Where Is the Industry Headed Next Year?

Mississippi Toyota plant

We can learn a lot from the past, even if predicting the future is impossible. So, naturally, opinions seem to be all over the lot regarding the auto industry outlook for 2012.

Let’s begin with the optimists. Bloomberg interviewed several people who stressed the fact that auto companies, foreign and domestic, were committing to new plants in the U.S. and quite a number of new jobs. The reasons are, basically, pent-up demand and the increasing cost of labor in China and India. Can you believe it? U.S. labor is competitive!

Toyota is opening a new plant to build Corollas in Mississippi (above) and hiring 1,500 people. Other furriners—Kia, VW, Mercedes, Nissan, Honda and BMW among them—are adding capacity and jobs: 6,350 this year, 3,400 in 2012.

The Detroiters have made contract agreements to restore or create 20,000 U.S. jobs by 2015. Steve St. Angelo, Toyota’s North American EVP, is quoted as saying the auto industry “will spur 88,000 more jobs” this year and next.

Auto sales forecastThis rosy picture is very much clouded by the financial crisis in Europe, and Alex Taylor reported last month on some gloomy forecasts, with many analysts predicting around 13 million cars sold in 2012. Compare that to the glory days of 2007 and before.

The industry is suffering badly in Europe, where new cars are being discounted heavily. Manufacturers and dealers are playing games like registering new cars to resell them as used, exports are way down, and GM’s Opel division is a mess. All this, plus FIAT shares are down 39 percent for the year.

No wonder Sergio Marchionne, FIAT/Chrysler CEO, is putting so much faith in the rebirth of Chrysler. Sales are up 24 percent for the year (more than GM’s), and he has done some smart things that have paid off, like spinning off Ram as a truck brand and reviving Jeep.

The company’s big issues include the delay in producing compacts and subcompacts, slow FIAT 500 and van sales, and the problems in importing Alfa Romeos. But Sergio has accomplished the next-to-impossible in bringing Chrysler back to life.

Where does all this leave us? It’s pretty clear that what happens with the euro (and in Italy) will play a key role in our economy this year and next. If we get a recession, all those happy, forward-looking investments the automakers have made here may come to naught—or less.

Are you an optimist or a pessimist on the auto economy for next year? Why?

—jgoods

Find Used Cars in Your Area at CarGurus

Used Toyota Corolla
Used FIAT 500

2 Comments

  1. In this economy and Europe’s as well, you have to be a pessimist, but here I would think that there is “an ass for every seat” and I would not be discouraging the manufacture of vehicles that can produce seats for all sizes, shapes, widths,heights, price ranges, etc, all with criteria that are different for every single body. Yes, a lot of what we do here is duplicitous and practices like rebadging can increase efficiency and reduce redundancy. So here the thinning out suggested above would work and I am okay with that.

    I do however, take issue with the concept of thinning out vehicles which have core constituencies, like, say, Subaru, no matter how small the market or segment. Here again, there is an ass for every seat. Our personal beliefs should not be used to infringe on other’s right to choose what works for them, no matter how big a piece of crap they choose.

    Globalization has indeed produced dozens of look-a-likes and knock-offs.
    I would rather have that choice of a dozen rather than just one or two “world” cars that are not easily differentiated. The market will achieve the demise of those inefficient companies that can’t compete in the free market. Even here, we have seen almost a dozen badges done away with because they have outlived their usefulness while young energetic companies like Kia and Hyundai are setting bar higher and higher and at the same time eating Toyota and Honda lunches.

    I am optimistic long term if the dollar remains weak against the major European and Asian currencies. The Japanese are particularly vulnerable and we have been seeing real rebates offered instead of the usual lease deals. Even BMW and MB are putting generous offers on the table. The currency business can only help sales here and may even help sell brands that are not usually on the radar for most American buyers. Volvo in particular, could really be helped if this currency crisis deepens. Its technology however comes at a cost and that cost keeps it off the must buy list at $40K. It might sell thousands more if the price could get in the $35K ballpark.

  2. By far, the biggest problem for the industry is far too much production capacity. Frankly, we need to have a dozen or so car companies go out of business– companies like Suzuki, Range Rover, Saab, Volvo, and quite a few others I can’t think of that are marginal performers or have large overlap. In North America, Chrysler is also a good candidate for doom, as it’s a company that produces almost nothing unique and is best known as the gas hog producer. Our own government prevented this overcapacity problem when it bailed out GM and Chrysler, keeping alive poorly managed companies that had created their own demise years ago. I wonder what would have happened if that process had taken place and the best parts of both companies were resurrected by investors without the OWG (old white guys) management and some incentive to create something beyond giant fleets of look-alike Malibu knock-offs.

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