The bad news keeps getting worse for the North American auto industry and its suppliers, which had just settled in for one expected downturn in sales, only to get blindsided by a wider economic crisis that has threatened to bring sales and production nearly to a halt.
In the fallout, automakers are shutting down production of some vehicles to clear inventory, and suppliers are laying off employees to keep pace with their customers.
``If people don't buy cars, it echoes through the entire supply chain,'' said Jim Gillette, director of supplier analysis with CSM Worldwide, an automotive research company based in Northville, Mich.
Flex-N-Gate Corp. of Urbana, Ill., will lay off 460 of the 660 workers at its DDM Plastics injection molding and painting facility in Woodstock, Ontario, and is closing a metal stamping plant in Danville, Ill. It cited the sagging auto industry in notices about the layoffs and shutdowns.
Johnson Controls Inc., with auto operations based in Plymouth, Mich., previously announced plans to restructure its global automotive supply operations, reflecting a slowing industry. Now it is cutting 100 jobs from its JCIM LLC interiors molding plant in Chicago as customer Ford Motor Co. cuts back production at its Chicago assembly plant to one shift.
Gillette said in an Oct. 9 telephone interview that he's spoken to one supplier that had three plants at the beginning of the year, and is now consolidating down to one.
All that downsizing is taking place as the auto industry tries to come to grips with the latest shock to its system a tightening credit market that is keeping buyers out of showrooms.
``[Sales] were down, but we were kind of happy with the way things were going through the second week of September, and then buyers just went on strike during the third week of September,'' Gillette said.
That was the week Treasury Secretary Henry Paulson began trying to sell Congress on the need for his $700 billion bailout plan, and consumers began to get a bigger picture of the global credit crisis.
``All this brouhaha and drumbeat has got to have people scared to death,'' Gillette said.
The slowdown has left cars unsold on dealer lots General Motors Corp. even closed the Bowling Green, Ky., assembly plant that makes the composite-bodied Chevrolet Corvette and Cadillac XLR for the week of Oct. 6, because of excess inventory for the first time ever.
Forecasters now are cutting their production and sales estimates. J.D. Power and Associates is predicting total retail sales of 13.6 million cars in North America this year, down from 16.1 million vehicles in 2007. Earlier this year, forecasters had expected total retail sales of about 15 million cars and trucks.
Ford President and Chief Executive Officer Alan Mulally warned reporters at the Paris auto show that he doesn't expect to see a recovery until 2010.
And that's not all. J.D. Power, based in Westlake Village, Calif., expects auto sales to slow globally, including a drop of 3.1 percent in Europe. Sales in China and India still should grow, but at a slower rate than first expected.
``We're still trying to feel where the bottom is, and until we do that, it's risky to talk about when things are going to get decent again,'' said Bob Schnorbus, chief economist for J.D. Power. ``My concern is that in this economy especially more so than in 2001 the consumer is just right in the vortex of everything that is going on that's bad.''
That means little cash for new cars. Incentives and offers like zero percent financing can help, but sales are still fighting huge financial headwinds.
Gillette said the current situation is as bad as the automotive slowdown of the early 1980s, and in some ways suppliers may find it worse. Back then, most companies were coming off a fairly profitable period, and they could withstand the hardships a little better. This year, the industry is entering a time of bleak sales after years of struggles that have already seen bankruptcies at major firms.
``We've been expecting to see more bankruptcies and closures,'' he said. ``I really am concerned about the situation.''
Schnorbus said he expects conditions to remain tough at least through the end of this year and the beginning of 2009, but the situation could begin to improve during the second half of next year.
``The recovery in the auto sector is going to be slower than it normally would be,'' he warned.
It may be too late now for suppliers to diversify their customer bases and try to get more parts on smaller cars, to see any improvement in the next few months, Gillette said. But suppliers can focus on bringing innovative parts to the market for future products that will put them on the right track once the industry turns around.
``We're in a fix, but I remain positive that we'll pull out of it,'' he said.