Sunday, January 18, 2009

Time to buy a car?

The Economist has a nice briefing on the car industry. The basic problem is overcapacity: "CSM Worldwide, an automotive-market consultancy, estimates that the world could produce about 94m cars a year—about 34m more than it is buying. In North America alone, capacity exceeds demand by around 7m vehicles." How does bailout money help solve this problem?
Mr Marchione "believes that to have any chance of making money in the future, volume manufacturers will need to produce at least 5.5m cars a year". That's a lot of cars. According to Wikipedia in 2007 only four makers were above this threshold and three of them are currently making losses. See source data here.

Fortune ran an interesting piece on GM a while back. The chart below sums up the extent of the trouble well. Otherwise GM financials are here.

Econbrowser always does an excellent job tracking US auto sales. After such a dismal 2008 it will be interesting to see how 2009 compares.

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