APRIL 2, 2009
Meanwhile in the real world...
The last week has seen more bad news for the automobile industry with March sales in the US down 37% compared to a year ago. The big loser was General Motors with a drop of 45% followed by Ford (41%), Toyota (39%), Chrysler and Nissan (38%), Honda (36%), Mercedes-Benz (25%), BMW (24%) and Audi (19%). The luxury segment of the market has tended to suffer a little less but it is still a big drop for the European firms, which rely heavily on the US market. Sales have been declining for 17 consecutive months. Unemployment continues to rise and house prices are still falling and so things are not expected to improve for a while although the car companies hope that the situation is now stabilizing. GM boss Rick Wagoner was ousted this week after the government rejected his plans to rebuild GM and it is expected that the firm will now have to go through a negotiated and controlled bankruptcy process to split the unhealthy parts of the business away from an operational company which might have some chance without debts and union demands. It is expected that there will be demands for creditors to accept equity in the new companies formed. GM needs to be sure that the whatever it does does not hurt the suppliers who are needed for parts and services to produce the vehicles.
In Europe Peugeot-Citroen has also dumped its chief executive Christian Streiff. He will be replaced by steel industry executive Philippe Varin.
Daimler AG, the parent company of Mercedes, says it is planning to reduce costs by $2.6bn by cutting hours and wages with administration, sales, and research and development staff being asked to work 30 hour weeks rather than 35 hours and accept a 14% cut in pay. The company is still avoiding redundancies but says that these cannot be ruled out.