GM to Cut Workers, Production Auto giant says it will idle factories for as many as three weeks in January ‘to adjust production to market demand’
General Motors Co. said it would lay off nearly 1,300 workers at an assembly plant in Detroit beginning in March and temporarily cut production at several other factories next month, the latest auto maker adjusting to softening demand after a seven-year growth spurt. (…)
Earlier Monday, GM confirmed that it will cut car production at five U.S. assembly plants for one to three weeks in January, mostly to reduce swollen inventories. The nation’s largest auto maker by volume entered December with about 873,000 vehicles on dealer lots, 26% more than the same time a year earlier and the highest mark for the month since 2007, according to researcher WardsAuto.com. (…)
Through November, U.S. passenger-car sales slid 8%, while sales of crossover SUVs, pickups and other light trucks rose 7%, according to research firm Autodata Corp. (…)
We have seen this one coming. Car sales have been weakish even with higher and higher incentives. Last week in Edge and Odds:
Last month’s stockpile of 4 million vehicles, or a 73 days’ supply, is the highest level recorded for a November, according to WardsAuto.com. Haig Stoddard, a Wards analyst, said last week that auto makers will need a strong sales performance in December to keep first-quarter production schedules intact.
Average incentives, including rebates and discounts, reached a record $3,542 per vehicle this year, market-research firm J.D. Power said. Though transaction prices have averaged a record $31,044 in 2016—driven primarily by customer migration to pickups and SUVs from cheaper cars—the 9.9% discount offered on those vehicles exceeds the previous high set in 2008, when sales were collapsing.
In addition to conventional rebates, auto finance companies are making deals with an increasing number of buyers who have negative equity on the cars they are trading in. J.D. Power estimates that 31.3% of buyers in November were upside down—meaning they still owed more than the vehicle was worth—on their auto loan, the highest level since June 2006.
December sales do not seem strong enough to delay the inventory correction.
In October, Ford announced that it would temporarily shut down production at one of its F-150 assembly plants (Kansas City), along with production at a plant that assembles the Escape and the Lincoln MKC (Louisville), plus two plants in Mexico. It would also lay off about 13,000 workers, 9,000 in the US and 4,000 in Mexico. Ford’s inventories on dealer lots at the end of November edged down from a year ago to 649,800. But that too amounts to 83 days’ supply overall, and 88 days for cars.
And Fiat Chrysler decided to discontinue two car models, the Chrysler 200 and the Dodge Dart, in what is becoming a very tough environment. It’s inventories soared 5% in just one month to 596,500 vehicles on dealer lots at the end of November, a dizzying 93 days’ supply overall (up from 76 days a year ago). Its supply of cars has surged to 103 days. (Wolfstreet.com)
- Add the tsunami of cars coming off-lease in the next 2 years:
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And the finance bubble: Delinquencies Rise on Growing Volume of Subprime Auto Loans The number of subprime auto loans slipping into delinquency rose to the highest since 2010 in the third quarter and is following a pattern much like the months heading into the 2007-09 recession.
(…) New auto loans to borrowers with credit scores below 660 have nearly tripled since the end of 2009. So far in 2016, about $50 billion of new auto loans per quarter have gone to those borrowers. About $30 billion each quarter has gone to borrowers with scores below 620, which are considered bad. (…)
So, housing is weak, autos are weak and November retail sales were soft with negative revisions to October. Meanwhile, interest rates are rising across the board. Better have a good Christmas, otherwise Q1’17 could prove pretty soft.
On the positive side, the December flash Manufacturing PMI signalled a “robust improvement in manufacturing sector business conditions” while the flash Services PMI “revealed an acceleration in jobs growth for the third month running” prompting Markit to forecast “a respectable 190,000 increase in nonfarm payrolls in December”.
On the other hand, the same survey mentioned that manufacturers have boosted both pre-production and finished goods inventories in December…
German business climate indicators (ifo) surprised to the upside.
- Will industrial production follow?
Source: @jsblokland via The Daily Shot
Italy Paves Way for a $21 Billion Aid Plan for Ailing Banks
The Italian government moved closer to a potential rescue of lenders including Banca Monte dei Paschi di Siena SpA by seeking permission from parliament to increase the nation’s public debt by as much as 20 billion euros ($21 billion).
The plan is aimed at providing a backstop to the banking system “through public guarantees in order to restore their short- and medium-term lending ability,” Finance Minister Pier Carlo Padoan said following a cabinet meeting Monday night. The funds could also be used “for capital-strengthening programs of banks within recapitalizations that include the sale of shares,” he added. (…)
Why not, given that the ECB will buy most of the new debt at rock-bottom interest rates…Simpler than Greece, isn’t it?