[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2008/images/10/28/art.vert.volvo.jpg width=292 height=320]
CNN Executive Editor
If there was any doubt that somehow the global economy could avoid following US financial institutions into deep crisis, one recent news item may have dispelled it. And it came from Sweden. Volvo disclosed last week that in the third quarter of the year it received a total of 115 orders for its trucks in Europe.
Yes, that's a total of 115 trucks - for all of Europe. The comparable figure for 2007: 41,970 orders.
The American motor industry is hemorrhaging cash and slashing production, but it is clearly not alone. Last week, the Financial Times was able to fill a whole page with gloom from the world’s vehicle makers. Daimler, Fiat and Renault all drastically reduced their profit forecasts for 2009, predicting that even demand in emerging markets like India and Brazil would fall. Renault said it would cut production of cars by 20 per cent in the current quarter and has already idled several plants in France; Peugeot-Citroen planned “massive“ production cuts. Volkswagen fretted that some of its suppliers would go belly-up – unable to secure financing in the midst of the credit crunch. And the elite are not spared: the chief executive of Porsche said there was a “real danger of a conflagration for the whole industry.”
Even Japanese giant Toyota has not been spared from the carnage, despite more fuel-efficient models. Toyota’s sales in the US declined by one-third last month, compared to September 2007. For a company that prides itself on never having made a single worker in North America redundant, the bell may be about to toll. As it is the company is paying 4,000 of its US workers not to make vehicles. The resurgence of the yen will also eat into Japanese car companies’ overseas profits.
But despite all the gnashing of teeth, most of these companies still hope to make profits in 2009, albeit much smaller ones than this year. The US auto industry can only dream of returning to the black. General Motors is burning its dwindling cash reserves at a rate of $1 billion a month and is trying to mortgage or sell its Detroit headquarters. Its financing arm is due to repay $1 billion in debt on January 14th next year – some analysts are not convinced it can though GM insists it will meet its obligations. Bankers say Ford may consider selling a chunk of its stake in Japanese carmaker Mazda to raise cash. One stark consequence of the US companies’ malaise: unemployment in Motown is already at 13 per cent.
If there is a silver lining in this worldwide stall it may be for the makers of fuel-efficient and hybrid cars. Korea’s Hyundai is not immune from the global trend, but still made $180 million in the latest quarter and expects its compact cars to help it weather the crisis. Honda is pressing ahead with introducing its compact Jazz model in Europe. And Toyota is converting a plant it’s building in Mississippi to produce the Prius hybrid hatchback rather than the Highlander SUV. However, even that strategy requires the price of oil not to continue its freefall.
Anderson Cooper goes beyond the headlines to tell stories from many points of view, so you can make up your own mind about the news. Tune in weeknights at 8 and 10 ET on CNN.
Questions or comments? Send an email
Want to know more? Go behind the scenes with