Post by ScottR@KTP on Feb 12, 2010 16:45:58 GMT -5
Is the Auto Industry Saving the Economy?
Jerry Flint, 02.11.10, 04:22 PM EST
It's good news that automakers are cranking out more vehicles, but remember--they're up from a lousy year.
If you follow economic statistics, there's good news: Manufacturing is growing. Jobs and hours worked in manufacturing are growing. That can be a sure sign of recovery.
Thank the auto industry, because it's this industry that is making the difference in those national statistics. But let's not get too excited. The comparison is against a miserable prior year.
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Look at the numbers. In the weeks through Feb. 6 this year 1.12 million cars and trucks were built in North America (731,000 in the U.S.), more than double the 595,000 vehicles built a year ago. And don't forget the manufacturing to make the parts for those vehicles.
Here's the catch: Last year production had fallen into a sinkhole. The sales collapse at the end of 2008 had left inventories high--3 million cars or trucks on Feb. 1, 2009, a 118-day supply.
So a year ago everyone was slamming on the production brakes because of those overstocked lots. GM was overstocked at 161 days, Ford at 120 days, Chrysler at 151 days, Honda ( HMC - news - people ) at 125 days, Toyota ( TM - news - people ), 91 days. In the year-ago first week of February, four Chrysler assembly plants were shut, as were seven Ford plants and eight GM plants. Hyundai, Nissan ( NSANY - news - people ) and Mercedes were working four days at their U.S. plants.
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While this year's vehicle production in the first month is twice last year's, it's still 20% less than the year earlier, in 2008.
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Toyota will be slammed to a grinding HALT, for quite some time, but only if the BRAKES work. Toyota, Moving forward because they are not able to stop. Ha Ha Ha!
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The good news is that the inventory now is a fraction of last year's. The Jan. 1 stockpile was down to just 2 million, or a 53-day supply.
What those numbers say is that the gains will come from sales and low/reasonable inventories. Carmakers aren't just rolling out cars to fill dealer lots in the hope they can be sold. So the production gains are good--good for potential profits because the labor costs of Detroit's three have been reduced and factories have been shut, reducing overcapacity.
That wasn't true the past few years. Detroit's financial types wrecked the industry with their weird thinking. The companies had boosted wages and benefits high--more than $70 an hour in labor costs--and they locked them in; that is, they were paying workers whether they worked or not. So the finance types figured the companies had might as well build cars, even if they weren't needed, and push them onto dealers. They would cut the prices by thousands of dollars per car with cash givebacks to encourage people to buy them.
The trouble is that they turned their business into a commodity price game, lowered the value of their own products and lowered the value of all the cars already in customers' hands. They wrecked their own business.
A new leader at Ford from outside the industry, and the bankruptcies at GM and Chrysler, seem to have put this destructive strategy to bed. At least wiser heads in Detroit hope so.
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Will production stay up? This depends on sales, of course. We don't know the effect of the Toyota mess yet. It might hurt Toyota sales and production. It might help everyone else.
Last year only 8.8 million vehicles were built in North American (5.8 million in the U.S.) against 13 million (8.7 million in the U.S.) a year earlier, in 2008.
This year the thinking is sales will run 11.5 million or so compared with last year's 10.4 million. If that happens, the production numbers will stay well ahead of last year, though not double the numbers as in January. That will keep manufacturing looking good in those national figures the government passes out.
Just remember: Up is better than down, but manufacturing is up so much because last year the auto industry ran through an incredibly down year.
Jerry Flint, 02.11.10, 04:22 PM EST
It's good news that automakers are cranking out more vehicles, but remember--they're up from a lousy year.
If you follow economic statistics, there's good news: Manufacturing is growing. Jobs and hours worked in manufacturing are growing. That can be a sure sign of recovery.
Thank the auto industry, because it's this industry that is making the difference in those national statistics. But let's not get too excited. The comparison is against a miserable prior year.
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Look at the numbers. In the weeks through Feb. 6 this year 1.12 million cars and trucks were built in North America (731,000 in the U.S.), more than double the 595,000 vehicles built a year ago. And don't forget the manufacturing to make the parts for those vehicles.
Here's the catch: Last year production had fallen into a sinkhole. The sales collapse at the end of 2008 had left inventories high--3 million cars or trucks on Feb. 1, 2009, a 118-day supply.
So a year ago everyone was slamming on the production brakes because of those overstocked lots. GM was overstocked at 161 days, Ford at 120 days, Chrysler at 151 days, Honda ( HMC - news - people ) at 125 days, Toyota ( TM - news - people ), 91 days. In the year-ago first week of February, four Chrysler assembly plants were shut, as were seven Ford plants and eight GM plants. Hyundai, Nissan ( NSANY - news - people ) and Mercedes were working four days at their U.S. plants.
Real-Time Quotes
Get Quote
BATS Real-Time Market Data by Xignite
While this year's vehicle production in the first month is twice last year's, it's still 20% less than the year earlier, in 2008.
* Stories
* In Pictures
* Videos
Rate This Story
*
Your Rating
*
Overall Rating
Reader Comments
Toyota will be slammed to a grinding HALT, for quite some time, but only if the BRAKES work. Toyota, Moving forward because they are not able to stop. Ha Ha Ha!
Read All Comments (7)
Post a Comment
The good news is that the inventory now is a fraction of last year's. The Jan. 1 stockpile was down to just 2 million, or a 53-day supply.
What those numbers say is that the gains will come from sales and low/reasonable inventories. Carmakers aren't just rolling out cars to fill dealer lots in the hope they can be sold. So the production gains are good--good for potential profits because the labor costs of Detroit's three have been reduced and factories have been shut, reducing overcapacity.
That wasn't true the past few years. Detroit's financial types wrecked the industry with their weird thinking. The companies had boosted wages and benefits high--more than $70 an hour in labor costs--and they locked them in; that is, they were paying workers whether they worked or not. So the finance types figured the companies had might as well build cars, even if they weren't needed, and push them onto dealers. They would cut the prices by thousands of dollars per car with cash givebacks to encourage people to buy them.
The trouble is that they turned their business into a commodity price game, lowered the value of their own products and lowered the value of all the cars already in customers' hands. They wrecked their own business.
A new leader at Ford from outside the industry, and the bankruptcies at GM and Chrysler, seem to have put this destructive strategy to bed. At least wiser heads in Detroit hope so.
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Will production stay up? This depends on sales, of course. We don't know the effect of the Toyota mess yet. It might hurt Toyota sales and production. It might help everyone else.
Last year only 8.8 million vehicles were built in North American (5.8 million in the U.S.) against 13 million (8.7 million in the U.S.) a year earlier, in 2008.
This year the thinking is sales will run 11.5 million or so compared with last year's 10.4 million. If that happens, the production numbers will stay well ahead of last year, though not double the numbers as in January. That will keep manufacturing looking good in those national figures the government passes out.
Just remember: Up is better than down, but manufacturing is up so much because last year the auto industry ran through an incredibly down year.