Industry News: GM, Ford Brace For Economic Downturn; German Economy Shrinks

[Drew Dowdell]

Ford and GM, the U.S.'s top two auto manufacturers are bracing themselves for the worst.  They have been running economic modeling to determin the steps they would take given a medium or severe recession in the US and across global markets.  General Motors has a stockpile of $18 billion in cash while Ford has $20 billion saved up.

GM is relying on deferring non-essential capital expenditures and a shift in production to lower cost vehicles as part of its plan to save costs in the event of a a strong downturn.  Ford says is is evaluating its future moves. 

Fears of a recession have plagued Wall St. most of 2019 while a trade war with China rages on.  Higher costs of materials due to tariffs is adding to the pain of weak product demand in the U.S., China, and Europe.  In Germany, Europe's biggest economy, growth shrank by 0.1 percent in Q2 2019 as trade conflicts and auto industry troubles weighed heavily on the economy.  Both exports and lagging demand at home have put a strain on German automakers already looking to slash costs. 

Today, a strong signal that a recession is looming appeared as the 10-year treasury yield dropped below the 2-year treasury yield while do Dow Jones Industrial Average sank over 450 points.  

Related:
Honda Slowing Production, Cutting Shifts
Nissan Profit Plunges 99%; 12,500 Job Cuts Eminent
Ford Europe Laying Off Another 12,000
Daimler Books First Quarterly Loss in Ten Years

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[ccap41]

Prepare for the worst and if it doesn't happen you were at least afloat and have "extra" cash. 

[smk4565]

The slow down is coming.  If China wants to get in an all out trade war and flood the market with some of the US treasury bonds they owe that can really throw gas on the fire.

[trinacriabob]

Economic downturn?  I like to look at real estate sites.  There are already residential properties (not the mansions Robin Leach would tour) in California, Washington state, et. al. that are showing "reduced" in their prices.  We've only seen this recently.  We certainly haven't seen this in a long time.  I would agree that there is a downturn coming.

[Drew Dowdell]

Apparently Singapore officially entered recession yesterday. Germany technically did also, but at such a low rate, they're not calling it yet. 

[G. David Felt]

Seems the news around the globe is all in sync for a global recession, the big ?????? is how big and how deep. Could it be the big Global depression that everyone has feared about and could really blow us into a cast system of have and have nots?

https://www.theguardian.com/business/2019/jan/05/global-economic-crash-2020-understand-why

https://upfina.com/2019-global-economic-recession-or-just-a-slowdown/

https://www.nytimes.com/2019/07/09/business/economy/recession-world-economy-federal-reserve.html

https://www.bloomberg.com/news/articles/2019-08-14/recession-warnings-pile-up-for-the-battered-global-economy

https://www.wsj.com/articles/as-global-order-crumbles-risks-of-recession-grow-11565784000

All good reads especially this one.

https://www.theguardian.com/business/live/2019/aug/14/germany-economy-shrinks-gdp-recession-uk-inflation-stock-markets-business-live

[ccap41]

I think the mass amount of firearms in the US will not allow an official "cast system". 

[riviera74]

51 minutes ago, ccap41 said:

I think the mass amount of firearms in the US will not allow an official "cast system". 

Are you sure about that? About half of all firearms are owned by about 4% of all Americans.  Most gun owners only have at most two or three firearms, often just one.

[ccap41]

9 minutes ago, riviera74 said:

Are you sure about that? About half of all firearms are owned by about 4% of all Americans.  Most gun owners only have at most two or three firearms, often just one.

Well, if you think about the cast that would be put at the bottom of the system.. yes.

You don't need an arsenal of firearms to defend yourself or family. You also don't need 100% pushback to defend your "cast". 

[Robert Hall]

27 minutes ago, riviera74 said:

 Most gun owners only have at most two or three firearms, often just one.

My idiot brother had 45...

[balthazar]

27 minutes ago, riviera74 said:

Are you sure about that? About half of all firearms are owned by about 4% of all Americans.  Most gun owners only have at most two or three firearms, often just one.

Those numbers don't seem right. Theres an estimated 400 million guns in the US. 4% of US population is 14,000,000, obviously a lot less once you eliminate minors.

[ccap41]

2 minutes ago, Robert Hall said:

My idiot brother had 45...

I assume he was a collector with those numbers. 

[Drew Dowdell]

*steers the topic away from guns*

[Robert Hall]

Just now, ccap41 said:

I assume he was a collector with those numbers. 

No, just an idiot.  They were seized when he was arrested last year, but he may get them back after probation ends next year..but that's neither here nor there. 

Anyway, the automakers shift to CUVs and SUVs seems short sighted if a downturn is coming...smaller, cheaper cars seem more likely to sell in a down market...

[Drew Dowdell]

2 minutes ago, Robert Hall said:

Anyway, the automakers shift to CUVs and SUVs seems short sighted if a downturn is coming...smaller, cheaper cars seem more likely to sell in a down market...

There's also the glut of used cars on the market at the moment. 

GM could bring the Cruze back in an instant. It's still in production in South America.  Just load them on a boat and ship them north. Sonic and Spark are still in production for now.  Sonic is not officially on the death list yet and its plant is not listed in the list of 5 plants that GM is closing. 

[ykX]

There are still bunch of cheaper smaller cars and CUVs from Asian automakers.

A lot of used post lease vehicles, but I think they still on a more pricey side because people tend to lease more expensive vehicles.

Edited August 14, 2019 by ykX

[A Horse With No Name]

30 minutes ago, Robert Hall said:

My idiot brother had 45...

I know several people with several hundred, and a few people with over a thousand. 

 

[balthazar]

2 hours ago, Drew Dowdell said:

Sonic and Spark are still in production for now. 

Did sales of that price tier really jump during the ‘08-09 recession? Cause the Trax MSRP’s starts @ $21K before deals/incentives.

[G. David Felt]

3 hours ago, riviera74 said:

Are you sure about that? About half of all firearms are owned by about 4% of all Americans.  Most gun owners only have at most two or three firearms, often just one.

Just the Facts please and according to the following:

http://concealednation.org/2016/01/how-many-guns-does-your-state-have-a-look-at-the-numbers-plus-comparisons-to-other-countries/

This info is from the recognized statista.com web site.

https://www.statista.com/statistics/215655/number-of-registered-weapons-in-the-us-by-state/

As of 2018 it would seem 43% of US households have at least one gun. Of those that do have a gun, most have multiple.

https://www.statista.com/statistics/249740/percentage-of-households-in-the-united-states-owning-a-firearm/

This in comparison to the number of auto's:

https://www.statista.com/statistics/196010/total-number-of-registered-automobiles-in-the-us-by-state/

According to the statistics, we have 375 million guns or equal to 113 guns per 100 people.

According to the statistics, we have 272.48 million auto's registered to people in the us or .85 of an auto per person.

Guns are winning ownership.  

[Drew Dowdell]

Enough of the gun talk. I'll delete further posts of it.

1 hour ago, balthazar said:

Did sales of that price tier really jump during the ‘08-09 recession? Cause the Trax MSRP’s starts @ $21K before deals/incentives.

Spike is a relative term because the entire industry was in a massive contraction at the time. Smaller cars did well relative to bigger ones yes, but part of that was cash for clunkers.

[balthazar]

I would think most consumers in the Spark/Sonic shopping tier would largely go to the pre-owned market in a hard downturn (not artificially effected by a ‘CfC’ program), not to mention CUVs are much closer in price to low-end cars than they were 10 years ago. I don’t expect the same dynamic of radical oil speculation to happen again, oil was down today with the news of an unexpected rise in supply.

I think GM & Ford are safe in a future economic storm without small cheap cars.

[Drew Dowdell]

15 hours ago, balthazar said:

I would think most consumers in the Spark/Sonic shopping tier would largely go to the pre-owned market in a hard downturn (not artificially effected by a ‘CfC’ program), not to mention CUVs are much closer in price to low-end cars than they were 10 years ago. I don’t expect the same dynamic of radical oil speculation to happen again, oil was down today with the news of an unexpected rise in supply.

I think GM & Ford are safe in a future economic storm without small cheap cars.

Keep in mind that Nissan, Kia, Hyundai, are ahead of GM and Ford in the small cheap crossover area. 

Nissan Kicks, Hyundai Venue, Kia Seltos and Soul,  all start under $20k.  Trax is over $20k and Ecosport sits right at $20k.

[balthazar]

^ same price tier. If you’re making a purchase primarily on saving a grand, again I would think most would go pre-owned.