Thursday, February 12, 2009

How Much Is That Bentley In The Window?

The ports and car plants in the world are flooded with new cars that have nowhere to go. It is very difficult to switch off production halfway for car manufacturers. You have people on your payroll, and you cannot really ask them to sit around and do nothing. So cars keep coming out of the assembly plants, but its getting to the stage where there is no more vacant places to put them.

Bloomberg: The auto industry is caught up in a catastrophe that has spread across the globe as even the key emerging markets that manufacturers had banked on for growth have now ground to a halt, a top executive said on Tuesday.

Christian Streiff, who heads Peugeot-Citroen, said he expects sales at Europe's second-biggest volume carmaker to fall 20 per cent in 2009 and sees further pain in 2010 as there seems no end in sight to the sector's crisis. 'What is striking at the moment is the worldwide catastrophe in the car industry because the Brazilian market, the Chinese market and the Russian market have stopped in their tracks just like the European market. That makes for a fall of over 20 percent'.

Car sales have been sinking fast in developed economies since the autumn as the credit crunch and worsening economic climate have combined to crimp big-ticket purchases, while a lack of visibility has made most manufacturers unwilling to make predictions for 2009.

In January, US auto sales fell 37 per cent, according to manufacturers' data, while corresponding figures for Europe due out on Friday are certain to show double-digit declines. Mr Streiff spoke fresh from signing a deal with the French government that provides 3 billion euros in preferential-rate financing for Peugeot as well as for domestic rival Renault, the conditions of which have met with criticism from other EU nations.

Outlook 'terrible'
'The outlook for 2009 is terrible. The group is starting the year with a fall of more than 20 percent compared to a year ago in all countries combined,' Streiff said. 'We are working on the assumption that the market in 2010 remains difficult.' PSA Peugeot Citroen is due to publish 2008 results on Wednesday and the average expectation for earnings before interest, tax depreciation and amortisation (EBITDA) is for 5.78 billion euros, down from 7.89 billion in 2007. People were excited ahead of yesterday's (financing) announcement and are now looking ahead to the full year results.

People are probably disappointed that (carmakers) can't close factories - but this was very much expected ... This is countered by the fact that there is no equity element to the aid. In exchange for the government loans, Peugeot and Renault promised to safeguard French jobs.

Union sees loss
The CGT labour union said in an email on Tuesday that writedowns and provisions would lead PSA Peugeot Citroen to would report a net loss, having made a US$733 million in the first half. 'If (the banking system) was working at all, we would not have asked for anything from the state,' Mr Streiff said. Referring to the pledge not to close any factories during the term of the loan, Streiff reiterated that if the crisis continued, the group would be forced to reduce the size of factories, cutting the number of teams and production rates.

French President Nicolas Sarkozy on Monday also promised more help for carmakers' financing units and the doubling of a fund to support struggling auto suppliers. Some of France's EU partners have already protested over efforts by Mr Sarkozy to protect French factories from the impact of the economic crisis, and the European Commission said it would scrutinise his auto plan while Germany said it was not happy. France is the latest European country to pledge to help its automakers, after Italy on Friday promised 2 billion euros for the flagging sector.

..... why car companies are losing tons of money ............

Nissan has announced plans to cut its Sunderland workforce by 1,200. Thousands of unsold cars are stored around the factory's test track

Honda is halting production at its Swindon plant in April and May, extending the two-month closure announced before Christmas to four months. Honda and Japanese rival Toyota are both cutting production in Japan and elsewhere. Pictured, Hondas await export at a pier in Tokyo

Earlier this week Jaguar Land Rover said 450 British jobs would go

The open car storage areas in Corby , Northamptonshire, are reaching full capacity

Imported cars stored at Sheerness open storage area awaiting delivery to dealers

Newly imported cars fill the 150-acre site at the Toyota distribution centre in Long Beach , California

The build-up of imported cars at the port of Newark , New Jersey

Stocks of Ford trucks in Detroit , Michigan

New cars jam the dockside in the port of Valencia in Spain

Peugeot cars await shipment to Italian dealers at the port of Civitavecchia

Unsold cars at Avonmouth Docks near Bristol

With many manufacturers on extended Christmas shutdown, the number of cars rolling off production lines in December fell 47.5% to just 53,823

Thousands of new cars are stored on the runway at the disused Upper Heyford airbase near Bicester, Oxfordshire, on December 18, 2008.

Sales of new cars in the UK have slumped to a 12-year-low and production of cars at Honda in Swindon has been halted for a unprecedented four-month period because of the collapse in global sales and represents the longest continuous halt in production at any UK car plant. The announcement comes on a day when the EU's Industry Commissioner Guenter Verheugen warned the outlook for the European car industry was 'brutal' and predicted not all European manufacturers would survive the crisis.

Reuters: General Motors Corp will slash its global salaried work force by about 10,000, or 14 percent, this year and impose pay cuts on most remaining white-collar US workers as it scrambles to reduce costs under a restructuring mandated by its U.S. government bailout.

GM, which was granted US$13.4 billion of government loans in December, said on Tuesday it would cut its salaried work force to about 63,000 from 73,000 during 2009. In the struggling automaker's home market, about 3,400 of 29,500 white-collar jobs will be cut. At the start of the decade, GM had 44,000 salaried employees in the United States, the majority of them in southeast Michigan.

Most jobs will be cut by May 1, and most remaining US staff will see pay cuts of between 3 per cent and 10 per cent for the year, GM said. The job and pay cuts come in addition to buyout offers for GM's union workers and represent the latest step by the automaker to pare its operations ahead of a deadline to present a restructuring plan to the U.S. government on Feb 17.

The moves also add to a growing toll from the downturn for US automakers that began in 2005 and drove both GM and Chrysler LLC to the brink of failure in 2008 as the recession deepened.

Chrysler LLC, which also received US$4 billion in government loans and is seeking an additional US$3 billion, is currently offering buyouts to its US hourly work force after cutting more than 8,000 salaried jobs in 2008. 'These difficult actions are necessitated by a severe drop in vehicle sales worldwide and by the need to restructure GM for long-term viability,' GM said in a statement.

GM's sales in January plunged 49 per cent and the automaker has said it expects industrywide US sales to be near 10.5 million vehicles in 2009, extending a four-year slump that has taken the market to the lowest levels since the early 1980s. As a result, GM executives have said the company is looking for deeper and faster cost-cutting under the restructuring plan that will be submitted to the US Treasury under terms of its US$13.4-billion bailout.

GM has offered buyouts to its 62,000 US workers represented by the United Auto Workers union. The automaker remains in talks with both the UAW and bondholders in an attempt to slash its outstanding debt. GM spokesman Tom Wilkinson said the cuts would not be made across the board, but would be based on specific staffing needs for each department in response to changing consumer demand. For example, GM may still need to hire more engineers for its next-generation battery business as the company pushes for the development of plug-in electric vehicles, Wilkinson said. He added that some countries may take deeper cuts depending on sales trends in those markets.

GM said US executive pay would be cut 10 per cent for the rest of 2009. Other salaried US workers will face pay cuts of between 3 per cent and 7 per cent, it said. GM also said it would review the pay and benefits its workers outside the United States receive. In Germany, GM's Opel unit is not planning any job cuts despite the push to cut costs, a union official said. Opel's works council chief Klaus Franz told Reuters in Frankfurt that job cuts are currently not on the agenda at Opel.

Salaried workers in the United States whose jobs are eliminated will be eligible for severance pay and some benefit assistance, GM said. GM had suspended some benefits for salaried workers in November and said then that it would aim to cut 30 percent of its white-collar payroll costs in North America. But the slump in global auto sales has deepened in the three months since and increased the pressure on GM to slash costs and conserve cash to avoid bankruptcy.

GM, Ford Motor Co and Chrysler have shed about 140,000 jobs since 2005 and almost half of their workforce since the start of the decade.

p/s photos: don't ask, I myself, am still looking for her name...


Jomaropol said...

She looks like one of those GROs in Bangkok...not that I go there...

Nutzkracker said...

Her name is Natsuko Tatsumi. Click on the pics and the tile shows the name. Cute as a button, way too classy to be a Bangkok GRO, IMHO.

Salvatore_Dali said...


errr, its not Natsuko Tatsumi cause when I saved the pics, I was the one who put in Natsuko, it did not come with the pics... I put the name cause it wa an array of phtotos and the closest name to her was that name... however when I did a google search for images of Natsuko, it was a diff girl... so the mystery deepens

Nutzkracker said...


In the midst of so many more "important" things out there today, its funny how not having a name to a girl's face actually irritates some of us enough to hunt down the answers ! Testosterone, indeed....

jp said...

do u think there will be 'fire-sale' or big discounts to clear inventories? Y & y not?

Nutzkracker said...

There is usually a natural sales spike for cars in January due to the new registration calendar, and CNY tends to spur some sales momentum as well so car companies may not be so aggressive in "stock clearing" exercises up to now.

However, post-CNY is a different story. These companies are likely to have growing stockpiles (and incoming stock pipelines) and will be up against a market void of cyclical stimulus. As such, they will be keen to clear out stocks from the 2008 calendar year (before they age further and deeper discounts are needed later in the year).

So yes, I would not be surprised to see fire-sale measures in Q1 and Q2. Its not a question of which car company pulls the trigger first, but how many rounds will they pump in.


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