Today we got another clear cut sign of just how tough things have gotten for the auto industry. Japanese automaker Toyota (NYSE: TM) stated it is going to shut down factories for 11 days in February and March.The news comes on the heels of yesterday's announcement that the company had a dismal month of December, with sales dropping by 37% in America, worse than Ford (NYSE: F) and General Motors (NYSE: GM), which saw sales drop by 32%, and 31% respectively.
The lack of sales resulted in one big problem for the automaker -- excess inventories -- leaving the company with no choice but to shut down production to reduce output in the face of continued slowing auto sales. The shutdown is going to affect all 12 of its Japanese plants, and is in addition to an already announced three day shutdown in the same plants this month.
Earlier this summer it looked like Toyota was going to be able to make it through the current auto slowdown OK, as consumers were eagerly buying up the company's fuel efficient cars, but that is no longer the case and Toyota has fallen victim to the global epidemic. The tough market forced Toyota to announce last year that it expects the company to post its first annual loss in 70 years.
Don't be too surprised to hear of more production shutdowns from major auto makers in the weeks, or months, to come, as companies try to adjust to a new marketplace in the auto industry. As Douglas McIntyre pointed out earlier this morning, we are no longer in a world where automakers are going to be able to count on selling 16 million vehicles a year. No one really knows just how hard the deepening recession is going to run, but with last month's sales figures it's possible that just 10 million vehicles will be sold in 2009.
Only time will tell just how bad things get for the automakers before consumers start to rush back onto show room floors. What about your personal experience? Are you in the market for a new car? When do you expect to buy your next car, and when you do go looking, what car brand are you planning to consider?
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
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Reader Comments (Page 1 of 1)
1-07-2009 @ 3:37AM
Aaron Winstanley said...
I think its great that Toyota is seeing slowdowns in sales. I think its a sock in the eye for them and its about time they come down of their high horse.
Im a big fan of Saab and Im very aware that their future is very uncertain as GM is now trying to flick them off! If I could afford a brand new Saab then I would buy one but for now Im going to have to stick with my current 1997 Saab 900.