Industry Survey: US Not Out Of The Overcapacity Woods Yet

Cammy Corrigan
by Cammy Corrigan
industry survey us not out of the overcapacity woods yet

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.

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  • Contrarian Contrarian on Jan 07, 2010

    Not surprising really. Given the new transplant factories, I suspect we still have NA capacity for 14 or 15M vehicles. And plan to sell 11M this year.

  • Dwford Dwford on Jan 07, 2010

    Well, we can fix the impending Chinese and Indian car problem easily by banning them outright until US exported vehicles can be sold unrestricted in those countries.

  • Njoneer Njoneer on Jan 07, 2010

    US overcapacity is about the size of GM and Chrysler. Coincidence?

    • Ihatetrees Ihatetrees on Jan 07, 2010

      Yeah, but some of that capacity would be acquired and used after a proper bankruptcy. A spin off such as "Silverado Motor Corporation" that focused on trucks & SUVs would do fine. Hell, Toyota might consider partial ownership. Think of the option choices. Imagine an IFORCE V8 Silverado or a small block Tundra... The capacity has to go somewhere...

  • Segfault Segfault on Jan 07, 2010

    No way. China will demand that we purchase their vehicles in exchange for their purchasing our debt. There will be quotas.

    • Dwford Dwford on Jan 07, 2010

      Or, we could just get the Federal Budget under control....hahahaha, just kidding.