J.D. Power Warns of "Outright Collapse" of Auto Industry

[Ming]

Report Warns Of "Outright Collapse" For Auto Industry
10/10/2008 9:54 AM ET



(RTTNews) - The auto industry could "collapse" outright in 2009, according to a report from J.D. Power and Associates released Thursday.

"While the global automotive industry is clearly experiencing a slowdown in 2008, the global market in 2009 may experience an outright collapse," said Jeff Schuster, executive director of automotive forecasting for J.D. Power and Associates.

The firm predicts that U.S. new-vehicle retail sales will total 10.8 million units in 2008, 2 million below 2007. Overseas, vehicle sales are expected to decline in China, India, and European markets, although the decline will be far more dramatic in mature markets.

"While mature markets are being impacted more severely than emerging markets, no country or region is completely immune to the turmoil," Schuster added.

The credit crisis will contribute to an already dire picture for the U.S. auto market, as consumers struggle to get auto loans. The report warned that there could be as many as 2.2 million fewer sales in 2008 if credit remains frozen and consumers are unable to purchase vehicles, the firm warned.

"Buyers are both voluntarily and involuntarily exiting the U.S. new-vehicle market," Schuster said. "The additional decline in expected vehicle sales is a function of growing concerns around availability of credit and leasing, declines in vehicle equity and general economic stress."

The report highlights the unprecedented turmoil facing the auto industry. Thursday, shares of General Motors (GM: News ) closed at 58-year low, down $2.15 at $4.76. In response to its dire situation, GM issued a formal statement Friday attempting to reinsure nervous investors, stating that bankruptcy as an option is not on the table.

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[prototype66]

We are in for a bumpy ride.

[drew770]

It might be time for the government to invest capital into GM and Ford so that they can stabilize.
The auto industry employes too many people for the government to sit on the sideline and watch it collapse.

[coaster.n3rd]

Originally Posted by prototype66

We are in for a bumpy ride.

Tell me about it. I have seen 3 customers all week.

[BigThreeForever]

2009 seems highly likely to be the Year of the Apocalypse for Detroit.

Given that GM is now all but worthless as a company, that Ford is mortgaged to the hilt and that Chrysler's financials are no longer disclosed, but are doubtless catastrophic . . . given their rate of cash-burn and the fact at their most profitable products are no longer being bought in the old volumes . . . given that oil prices are volatile, that consumer confidence is all but non-existent, that the banking system has gone belly-up and that credit is harder and harder to get . . . . we have a "Perfect Storm", gentlemen.

I now firmly believe that at least one, and probably two, of the Detroit Three will file for bankruptcy protection in 2009. I hope I'm wrong but cannot see otherwise.

I just hope some sort of solution can be found. This is a freaking NIGHTMARE.

[Caleb02]

gm and ford have already gone under, they are dead, lets face it, the american auto industry is a thing of the past. Ford and Gm and Chrysler will get bought out by a chinesse company who will close them down and use their platforms and move production to were it should be china. China is the new america..

[triadecho]

Nothing can kill a company faster than lack of cash flow.
I was with Douglas Aircraft when they became McDonnell Douglas for that reason.
Great products or even unfilled back orders can't save you when money stops coming in.

[squat]

GM and Ford have a rough ride ahead of them. I think they'll be fine though. If nothing else they'll get a loan in 09 from the gov to keep them going to 2010 when they have a lot of new products coming.

Chrysler I think is best positioned, they've already made and continue to made aggressive cuts in production and jobs. Since they're private they don't have to worry about investors seeing there short term worth diminish for long term growth. Plus they have already said that they want to be the best small automaker out there.

[ByTheLake]

Originally Posted by BigThreeForever

2009 seems highly likely to be the Year of the Apocalypse for Detroit.

Kind of ironic, isn't it, that so many critical vehicle programs launch a year later.

GM will survive. It may look like a completely different company in the end, but GM will survive.

[FenixII]

I think this situation is very dangerous, even Toyota´s shares are going down rapidly.

I hope it stops soon,,,

[Bvonscott]

No no no. If the auto industry collapsed, and the detroit automakers went belly up, MILLIONS of people would lose their jobs. MILLIONS. All the plants, all the dealers, all the parts supplies, majority of auto shops. Plus the stock market would crash. Entering a full depression. So where would people go to get there car fixed? Or anything else auto related? The public would be up in arms!

Trust me, the government knows this, they will step in and help detroit at the last minute. Too many taxpayers to lose.

[triadecho]

You would be amazed what car companies will do to stay afloat.
During the Depression, you could turm in last year's Ford with $100 and get a new one.
Our trade was wrecked, so they asked for $200.

[Chaz_23]

Since when is JD Power an expert in financial matters?

[Snafu_SS]

I've already decided long ago that a new vehicle is out the question for many many many years. Used is probably the only way I'll buy for a long time.

Why should I pay 40k plus for a new F250 when I can get a nice used one that's 3 years old for 20k?

[PhishPhood]

Originally Posted by Bvonscott

No no no. If the auto industry collapsed, and the detroit automakers went belly up, MILLIONS of people would lose their jobs. MILLIONS. All the plants, all the dealers, all the parts supplies, majority of auto shops. Plus the stock market would crash. Entering a full depression. So where would people go to get there car fixed? Or anything else auto related? The public would be up in arms!

Trust me, the government knows this, they will step in and help detroit at the last minute. Too many taxpayers to lose.

The problem is NOT the bankruptcy of one or all of the detroiters that would cause massive downstream problems, it's the slow down in business and buying that would cause problems downstream.

What's the difference? Bankruptcy is not liquidation in most cases. When companies do go BK they normally remain in business, the employees keep working, the suppliers do take a hit but they still continue to sell to the BK company but the courts guarantee the payments. The losses to the BK customer are underwritten 50% by the IRS. It's the stockholders that lose everything. But most if not all the downstream benefits remain albeit at a reduced but more vibrant level.

However if a business keeps shrinking and shrinking and shrinking...THAT will reduce the level of benefits downstream. In this case one might WISH for a BK so that the subject company can wipe the slate clean and begin growing again. The current situation is like a wasting disease, TB or cancer, where the bread winner is bed-ridden and can't earn any money. The 'family' suffers.