Monday, December 29, 2008

CSM Worldwide Was Right on in 2007, Will They Listen in 2008?

CSM Worldwide provides trusted automotive market forecasting services and strategic advisory solutions to the world's top automotive manufacturers, suppliers and financial organizations. CSM Worldwide covers the global automotive environment from Detroit, Grand Rapids, Sao Paulo, London, Paris, Frankfurt, Budapest, Delhi, Bangkok, Shanghai and Tokyo.

Last year, CSM predicted all the gloom and doom that we saw happen in 2008. As with all the people that were told they were nuts about the overall economy when they predicted the cotastrophy of 2008 housing markets, not many in charge listened to CSM last year either.

So are they listening this year? Here is what CSM had to say about the 2009 auto industry. The most striking of all their predictions was the number of automobiles that will be sold in the U.S. in the upcoming year. An average of around 17-18 million is considered a good year. Last year predictions were in the 15 million range, but this year is much worse. CSM predicts that total will fall all the way down to approximately 11.5 million units. Maybe the auto execs can live with out their gold plated bathroom fixtures in their gold plated private jets this year?

The report linked above asked questions about how the loss of one of the big 3 will not only effect the auto industry in Detroit, but the auto industry, and the parts makers as a whole.

“The bankruptcy of a major automaker won’t be just a Detroit problem or a Michigan problem,” says Craig Cather, CSM’s president and CEO, “The pain will quickly spread to the Southern states that have new foreign-owned auto plants, as well as Canada and Mexico, because there are no quick and easy ways to restructure companies or source components when the entire industry is in crisis.” And at barely two-thirds of a normal sales year, perhaps the often-abused term “crisis” is appropriate.

CSM and the Center for Automotive Research both assert that the interdependency of suppliers to automakers is a critical factor that is glossed over in newscasts and Congressional hearings. Something that I scream at the TV every time I see these guys talking about the "bailout", or bankruptcy for the auto makers. It seems that none of them really care all that much about the suppliers to me. CSM says the suppliers who contribute to Buick, Cadillac, Pontiac, etc. provide 58% of the parts to Asian “new domestics” and 37% of European “new domestics.” Those who provide parts for your Focus, Fusion, MKS, or MKZ also supply GM (70%,) Asians (65%), and 46% of the Europeans. Chrysler’s suppliers are similarly interconnected.

GM is bleeding cash, and can't really afford to wait much longer. As the biggest of the domestic automakers they are directly related to the suppliers' profitability. If they go down a lot of small businesses will go down with them.

Ford is considered to be in a decent position, but Chyrsler is going to die.

In fact, “the controlled wind-down of Chrysler is in everybody’s best interest,” according to Michael Robinet, CSM’s head of global vehicle forecasting. He is expecting that Cerberus Capital Management, Chrysler’s owner, will be able to sell the most valuable assets and brands while closing out the less valuable brands and facilities thereby mitigating, at least a bit, part of the auto industry’s huge overcapacity problem.

A survey by the website Kelly Blue Book says 32% of Americans would consider purchasing a car built in China, 28% a car built in India. No kidding? HArd to imagine it isn't higher.

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