Purchasing.com reported that North American motor vehicle production dropped 9% during the first quarter due to the overall drop in consumer spending and the ongoing strike at parts supplier American Axle & Manufacturing Holdings.
Mr David Leiker analyst at Baird Research said that this explains why bookings are in disarray for makers of automotive grade plain and zinc coated steel, common alloy aluminum sheet, copper wiring harnesses and lead for batteries. He said that about 3,600 United Auto Workers union members have been on strike at American Axle's five US facilities since February 26th2 008.
The Detroit News this week reported that, the auto assembly cutback is much higher than the 5% forecast earlier by numerous automotive analysts and is pinned to weaker than expected sales. It said that automotive sales are falling harder and faster this year than anyone anticipated because of a toxic combination of factors not seen since the oil shock of the 1980s citing a weak economy, sagging consumer confidence, record-high gasoline prices and hard to get credit. The report said that automakers, consultants and financial analysts have been cutting their forecasts after the weaker than expected start to the year. But they have not arrived at a consensus about this sales slump because it defies the usual patterns.
Mr Jesse Toprak, director of market analysis at online automotive research site Edmunds.com tells the Detroit newspaper that “It's an unusual downturn. It's probably the deepest since the 1980s, but technically, this is still not a recession. Nothing like this has ever happened before.”
Economists Mr Carlos Gomes at Scotiabank.com tells Purchasing.com that “the deterioration in the auto marketplace probably will continue until summer,” when his forecast suggests stabilization and a slight pickup in assembly and sales in the fourth quarter. However, he still sees a 5% slide in US and Canadian motor vehicle sales for 2008 to 15.3 million units from 16.1 million in 2007.
Normally, in a weakening economy, demand for oil falls and prices subside. And interest rate cuts usually encourage banks to lend more generously, enabling consumers to keep spending. But this time, there's no such relief to encourage car buyers. Oil prices keep rising, pushed by strong demand in huge emerging economies such as China. In the United States, the impact of high gas prices has been magnified this time around because light trucks make up half the market.
