Rapid Downsizing of the U.S. Auto Market
Automakers were in trouble even before the collapse of the credit market. Twenty-seven billion dollars worth of trouble for Ford and GM alone, just for the first six months of 2008. Projections are for two billion more from each company in third quarter losses.
While American automakers are the worst hit, the rapid downsizing of the U.S. auto market is touching everyone in the industry. Toyota, for instance, is cutting their annual sales forecast for 2008 by 26 percent. After posting their worst sales month in twenty-five years, BMW is slashing production and preparing for a price war, hoping they can get rid of current inventories.
Other stories differ in specifics, but not in basics. U.S. auto sales, down 32 percent across the board, are the lowest since 1983. European automakers are about the same, on average, and Japanese automakers are heading in that direction. To compensate, automakers are already cutting overtime, and will likely cut some jobs and suspend others.
There is a ray of good news in all this, in a backhanded sort of way. If you have the money, or can borrow it, prices are about to take a big drop on almost any car you want to own. Few people have the money in hand, of course, so the question is, can they borrow?
There is credit out there, but it is getting harder to find. The big banks - Bank of America, CitiBank, Wells Fargo and their ilk, are not really affected. They are so diversified in their loan portfolios that they can afford to keep lending on automobiles. But in the current economic situation they are not likely to loosen their requirements or add to their available loan capital, so the number of people they serve is expected to remain static.
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Posted by heroauto | 4:57 AM | Auto Articles, Auto Review | 0 comments »
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