It's rapidly becoming the world's largest parking lot. Is it the Cross Bronx Expressway at 6 p.m.? No, it's the Long Beach, California port, which along with the Los Angeles port is rapidly becoming a defacto storage lot, The New York Times reported, as thousands of unwanted, new foreign cars pile up, their future unknown.
The reason? Foreign new car sales have plunged as consumers cut back spending amid the caution-inducing U.S. recession and unemployment levels rise, which historically has led to a decline in new car sales. New car dealers order cars months in advance but have the authority to reject delivery if demand declines.
Further, if you thought only U.S. automakers General Motors (NYSE: GM), Ford (NYSE: F) and Chrysler had lots and storage fields of unsold new cars, you're mistaken, so says economist Peter Dawson.
"This recession is an equal-opportunity pain inflicter for auto manufacturers, and it's hitting foreign car manufacturers as well," Dawson said. "Toyota (NYSE: TM), Nissan, even Mercedes-Benz are seeing their inventories build, despite promotions and sales incentives."
The typical car supply on hand per manufacturer is now four months, compared to two months, a year ago The Times reported. Dawson says he knows why.
"There's this mindset among manufacturers to say 'our models won't be hurt as much by the downturn,' so they continue to produce at the same rate. Then they realize that declining employment levels affect all brands, to varying degrees, and the inventory of unsold cars rises," Dawson said.
Further, Dawson said this recession's inventory build is also being magnified by a new factor: globalization has created too many auto manufacturers.
"Most auto sector analysts agree that there are too many manufacturers. There's also a wide swath of mid-priced cars with little performance or styling difference and that's also served to clog sales," Dawson said. "The solution would be mergers and consolidation, with other companies ceasing operations, but many foreign countries view auto manufacturing as a high-end strategic resource, a national asset and treasure, and they'd rather do what it takes to support their companies than see them go out of business."
The inventory build also underscores another auto sector reality, Dawson said: the first company that can produce "a game-changer" -- a remarkably innovative auto, such as a viable electric car or a sedan that doubles gas mileage -- will quickly become distinct and have an advantage over the pack.
Auto Sector / Economic Analysis: Those who thought all was well among foreign car manufacturers are mistaken. Moreover, the above adds evidence for an U.S. auto sector revitalization package, with incentives for next-generation car development. If other nations are committed to strengthening their auto manufacturers, Congress and the U.S. president should act to strengthen GM, Ford and Chrysler.
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Reader Comments (Page 1 of 1)
11-19-2008 @ 11:15AM
gary mills said...
There is just to many automobiles being made, and NO ONE in the USA wants an American car build by over paid UNION workers! I sold GM cars in the 70's and 80's and they were JUNK then and are now! There is 1500.00 dollars per unit of bennies on American cars and 400.00 dollars on the Janpenese cars MADE here and the works LOVE the co! Who wants to pay a UNION to steal their money?
11-19-2008 @ 11:41AM
Darryl said...
How about this for an idea.
Instead of just handing over more money to a failed automotive business model; solicite a bid for a contract to repower all the small, local delivery, mail trucks with a plug-in electric engine.
Detroit would have money to develop and make the electric engines and adapters to fit into the mail trucks, the government would have a return on investment as there would be a major cost decrease in running this fleet without gasoline and local dealers could win as installers for the engines into existing trucks.
11-19-2008 @ 12:44PM
bigflame8 said...
The Auto companies and the UAW need to make scrafices thenselves, instead of just being given billions from taxpayers.
When a family is in trouble, everyone pitches in to help. Everyone should be willing to accept lower salaries until the situation is resolved.
11-19-2008 @ 1:26PM
ken said...
why were we as a country able to retool almost overnight for ww2? we moved from cars to tanks and planes ect. the unions had their time and place but no more. the average line worker makes over 85k per year plus benifits. anyone and i mean anyone can do that job hands down.if we bail out the auto companies will the execs. agree to forfit an bonuses and perks? are they willing to take a pay cut as well? i say no until all parties agree to cut their wages and scale back the 30 plus unions that hold the mfg hostage every day. god fobid the janitor pushes a box sideways or a parts picker pushes a broom or a non approved employee moves a machine. the steward is writing reports and filing grevences against the offenders.
11-19-2008 @ 4:05PM
Tom said...
This is not a new problem. The auto industry has not been building cars that attract for years. We should force them into bankruptcy, so they have to reorganize. The 3 million jos is a lot of BS. Many of those jobs do multiple things and provide items for foreign competitors etc. When your handout seekers arrive in private company aircraft, make 400 time my salary, its time to bring back some reality
11-19-2008 @ 4:42PM
Larry said...
HELLO>>> this is a recession...if your solution is to bankrupt the american industrial base and create 3 million more unemployed, you don't know much about the economy...DUH
11-19-2008 @ 4:45PM
Ed said...
This is our economy at it's finest. God Bleass America! And I mean that most sincerly... We are not run by the big Government, the Big oil, or the Big Three!!!! People, we are in control of our economy let's not put ourselves back into indentured servitude. We all want cheaper (less expensive) cars, cheaper fuel and a small transparent government. That is what we have. We are the "dog" not the tail. Lets "really" take back America, TODAY!
11-19-2008 @ 7:40PM
Tom said...
How much more do you expect the uaw workers to lose? In the past 2 years the average salary for UAW workers in my plant was about 60,000, now its about 40,000. Is that too much? I have a house and 3 kids so are you telling me 40,000 is too much for me to make? The plant I work at makes parts exclusivly for general motors and if they fail it will be over 1500 out of a job, collecting unemployment. Thats just 1 plant.
If the big 3 fail, get ready for the 1930's all over again!
11-19-2008 @ 8:08PM
phil said...
The auto companys were doing just fine until the economy went to hell. Now everyone including the foreign auto companys are in trouble. If you think the economy and dow are bad now just wait and see if the auto companys don't get a LOAN.
The government ask for lower wages and reduced benfits and other things, well!! The government is worst off and getting a bail out from China and who knows? The government should take a pay and benifts cut or file for bankruptcy. They make more, have better benfits, work less 100 days a year and voted themselfs yearly pay raises.
11-19-2008 @ 8:56PM
Jim said...
What's this about the big three? Chrysler is a foriegn owned car maker. Why should the u.s. government help them? They are based in Germany.
11-19-2008 @ 11:23PM
Worker said...
After 31 years in the auto bus. I can say you people are full of crap !! Just wait till you can't buy an american car, see how much it will cost. Even wallstreet knobs say at least 20-30% more. They will have you all by the short hair. Then I will laugh by rear off.
11-21-2008 @ 9:18AM
WhoKilledBig3 said...
The GM Volt is a game changer, it leapfrogs current tech and it would be stupidity to the tenth power to let GM go under now. I can see why the Republicans could care less if the big three sink, Sen. Shelby of Alabama leading the charge. It's because his masters are Mercedes and Honda which got big subsidies to build plants in his state and I guarantee those workers don't get the same pay and benefits the Big Three give. Thanks for trying to kill the American auto industry Shelby, enjoy your sushi and schnitzel.
11-21-2008 @ 1:47PM
Pat said...
Sorry Gary Mills you feel like this. You sound like a saleman who did not make it !
Yes the 70 s & 80 s saw poor quality as compared to the Imports.
Gary obviously you have not driven a GM / Domestic lately. I am driving a Buick Lucerne right now and my friends with Lexus & Benz are surprised at the performance level .....
It is so "Glamorous" to knock anything Domestic and go along with the media.
This article says the Imports are piling up too ! So what happened Gary?
Be carefull Gary, or soon you will not even have a job at McDonald's taking drive in orders since even that will be soon handled by the guys in India.
Yes they will need you to flip the bugers though !!!!
11-25-2008 @ 3:19PM
Walter said...
USA needs to start exporting more or stop the importing you cannot flood this country with imports and all our money and jobs going over seas .Build in America
buy American made products or we have no future.UAW auto workers make 28.00 dollars an hour not 70.00 this 70.00 dollar
an hour is lies .Where the off balance between American made autos and imports come in is that General motors being around supporting family for 100 years they now have a large amount of people retired imports being built here in the USA only has as of now 1000 people retired from the USA wait till they are here a while and they have to support 100,000 of retires .Support American People and do it now or do without