Sales and Spending Continue to Slump in the U.S. Automotive Sector

---

Researched by Industrial Info Resources (Sugar Land, Texas)--The continued slide of the United States automotive market has almost reached legendary status. Even with the approval of a $25 billion low-interest loan bailout package by Congress just weeks ago, the automotive sector continues to slump. September sales numbers show negatives across the board, even with the foreign automakers who had been riding the storm out quite well until recently. As a result of almost nonexistent sales, spending has also taken a severe hit in the U.S. within the sector.

Click on the images at right to see a figures of September auto sales.

The sales figures for the past few months have been very disheartening for the industry as a whole. The worsening crisis on Wall Street combined with the continued credit crunch, housing market collapse and high gas prices have kept consumers off auto lots. In numerous cases, the sales figures have been so dismal automakers are reducing the number of dealerships by closing or selling their facilities in many cities.

Nissan North America Incorporated (Smyrna, Tennessee) took the largest hit in September sales, with a 36.8% decrease in monthly sales compared to September 2007. Ford Motor Company (NYSE:F) (Dearborn, Michigan), Chrysler LLC (Auburn Hills, Michigan) and Toyota Motor Manufacturing North America (NYSE:TM) (Torrance, California) all also posted monthly sales losses of over 30%. General Motors Corporation (NYSE:GM) (Detroit, Michigan), somewhat surprisingly, managed the smallest loss for the month with sales down only 15.8%.

As sales continue to plummet across the board, the automakers are lessening both capital and maintenance investment in the U.S. With no sales to back up expenditures, it is simply not good business sense to spend money until the overall economic situation improves in the country. In 2007, automotive-sector spending was just shy of $12 billion in the U.S. Almost 500 capital and maintenance projects began during that year within the automotive sector. However, the spending numbers for 2008 are slightly more than half last year's amount. Only 300 capital and maintenance projects have begun or will begin construction during 2008 in the U.S., representing $6.1 billion in total investments. Spending for 2009 is expected to be even worse, with only $1.4 billion in project work currently scheduled.

The only reason automotive sector spending reached $6 billion this year was because of a few select large projects that began construction earlier in the year before the full brunt of the economic crisis hit the automotive sector. Toyota began construction on its grassroot plant in Mississippi in the late spring of 2008. Even this project, which had been announced and begun site work in late 2007, has been affected however. Originally, the new facility was going to assemble Highlanders, Toyota's high-end SUV. However, as the economy began to decline and automotive sales plunged, Toyota decided to alter their plans and produce the Prius at the new plant once it is completed in early 2010.

All indications are that it is going to be a tough winter for the automotive sector in the U.S. and probably a tough spring and summer as well once we get into 2009. Massive effort and a lot of money will be needed to clean up the mess on Wall Street and to restore consumer confidence. Until that occurs, however, the automotive sector will continue to see sales drop. Some capital investment will continue throughout these tough times, but as we saw in 2008, most auto companies will extend maintenance rather than spend significant capital dollars in this country until the economic and sales situation stabilizes.

View Plant Profile - 1072272
View Project Report - 03002945 03002856

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.