The Department of Labor released unemployment figures today and the jobless increase does not give much comfort:
Bureau of Labor Statistics
The unemployment rate stands at a whopping 8.9 percent and this does not include those whose hours have been cut or those who have either stopped seeking full time work or whose benefits have expired. In one year the unemployment rate has grown from 5 percent.
A surge in unemployment looms. Reality in the auto industry must be faced; despite the machinations of the government, both GM and Chrysler will end up being liquidated Chrysler is a mess and this mess feeds upon itself. Chrysler’s highly paid workforce and that of its archipelago of suppliers, dealers and transport companies are a vital part of its customer base. With that workforce on the streets tending fires in rusty barrels there are ever fewer buyers for new cars.
Right now it looks as if the Jeep brand, which is the ‘diadem’ of Chrysler will be taken over by Fiat. The rest of Chrysler represents undesirable small(er) cars and useless giant pickup trucks and SUV’s. These larger vehicles … in an environment where cheap fuel is a thing of the past … are obsolete.
Fiat says it hopes to ‘Eurostyle’ (verb) Chrysler by replacing stodgy Chrysler design with stodgy Fiat (or Opel) designs. This is more fantasy. Rebranding Opel will not attract customers who do not have any money!
Liquidation looms for GM as well, which has little left to offer … to meet the needs of a relatively car- free future. Some sheikh or Indian will buy Hummer (Tata Motors?) and Cadillac; the rest of GM’s lineup is more unappealing sedans, pickups and SUV’s.
Ford puts on the brave face, it is losing less this quarter than last quarter and opined that profitability is in the dark 2011 future. That Ford has lost money 13 out of the past 15 quarters speaks for itself. Again, Ford’s most profitable vehicles have been large SUV’s and giant pickup trucks. It makes and sells smaller cars overseas, but such vehicles do not sell well here in the US. As fuel prices remain hsitorically high, the sales of smaller vehicles will come under pressure as well. The most fuel efficent car is no car at all.
On Monday, Toyota said it expected an operating loss in its auto operations of 150 billion yen, or $1.7 billion, for the fiscal year ending March 31. That would be the company’s first annual operating loss since 1938, a year after the company was founded, and a huge reversal from the 2.3 trillion yen, or $28 billion, in operating profit earned last year.
Analysts said Toyota’s downward revision, its second in two months, showed that the worst financial crisis since the Depression was threatening not just the Big Three but also even relatively healthy automakers in Japan, South Korea and Europe. Many other companies will also soon be reporting losses.
Worse, analysts said that they expected next year to be even more painful, amid forecasts that the global economy would continue to slide until at least the summer. This could cause a significant shakeout, driving smaller and weaker companies into the arms of a smaller number of bigger, richer players.
Volkswagen suggests that it can double US market share by … 2014! Who are they kidding?
May 14 (Bloomberg) — Volkswagen AG, Europe’s largest carmaker, aims to double its U.S. market share in three to five years by targeting consumers seeking cars that use less fuel, the company’s U.S. chief executive officer said.
Volkswagen and its luxury Audi brand can build on their combined 2.7 percent share of a market hampered by the lingering effects of the recession, Stefan Jacoby said today in an interview before the German company held a wall-raising ceremony for its new car plant in Chattanooga, Tennessee.
If Volkswagen isn’t bankrupt by then, they will certainly be a lot smaller than they are currently.
The problem with the industry is a lack of customers with money, combined with the strangulating effects of more expensive fuel. Add to this the reverse synergies of shrinking sprawl, still excessive traffic congestion and overall uncertainties about employment. The assumptions about the industry are outmoded. Since many ‘alternative’ designs and drive systems are subsidized by the sales of SUV’s and giant pickup trucks, the falloff in the sales of these vehicles makes it unlikely that electric or hybrid models will be little more than niche items.
As the parts makers, dealerships, insurance companies, auto transport and other auto- related industries falter, look for unemployment to surge from the current astounding levels. The painful part of a million unemployed a month is coming soon to a town near you.