hoonage Potential The Best Way Possib ... Read...
1-8-2009 10:57 Detroit Auto Show: Crafting The Authentic Swedish Crystal Console Of The Volvo S ... Read...
1-8-2009 10:57 Volvo FH16: Volvo FH16, Worlds Most Powerful Truck, Unveiled In Europop Music Vi ... Read...