From Mish:

http://globaleconomicanalysis.blogspot.c....

Global Collapse In Auto Sales Coming Up

In response to my post Plunging New Orders Suggest Global Recession Has Arrived I received a couple of interesting emails from readers, one from the US, the other from an employee of the world's largest automotive parts manufacturer.

Small US Distributor Responds

Dear Mish,

I am a small distributor and sell mostly to online stores. In the past 3 weeks, our business has dropped off a cliff.

Our retail store that usually has 5 orders a day, has had 1 in the past week. I also have a customer with an Amazon store and he has gone from 10 orders a day to a total of 1 order all this week.

Moreover, I have spoken with a number of other distributors and they are all begging for business. There is a dead silence in the buyers right now.

Something is definitely happening and it isn’t good. The numbers are not showing the real depth of this. I think we may see them fall off hard in the next 90 days.

Tom

Employee of German Manufacturer Robert Bosch Responds

Hi Mish,

Love your blog. I've written before.

I work for Robert Bosch in Germany. We make diesel injectors for common rail systems (truck and passenger car).

Our sales forecasts are again down and there is a huge crunch now to save money to try to squeeze out a profit at the end of the year. Sales are down 10% to business plan so they are looking for every dime right now.

The retiring CEO (Ferhnback...a good man) wishes for a "black 0" at the end of the year. However, I doubt that will happen.

Numerous older people have been given incentives to leave the company before official retirement age.

There are numerous closure days still planned. I would guess we can expect more.

So what you are seeing in the PMI is reality. I do not see or hear similar hints in the rest of the German economy yet......

Regards,

Name Withheld by Mish

Notes About Bosch

Wikipedia has these details about Robert Bosch.

Robert Bosch GmbH (commonly known as Bosch) is a German multinational engineering and electronics company headquartered in Gerlingen, near Stuttgart. It is the world's largest supplier of automotive components.

Bosch's core products are automotive components (including brakes, controls, electrical drives, electronics, fuel systems, generators, starter motors and steering systems), industrial products (including drives and controls, packaging technology and solar panels) and consumer goods and building products (including household appliances, power tools, security systems and thermotechnology).

Bosch has more than 350 subsidiaries across over 60 countries and its products are sold in around 150 countries. Bosch employs around 303,000 people and had revenues of approximately €51.4 billion in 2011. In 2010 it invested around €3.8 billion in research and development and applied for over 3,800 patents worldwide. In 2009 Bosch was the leader in terms of numbers of patents at the German Patent and Trade Mark Office (GPTO) with 3,213 patents.

Global Auto Sales Collapse On The Way

Anecdotes are personal by definition, and thus cannot tell the full story.

However, anecdotal evidence is in sync with a collapse in new manufacturing orders globally as noted in Plunging New Orders Suggest Global Recession Has Arrived (same as link at top, repeated for convenience).

For more details on the US specifically, please see US Manufacturing ISM Contracts for First Time in Three Years; New Orders and Prices Plunge; Perfect Miss: 0 of 70 Economists Polled By Bloomberg Expected Contraction

Given the nature of Bosh's business, the reported slowdown in that business, and a plunging collapse in new manufacturing orders virtually everywhere, a collapse in global automobile sales is coming.

Perhaps there is one more channel-stuffing rise in sales coming up in the US (sales are reported when cars are delivered to dealers, not when consumers buy them), but if so, it will be the last big hurrah.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.c....
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Quote:

Our retail store that usually has 5 orders a day, has had 1 in the past week. I also have a customer with an Amazon store and he has gone from 10 orders a day to a total of 1 order all this week.

This is EXACTLY what happened in 2008 where I was at the time.

Just replace 'orders a day' to 'hard phone call ledes a day' and that's what happened. 5-7 calls a day, to one per week. Happened from a Friday to the next Monday. The business climate changed over one weekend.

Bullish!

Europe Automakers Brace for No Recovery From Crisis

By Tommaso Ebhardt, Manuel Baigorri and Mathieu Rosemain - Jul 9, 2012 6:01 PM ET


Manuel Cervantes used to enjoy taking friends to the beaches of southern Spain in his Seat Leon before the slowing economy cost him his job three years ago.

After sending out more than 200 applications without luck, the 27-year-old from Cartagena may switch to his bike or the bus to conserve cash. While he longs to replace his nine-year-old hatchback, the former bank salesman doesn’t have the money with the economy hobbled by Europe’s debt crisis.
Enlarge image Jobless Youth Lead Europe to Worst Auto Sales Since 1995

Sales in Germany, Europe’s biggest market, are forecast to decline to about 3.1 million vehicles this year from 3.17 million in 2011, the country’s auto association VDA said July 3. Photographer: Guenter Schiffmann/Bloomberg
Enlarge image Jobless Youth Lead Europe to Worst Auto Sales Since 1995

With a generation of drivers lost, Europe-focused carmakers like Fiat SpA, PSA Peugeot Citroen and Renault SA face a struggle to stem losses in the region. Photographer: Balint Porneczi/Bloomberg
Enlarge image Jobless Youth Lead Europe to Worst Auto Sales Since 1995

In Spain, the rate for youth unemployment is 52 percent. Photographer: Denis Doyle/Bloomberg
Enlarge image Jobless Youth Lead Europe to Worst Auto Sales Since 1995

Peugeot plans to cut as much as 10 percent of its French workforce this year, lifting its previous job-cut target in response to falling sales, a French union official said. Photographer: Fabrice Dimier/Bloomberg
Enlarge image Fiat Chief Executive Officer Sergio Marchionne

Fiat Chief Executive Officer Sergio Marchionne said he may have to close another factory in Italy because of the plummeting sales in Europe. Photographer: Nelson Ching/Bloomberg

High unemployment, especially among young people like Cervantes, has pushed many consumers out of the car market, making the slowdown stickier than if it were caused by shaky confidence. Sales in the European Union will probably fall to 12.2 million vehicles this year, the lowest level since 1995 and 21 percent below the 2007 peak, according to European auto industry group ACEA. A recovery to pre-crisis levels in the region isn’t likely until after the end of the decade, according to consulting company AlixPartners.

“The situation here is very difficult,” said Cervantes, who aspires to own an Audi or BMW but can’t afford to move out of his parents’ home. “Many of my friends are in the same situation. If it doesn’t improve soon or I don’t find a job by let’s say the end of the year, I will have to make more drastic decisions.”

In France, 22.5 percent of people under 25 are out of work, compared with 36 percent in Italy. In Spain, the rate for youth unemployment is 52 percent. With a generation of drivers lost, Europe-focused carmakers like Fiat SpA (F), PSA Peugeot Citroen (UG) and Renault SA (RNO) face a struggle to stem losses in the region. Those three companies have lost more than 9 billion euros ($11.3 billion) in combined market value over the past 12 months.
Aggressive Action

“Young people in Greece or Spain can’t afford to buy a car,” said Peter Fuss, an auto analyst at Ernst & Young in Germany. “We all have to understand that sales volumes going forward will be in some way flat.”

With prospects for a recovery dim, carmakers are becoming more aggressive in their efforts to reduce costs. Peugeot plans to cut as much as 10 percent of its French workforce this year, lifting its previous job-cut target in response to falling sales, a French union official said.

Fiat, which cut investment in Europe by 500 million euros this year because of the dim prospects for a second-half recovery in demand, will extend temporary layoffs for about 5,000 workers at its headquarters in Turin, according to an Italian union official. Chief Executive Officer Sergio Marchionne said he may have to close another factory in Italy because of the plummeting sales in Europe.
Tumbling Sales

The epicenter of the crisis is in the Mediterranean region, including Italy and France. Car sales in those so-called Club Med countries have dropped more than 15 percent through May, according to the ACEA trade group. In Greece, demand in the first five months of 2012 tumbled 41 percent, while deliveries in Spain, where sales are less than half their peak level, were down 7 percent. ACEA will release June figures next week.

“We are facing a de-motorization of Italy as a consequence of the crisis,” said Romano Valente, general manager of Italian auto industry group Unrae. “For the first time ever, the number of cars on the road in Italy is falling.”

Marcello Traversin is part of that trend. The 39-year-old switched to a second-hand bicycle for transportation in the coastal region near Venice, Italy, because he didn’t have money to pay for fuel and repairs for his Seat Ibiza from Volkswagen AG (VOW) after losing his job earlier this year.

“I can’t afford a new car and all the related taxes since I don’t have a job,” said the former purchasing manager at a food supplement company. “I’ll keep riding my bike.”
Government Aid

The decline has led to calls for political intervention to boost sales and help the industry restructure. Fiat CEO Marchionne, who is also president of ACEA, has urged the European Union to support industry efforts to trim overcapacity.

AlixPartners estimates that 40 percent of the region’s auto factories aren’t using enough of their capacity to be profitable, with the lowest utilization rates in France, Italy and Spain.

Francisco Garcia Sanz, VW’s head of purchasing and president of the Spanish carmakers’ association, asked Spain’s Premier Mariano Rajoy for measures “to improve purchases” of new cars, even though “room for action of the government is limited” because of the crisis, he said last month in Madrid.

French Prime Minister Jean-Marc Ayrault pledged in a July 3 speech to parliament to come up with a plan by the end of the month to help the auto industry. More countries may feel pressure to follow suit.
Spreading Slump

The slump in sales in southern Europe “is spreading” to the rest of the region, Stefan Jacoby, chief executive officer of Volvo Car Corp., said in a June interview. “Uncertainty will be the new era globally” in the auto industry, he said.

Signs of a contagion are mounting. Sales in Germany, Europe’s biggest market, are forecast to decline to about 3.1 million vehicles this year from 3.17 million in 2011, the country’s auto association VDA said July 3.

“You see the numbers,” Carlos Tavares, Renault’s chief operating officer, said at an auto conference in Monaco last month. “There is a point in time when you should recognize that if it continues to go down, it will be a problem for everybody.”

To contact the reporters on this story: Tommaso Ebhardt in Milan at tebhardt@bloomberg.net; Manuel Baigorri in Madrid at mbaigorri@bloomberg.net; Mathieu Rosemain in Paris at mrosemain@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net

http://www.bloomberg.com/news/2012-07-09....