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The situation in the global automotive industry is grim, and the outlook is even grimmer

The automotive industry today is marked by deep and widespread uncertainty. As global stock markets plunge and consumer confidence dips to historic lows, light vehicle sales in almost all regions continue to slide, says the recently published white paper A rough road: The effects of today´s financial crisis on the global automotive industry published by KPMG International.

For the mature markets, especially in the U.S. and Western Europe, the decline in sales has been particularly sharp. Major factors for this decline include a lack of cash and financing sources, placing severe pressure on suppliers and dealers in particular. This situation, in turn, increases the risk to Original Equipment Manufacturers (OEMs) that suppliers may fail and production may have to stop.

"One of the main reasons for the current downturn is an industry-wide credit crunch. Loan defaults are increasing, and many banks and finance companies, especially in the U.S. and Europe, are becoming much more rigorous in approving car loans. With declining sales and a virtually frozen credit market, it should come as no surprise that main carmakers have announced a string of production or staff cuts in Europe and the U.S.", says Andrew Sutherland, partner in charge of the Automotive sector in KPMG Czech Republic.

With credit increasingly more expensive and difficult to get, these financial tensions will likely continue to affect the entire industry – from consumers of the end product to dealers, OEMs and suppliers. In September U.S. sales for most carmakers have declined by double digits. General Motors sales are down 16 per cent, Toyota 32 per cent and Ford 34 per cent. In Europe, September car sales decreased by 8.2 percent – the steepest declines were noted in the U.K. and Spain. Global automotive sales, even in traditionally strong markets such as China, have seen slowing growth rates or even declines.

Czech Republic

"In terms of the Czech Republic, it is clear that consumers are losing confidence, domestic sales are still falling and cash is getting tighter. Suppliers are being squeezed by their customers as future orders are uncertain and the situation is changing by the day. Unfortunately there is little good news for the sector at present," says Andrew Sutherland.

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http://www.kpmg.cz/index.thtml/en/library/press/2008/index.html