It s always about product..

Transcription

1 The U.S. Automobile Industry: An Outlook FTA Revenue Estimating Conference Kim Hill Associate Director, Economic and Business Group Director, Automotive Communities Program Center for Automotive Research It s always about product..

2 Auto manufacturing operations in 25 states State Plants Employment MI 49 78,159 OH 25 40,976 KY 5 23,606 IN 11 22,337 TN 6 18,904 AL 5 14,119 CA 3 12,019 MO 6 11,688 IL 4 9,048 SC 1 4,500 TX 2 4,307 MS 1 3,662 WI 2 3,289 NY 3 2,911 DE 2 2,540 KS 1 1,969 LA 1 1,877 GA 2 1,476 WV 1 1,150 MN 1 1,060 OK AR MD PA VA Total ,829 Automobile parts manufacturing operations in 50 states!"#" %&"#'()&*+,"& %+-(./+,"!"#" %&"#'()&*+,"& %+-(./+," Michigan!"! #%&!'! Oregon!! &%' Ohio ()' )'&((* Minnesota!% &*'' +,-./,/!#!"&#(' 0/,1/1 (% *&))% Tennessee #)% "&'#* 23.45,/!) *&6)! 07,89:;< #% #&(6% Washington "' *&6%" +==.,5.1 *6! *"&%( West Virginia #% *&#'# >/=.?53,./ 6*) *(&*'# Massachusetts (( #&!"' New York #6% **&!6 Maryland # #&6)( North Carolina #% #"&%#) Louisiana * #&6'' 2=/@/A/ #'# #!&"*! New Hampshire #" #&6'' Wisconsin #(# #6&*!' >5=53/-5 %" #&*"" South Carolina ) #(&6(* New Jersey %! #&''( Missouri #) #&6#6 North Dakota # )(' Pennsylvania #(% #*&(!* South Dakota #%!)( Texas *%) ##&"*# Nevada *6 6'' B753C./ ##) #'&(% Vermont (!' +5D/ 6*!&%6% E7=/D/37 ( # Virginia! 6&)%6 Maine ## *)' Mississippi %6 6&!# Rhode Island % *"! 23;/,1/1 (6 %&"(' Wyoming #' #6' F=53.-/ #!% (&")' Montana #( #'' >5,,7:8.:98 6' (&#') New Mexico #% #'' Utah (* (&''' +-/G5 ## 6" Oklahoma 6' &)# H/D/.. 6 *% Nebraska ' &)'! 2=/1;/ * ) T o t a l

3 Employment contribution of the automobile industry Of all the jobs created by the direct employment of the automobile industry: 18% are in manufacturing 82% are in non-manufacturing Jobs in and created by the automotive sector Engineering R&D, Scientistific Administrative and support positions (Waste, IT, etc.) Management Logistics: Transportation & Warehousing Manufacturing Finance Legal Sales Accounting Public Relations and Marketing Human Resources

4 Auto jobs are good jobs: 2006 average annual salaries Toyota U.S. Operations 73,141 Motor Vehicles 63,088 Motor Vehicle Parts 46,998 Insurance carriers 44,783 Durable Goods 38,054 Manufacturing 35,923 Financial activities 34,965 Total Private 29, ,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 Sources: Toyota, Center for Automotive Research, and the Bureau of Labor Statistics, Employment Series CEU Feb. 26, 2008: 3,650 direct employees Feb 29, 2008 By April 5, 2008: 40,000 assembly/ component employees + 40,000 lower tier suppliers March 7, 2008 March15, 2008 March 22, 2008 April, 5, ,650 => 80,000

5 Major Industry Challenges Economic cycle Credit crisis Price of energy Materials inflation Segment shifts Government mandates New competition Emerging markets New technologies Millions Down the Slippery Slope! Total U.S. Sales of Light Vehicles: Car MV/CSU/CUV Other Truck/Van Source: Ward s Automotive Reports Year

6 Capacity Utilization U.S. Automotive Manufacturing Sector Capacity Utilization YTD Source: Federal Reserve, data through June 2008 Year Percentage Change in U.S. Sales of Light Vehicles: YTD Through August: 2008 vs Total ,800,814-1,235,657 Im ports ,495,358-67,289 (25.5%) Int. Dom estics ,848, ,985 (29.1%) Korea ,218-10,345 (5.8%) Japan ,020, ,317 (41.0%) Big 3 Chrysler Group ,457,221-1,061,383 (45.5%) 1,076, ,802 (11.0%) Ford ,421, ,734 (14.5%) GM ,959, ,847 (20.0%) Updated 0909/ Source: Automotive News Percentage Change 12

7 Percentage Change in U.S. Sales of Passenger Cars: YTD Through August: : 2008 vs Total ,285, ,319 (53.9%) Imports Int. Domestics Korea Japan Big 3 Chrysler Group Ford GM ,766, ,382 (33.4%) 1,779, ,177 (33.7%) 401, ,414 (7.6%) 2,529, ,859 (47.9%) ,740, ,878 (32.9%) 346,398-93,660 (6.6%) 510,299-27,490 (9.7%) 883, ,728 (16.7%) Updated 09/09/ Source: Automotive News Percentage Change Percentage Change in U.S. Sales of Light Trucks: YTD Through August: 2008 vs Total Imports Int. Domestics Korea ,515,027-1,104,338 (46.1%) 729, ,671 (16.2%) 1,069, ,162 (23.7%) 164,305-51,759 (3.6%) Japan Big ,490, ,176 (33.0%) 2,716, ,505 (60.2%) Chrysler Group , ,142 (16.2%) Ford , ,244 (20.2%) GM ,075, ,119 (23.8%) Updated 09/09/ Source: Automotive News Percentage Change

8 Down Below 50% Detroit 3 3 U.S. Market Share 1986 August 2008 (Sales of Detroit 3 N. American owned production) Percent Source: CAR Research Ford GM Chrysler YTD Year U.S. Market Share Forecast Through 2011 (Sales of Detroit 3 N. American owned production) Detroit 3 Internationals Percent Year Source: CAR Research

9 Market Share: Segment Breakdown - U.S. LV Sales Through August: 2008 Pickup 14.4 Van 6.3 SUV 8.7 CUV 18.0 Luxury Car 7.6 Large Car 3.5 Middle Car 21.6 Small Car Percent Share Source: Ward s Automotive Reports Segment Breakdown - U.S. LV Sales YOY % Change Through August: 2008 Pickup Van SUV CUV -4.5 Luxury Car -9.6 Large Car Middle Car -3.1 Small Car Source: Ward s Automotive Reports Percentage Change

10 Ford Sales Performance by Segment YOY Difference thru August: 2008 vs Pickups % (28% of total Ford Sales) Contractors are buying fewer pickups due to housing market slump, pickups no longer viable for commuting SUVs CUVs % (8% of total Ford Sales) Explorer is selling poorly despite recent redesign, replacing this segment for most buyers Cars - 7.0% (38% of total Ford Sales) Reduced fleet sales and incentives CUVs -0.9% (18% of total Ford Sales) The Edge and Escape continue to sell well, Flex arriving in showrooms Source: Automotive News Data Center GM Sales Performance by Segment YOY Difference thru August: 2008 vs Pickups % (24% of total GM Sales) Contractors are buying fewer pickups due to housing market slump, pickups no longer viable for commuting SUVs % (13% of total GM Sales) GMT900 s and GMT360 s struggle Cars - 9.7% (46% of total GM Sales) Too much old product; Aura and Malibu to the rescue CUVs - 5.9% (11% of total GM Sales) Lambdas transform GM s CUV lineup Source: Automotive News Data Center

11 Chrysler Sales Performance by Segment YOY Difference thru August: 2008 vs Pickups % (18% of total Chrysler Sales) Contractors are buying fewer pickups due to housing market slump, pickups no longer viable for commuting Minivan % (17% of total Chrysler Sales) Transition to new platform, strong competition SUVs % (23% of total Chrysler Sales) New Wrangler, Nitro not offsetting struggling Aspen, Durango and Commander Cars % (32% of total Chrysler Sales) New Sebring not living up to expectations CUVs % (9% of total Chrysler Sales) Source: Automotive News Data Center Addition of Compass, Patriot, and Journey boosting sales Toyota Sales Performance by Segment YOY Difference thru August: 2008 vs Pickups % (13% of total Toyota Sales) Contractors are buying fewer pickups due to housing market slump, pickups no longer viable for commuting Minivans % (5% of total Toyota Sales) Strong competition, slumping segment SUVs % (5% of total Toyota Sales) Sequoia sales are up but the 4Runner is struggling Cars - 2.5% (62% of total Toyota Sales) Overall market weakness CUVs -14.0% (10% of total Toyota Sales) Highlander slumping slightly, RAV4 down nearly 20 percent Source: Automotive News Data Center

12 It s a Short-term Thing Right?? '" '# &" &# %" %# " # "" "#!" Big 3 Market Share and Historical Cost of Gas in Real 2008 Dollars ('%# ('%) ('%! ('% ('%& ('&# ('&) ('&! ('& ('&& (''# Year ('') (''! ('' (''& )### )##)!"#%&''(% )*+%,-./01%% 2345( )##! )## )##&!*)"!*## +*%" +*"# +*)" +*## )*%" )*"# )*)" )*## (*%" (*"# (*)" (*##,-./+/012345/ /:2-;49 Real 2008 US Dollars Sources: Energy Information Administration (EIA) April 2008 Monthly Energy Review; Bureau of Labor Statistics CPI Data; EIA Annual Energy Review 2006,Automotive News Market Data Books 96, 98, 03, 06-08

13 Light Truck Sales No Longer Immune to Gas Price Fluctuations Gasoline Prices Fall 01 GM-Keep America Rolling 11.2 M Summer 05 Big 3-Employee Discounts for All 12.6 M 9.3 M 7.4M 3.02 Light Truck Sales Monthly SAAR Nominal Gasoline Prices All Grades All Fuels 8.6M M Light Truck Sales SAAR (Millions) Jan-99 May-99 Sep-99 Sources: EIA, Ward's Automotive Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Recent New Vehicle Rollouts, Unfortunately

14 The Future... They will be Smaller Subtract 3,000 5,000 for Fixed Costs! Variable Profit by Segment Small Car 2,400 Mid SUV 4,700 Small CUV 2,900 Large Pickup 5,200 Small Pickup 2,900 Large SUV 6,800 Large Van 3,700 Luxury CUV 7,300 Mid Car 3,900 Luxury Car 8,400 Mid CUV 4,400 Large Luxury SUV 11,100 Minivan 4,600 Mid Luxury SUV 12,600 Source: UMTRI, WARD S AutoInfoBank and CIR Ests (CitiGroup Investment Research)

15 How Can This Be Maintained? Big 5 Research & Development Expenditures Billions GM Ford Chrysler Toyota Honda Big 5 Cash and Cash Equivalent st Half 2008 Billions bil mil./mo bil mil./mo GM FORD Chrysler Toyota Honda

16 Big 5 Operations Income ( Automotive Sector) st Half 2008 Billions GM FORD Chrysler Toyota Honda Source: Company 10-Ks, 2Q Qs, and company s press releases Not Much Time or Money Left... GM will be at 11 Bil. to 14 Bil. operating cash limit within 12 months. Sooner if Delphi folds and GM must fund Delphi s underfunded pension obligations and operational needs. Ford will be at its limit in 18 months. Chrysler LLC??? Institutional Debt Markets are closed to OEMs and Suppliers. Effective rates are at 15.5+% a year. Use Visa. Detroit 3 can borrow from no one... Lehman Bro. estimates GM will burn 11.3 Bil. more in cash thru end of 09 and must raise 7.3 Bil. in Capital. D-Bank estimates an 11.0 cash burn. GM may need to borrow 12.2 Bil. if overseas markets collapse

17 What Can Be Done? Sell Assets: But GM s Hummer, Mid-sized Truck, rest of GMAC, and OnStar have no bidders. Ford has pledged all assets against loans. Can sell Volvo/Saab for what? Issue Equity to retire and acquire debt spin-off international divisions and issue new shares for these subsidiaries. 10 Bil. at GM? Cut Costs. This is being done, but the bone is being cut... And the companies are shrinking. Ask the Feds for a 50 Bil. bailout Loan at T-Bill rate. Re-negotiate again with the UAW... Or Ch. 11. So... GM Will be the Size of Ford, and Ford the Size of Chrysler and Chrysler the Size of Change in North American Vehicle Production Capacity 8 7 About 26% since 2004, or 3.6 mil. units (2.0 million to cut from 2006) 6 Millions Source: CSM Worldwide 0 GM-2004 GM-2010 Ford Ford Chrysler Chrysler

18 GM, Ford, Chrysler, Delphi & ACH U.S. and Canadian Plant Shutdowns (Retreat to the Core??) Announced and Executed, Drayton Plains PC Lansing Craft Centre-2006 Flint North Components Oshawa Truck Lansing Metal Portland SPO Saginaw Malleable Livonia Engine Lansing M Twin Cities Wixom 2007 Massena Foundry GM, Ford & Chrysler Shutdowns: 36 Plants 45,500 in Announced Plant Shutdowns 19,000 Salaried Janesville Essex Engine 2007 Windsor Casting 2007 Conner Ave Maumee Stamping 2007 Delphi Job Cuts: 21 Plants 23,200 in Plant Shutdowns and Selloffs ACH Job Cuts: 14 Plants 21,400 in Plant Shutdowns and Selloffs 500 other salaried Shutdown Total = 111,100 Line Trimming, Sold, & Unidentified = 47,300 Total Impact = 156,800 Jobs Ford Shutdowns Chrysler Plant Shutdowns Delphi Plant Shutdowns ACH Plant Shutdowns Brook Park Casting 2010 Linden Newark 2009 Baltimore Pittsburgh Metal Norfolk 2007 Lorain Toledo South 2006 Moraine Batavia 2008 Indianapolis Metal St Louis South 2008 Atlanta 2006 St. Louis Doraville St. Louis Bulk Center 2009 Spring Hill Oklahoma City-2006 Updated: Aug 26, 2008 Direct Employment Intermediate Employment Spin-off Employment Total Employment Economic Impact of the Automotive Industry in Michigan, Ohio & Indiana % of Labor Force Total Wages ( Millions) Tax Revenues ( Millions) Average Annual Wages Lost Per Worker Indiana 10,906 15,075 25,392 51, % 3, ,29 5 Michigan 18,912 36,200 39,219 94, % 6, ,03 5 Ohio 14,000 25,265 34,608 73, % 4, ,21 1 Tri-State Total 43,818 76,540 99, , % 15,23 2 1,861 69,37 0 Rest of U.S. 40, , , % 8,486 1,133 58, TOTAL U.S. Losses 43, , , , % 23,71 8 2,994 64,94 5 Source: CAR Research, Regional Economic Models Inc.

19 The Darkest Part of the Tunnel Motor Vehicle & Parts Manufacturing Employment 1999 May 2008 Michigan Indiana Ohio U.S. State Level 400, , , , , , ,000 50, ,128, , , ,100 49% change 28% change 35% change 31% change 769, ,800 99,500 75, May ,200,000 1,000, , , , ,000 0 U.S. Source: BLS July 2008 Currency Moves in Favor of U.S. Production Euro Yen Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

20 Roads Heading South? International Supplier And Manufacturer Locations TX MITSUBISHI-NORMAL TOYOTA-PRINCETON TOYOTA-HUNTSVILLE TOYOTA-BLUE SPRING IL MS I-65 IN AL MI TN KY NISSAN-CANTON TOYOTA-SAN ANTONIO I-75 OH GA HONDA EAST LIBERTY HONDA MARYSVILLE HONDA GREENSBURG TOYOTA-SUBARU TOYOTA-GEORGETOWN NISSAN SPARTANBURG-BMW SC VOLKSWAGEN- CHATTANOOGA KIA-TROUP COUNTY HONDA-LINCOLN HYUNDAI-HOPE HULL MERCEDES BENZ-VANCE 39 Japanese U.S. Light Vehicle Sales: Transplants Imports Total Japan Sales Vehicles in Millions Sales in Millions Year Source: Automotive News

21 News in Europe MAR The US becomes a low-cost News in Europe FEB Suppliers asked to produce in dol

22 News in North America Headline News: Detroit to Export Cars! APR

23 VW Will Build Plant(s) for U.S. Production New Plants: Car Assembly of most likely VW Passat/Audi models Will likely need engine and transmission plants as well VW has confirmed that Chattanooga TN will home to new 800 million assembly plant VW must protect itself from the rising Euro; has announced very ambitious goals for N. American sales Emerging Global Vehicle Development Centers of Expertise a lot of vehicles we don t build... Yet Vehicle Segment Location Prominent Example Small Cars Korea, Germany GM/Daewoo, Astra, Cruze Mid-size FWD Cars Germany, Japan Next GM Saturn Aura Mid-size/Large RWD Cars Australia, U.S. 09 Camaro, Future Mustang Luxury RWD/FWD U.S. Cadillac, Buick Small CUVs Korea, Europe Hyundai Santa Fe, Opel Antara Mid/Large CUVs U.S. GM Lambda Platform Small SUVs/Pickups Brazil GM/Isuzu, Ford Full-size SUVs/pickups U.S. Big Three, Toyota, Nissan

24 The U.S. Market: Mature but Will Grow Again Sales (Millions) Source: CSM Worldwide Year So, Does the Industry Need a 50 Billion Loan Guarantee? (not a bailout) Economically significant industry Unfunded mandates