Auto Industry Braces For Downturn as Sales Growth Slows

[313WX]

GM plans to invest $1B to revamp Warren Technical CenterSince this is local and a long-term investment, it doesn't refute the OP. Still, it's welcome news!

The investment has to be made, whether GM wants to or not. The conditions at the Tech Center are abysmal [[which is still an understatement) right now because GM can't afford the necessary maintenance and upgrades of its facilities. If things don't improve soon, GM will lose more talent to companies in places such as the Silicon Valley with more "state of the art" facilities.

Of course, the project can always be put on hold as well.

[313WX]

Wall Street knows a thing or three about a tactic used by the auto makers. Auto makers do it for a number of reasons.

http://www.investopedia.com/terms/c/channelstuffing.asp

http://en.wikipedia.org/wiki/Channel_stuffing

Good point.

Interesting enough, the US economy had a record high inventory build during the last quarter, which masked what would have otherwise been an unadjusted decline in the economy. There's no doubt in my mind the Auto Industry contributed largely to this.

The Auto Industry has also resorted to boosting car sales via. credit being awarded to folks who can't actually afford a car note [[just like the real estate industry in the early/mid 2000s). But if credit application rejections are starting to explode, then that party will be ending soon.

[emu steve]

1. Light vehicles are by far the lowest selling line of vehicles the Big 3 automakers have. So that doesn't mean much.

2. The analysis was done by someone in Michigan, who [[living in a state where this industry is the life and blood of it) has a special interest in the auto industry not declining any further. So I wouldn't put too much stock in their say.

I'm not sure what the main theme of this thread [[and the first referenced article) was.

Big Three profits? Stock prices? Automobile employment [[white and blue collar)?

As discussed in this thread, a 6% [[1M units) decrease in sales might lead to a significant [[?) drop in profits and bigger drop in stock prices.

Does that make ANY difference to the worker on the assembly line? He or she might lose some overtime which may be a bad or even good thing [[too much OT can be a negative for many workers).

Presumably he or she still have the income to buy a house and disposable income to have a good standard of living...

[313WX]

I'm not sure what the main theme of this thread [[and the first referenced article was).

Big Three profits? Stock prices? Automobile employment [[white and blue collar)?

As discussed in this thread, a 6% [[1M units) decrease in sales might lead to a big [[?) drop in profits and bigger drop in stock prices.

Does that make ANY difference to the worker on the assembly line? He or she might lose some overtime which may be a bad or even good thing [[too much OT can be a negative for many workers).

Presumably he or she still have the income to buy a house and disposable income to have a good standard of living...

You're assuming we'll no longer see a decline in sales. Maybe we won't. For the reasons stated in the article, there's a good chance that's not the case.

And when profits to the shareholders drop, guess which expenses are cut first to make up for that [[hint: it will impact the workers on the assembly line the most).

[emu steve]

You're assuming we'll no longer see a decline in sales. Maybe we won't. For the reasons stated in the article, there's a good chance that's not the case.

And when profits to the shareholders drop, guess which expenses are cut first to make up for that [[hint: it will impact the workers on the assembly line the most).

Yeah, maybe around the 'margins.'

I assume a decline of 1 or 2M sales will be absorbed without significant changes to employment.

[rjlj]

You are absolutely correct, the writer of the article should really ignore all facts and data and only make sure the industry looks good. [[insert sarcasm here)

1. Light vehicles are by far the lowest selling line of vehicles the Big 3 automakers have. So that doesn't mean much.

2. The analysis was done by someone in Michigan, who [[living in a state where this industry is the life and blood of it) has a special interest in the auto industry not declining any further. So I wouldn't put too much stock in their say.

[313WX]

You are absolutely correct, the writer of the article should really ignore all facts and data and only make sure the industry looks good. [[insert sarcasm here)

The problem wasn't that the article ignored all facts, but that it reeked as naivety as it only acknowledged SOME of the facts.

[CrashDummy]

1. Light vehicles are by far the lowest selling line of vehicles the Big 3 automakers have. So that doesn't mean much.

2. The analysis was done by someone in Michigan, who [[living in a state where this industry is the life and blood of it) has a special interest in the auto industry not declining any further. So I wouldn't put too much stock in their say.

Light vehicles include everything with a gross vehicle weight rating of 8500 lbs or less [[or sometimes10000 lbs, depending on the definition), making them by far the highest selling line of vehicles the Big 3 automakers have.

[mikeg19]

The problem wasn't that the article ignored all facts, but that it reeked as naivety as it only acknowledged SOME of the facts.

Thank you for that. I was waiting for someone to point that out.

The auto market has ebbs and flows like any other industry. Right now we are riding the wave up. Profits are good, cars are selling well, and high margin trucks/suv's/luxury vehicle segments are selling well. We can't hire people fast enough at Ford and our buildings are bursting at the seams. Is this sustainable? No. Sooner or later the Fed will raise interest rates and gas will come up again and that'll surely impact sales. But I don't think we need to be all doom and gloom just yet.

[emu steve]

Thank you for that. I was waiting for someone to point that out.

The auto market has ebbs and flows like any other industry. Right now we are riding the wave up. Profits are good, cars are selling well, and high margin trucks/suv's/luxury vehicle segments are selling well. We can't hire people fast enough at Ford and our buildings are bursting at the seams. Is this sustainable? No. Sooner or later the Fed will raise interest rates and gas will come up again and that'll surely impact sales. But I don't think we need to be all doom and gloom just yet.

I really agree with the no need for gloom and doom.

Too many folks look outside and the weather is rainy and they get gloomy.

Then those same folks see a few days of sunny skies and say 'ah, it can't last. The rainy, gloomy days will be here soon enough.'

The more optimistic person, relating back to automobile sales, might say, when the down cycle does finally occur: "better days ahead. We'll be growing again. Just need to be patient just like spring comes after winter."

[Wesley Mouch]

What would be the impacts of the Trans Pacific Partnership? If the US manufacturers really are more efficient and productive than they were, they might make an impact in SE Asia. Whoda thunk Buicks would be a status symbol in China. Maybe Ramblers in Indonesia next?

[mwilbert]

What would be the impacts of the Trans Pacific Partnership? If the US manufacturers really are more efficient and productive than they were, they might make an impact in SE Asia. Whoda thunk Buicks would be a status symbol in China. Maybe Ramblers in Indonesia next?

Probably a net negative for US producers [[based upon what we currently know of the agreement) as it is likely to result in a phase-out of the "chicken tax" on imported light trucks. They wouldn't be likely to serve anything but niche portions of those markets with US production anyway.

[emu steve]

This is historical and not really relevant to what might happen in the future, but this was a great article by Steven Pearlstein, Washington Post, Dec 5, 2007 which predicted the September 2008 crisis to a tee. I believe he received his Pulitzer for this work:

"It's Not 1929, but It's the Biggest Mess Since"

http://www.washingtonpost.com/wp-dyn...T2007120500794

"This may not be 1929. But it's a good bet that it's way more serious than the junk bond crisis of 1987, the S&L crisis of 1990 or the bursting of the tech bubble in 2001."

Since then he has been optimistic on the economy and the stock market. I'll check his current thinking... This guy isn't a Dr. Ron Paul and what he is peddling.

[emu steve]

If anyone is interesting in production work staffing in various MI plants, here is some details from an article about GM.

It is like hitting a moving target. Some jobs were lost in Lansing. All of those employees were outplaced [[to different plants) and now GM need to add more for the resumed 2nd shift in Lansing.

So this is Lansing, not Detroit, and GM, not all domestic automakers, but staffing there is net positive.

http://www.detroitnews.com/story/bus...hift/28059457/

[emu steve]

I keep re-reading this article and don't know what to make of it...

http://www.nytimes.com/reuters/2015/...src=busln&_r=0

I read this: " But there are warning signals. Sales growth is slowing in the home market, demand for small cars and family sedans is falling, revenues have declined, profits outside North America and China are virtually nonexistent and share prices have flattened."

Then I read this:

http://www.usatoday.com/story/money/...ales/28342149/

Auto sales are up year-over-year, less fleet sales, more pricey and profitable vehicles, more millennials buying cars, etc.

The DOMESTIC automobile market is in excellent shape. Am I worried about the automobile market in Europe? Not too much...

I say it is "[[still) Morning in Detroit" but the Times article says we see ominous, gray clouds forming on the horizon...