Carmakers strategize for new year
As the auto industry looks ahead towards the next 12 months, even strong foreign companies have to readjust their original profit forecasts. Steve Chiotakis reviews carmakers' 2009 outlook with Marketplace's Alisa Roth.
The back bumpers of Toyota vehicles parked in a sales lot in Miami (Joe Raedle/Getty Images)
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TEXT OF INTERVIEW
Steve Chiotakis: The auto industry no doubt has 'good riddance' on its mind for 2008. Horrible sales, a bailout from the government, a global slowdown. Marketplace's Alisa Roth has been following the story; she joins us now. Alisa, it seems like the bad news just keeps coming. What's the latest?
Alisa Roth: The big news has actually been going on for several months now, and that is that nobody is really buying cars. I spoke to Michael Robinet, and he's in charge of global vehicle forecasts at the consultancy CSM Worldwide, and this is what he had to say:
Michael Robinet: There's no doubt that pressures are being felt around the world. No region is really immune from the decline in demand and also the credit issues that we're seeing in the automotive industry.
In the U.S. at least, the problem is two-fold. One is that people are really concerned about the economy, so they're not inclined to make a big purchase when they're not sure if they're going to have a job next week. The other problem is that it's just gotten very, very hard to get credit. So what we're seeing is across the board, the carmakers are struggling. Toyota just warned that it's gonna report losses this year for the first time in its history. Honda has revised its expectations for the coming year several times. Hyundai, Kia, they're all issuing profit warnings. They're all also cutting back production to make up for reduced demand. And the foreign subsidiaries of the U.S. carmakers, which have until now actually been doing pretty well, are also just having a really hard time of it, because nobody wants to buy cars right now.
Chiotakis: I think the logical question would be what can we look forward to in 2009, but given 2008, I'm not sure that's the right question. I mean, what can we look out for?
Roth: More bad news and more bad news. I think vehicle sales are expected to continue to be very slow in the coming year, so we're looking at a pretty long rough patch here. I think that strong companies like Toyota will probably come out OK on the other end, but they really need to be thinking about what they're doing, how they're going to do it. And if one of the Detroit Three were to go under, it could have wide-ranging effects, because it really could shut down the global supply chain for at least six months, maybe longer. And that would be a tough thing for all the companies, even the strong ones like Toyota and Honda. I think we're really looking at massive changes in how the industry works and who the major players are. Michael Robinet from CSM had this to say:
Robinet: It's evolving in many different production locations in a sense that who's making the vehicles, how are they making them, how are the imports and the exports of those vehicles, where are they going in the future.
So there's plenty to watch out for, but unfortunately I don't think any of it's going to be good news.
Chiotakis: All right, Marketplace's Alisa Roth joining us from New York. Alisa, happy new year.
Roth: Thank you, same to you.
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