With the world starting to gain stability economically and economists talking about “bull markets” you’d be forgiven for thinking we can start to be optimistic and why not? Ford are flying high, GM (prodded by the government) are adding third shifts and Chrysler’s sales “only” dropped 3.7% in December. Well, don’t be too sure. CNN Money reports that a survey conducted by KPMG of 200 auto and supplier executive showed that 88% of them believe there is still too much capacity in North American plants. In fact, the survey showed that the executives believe that overcapacity is a bigger problem today than a year ago and when you look at the figures, it’s a bit of a no brainer.
Wards Automotive estimates that with all the plant closings in North America, capacity was cut by 1.5 million to 18 million. But in 2009, only 10.4 million cars were sold and forecasts only predict the level rising to 11.5 million for 2010. “Despite the fact we’ve taken out capacity, if volumes remain low we will continue to be in an overcapacity situation,” said Betsy Meter, the auto industry audit leader at KPMG. The survey also showed that the executives believe that there will be more mergers and consolidation which will force the plant closings which the industry needs. And if the mergers and consolidation don’t bring about the productions cuts, then the impending Indian and Chinese invasion will.