The most urgent question facing the global automotive industry in 2009 is, how much farther will it fall?
And for carmakers and suppliers alike, the follow-up is whether they can survive the crash.
``Global automotive production is significantly worse than just two months ago,'' said Stephen Roell, chairman and chief executive officer of Johnson Controls Inc., a Glendale, Wis.-based company that makes auto interiors and batteries.
``Our customers continue to announce production reductions and plant shutdowns on a weekly basis. Every region of the world is down by a double-digit rate, with virtually every automotive customer affected.''
U.S. auto sales were down 20 percent for Ford Motor Co. in 2008 — and Ford is in better shape than rivals General Motors Corp. and Chrysler LLC. GM's U.S. sales were down nearly 23 percent for the year, while Chrysler's sales dropped 30 percent for the full year and 53 percent in December alone, compared to December 2007.
Detroit-based GM and Auburn Hills, Mich.-based Chrysler both needed an infusion of cash through loans from the U.S. government just to stay in business for the next few months.
And these months will be crucial. Industry analysts with CSM Worldwide Inc. of Northville, Mich., are projecting that automakers will make 11.9 million vehicles in 2009, down from 12.9 million in 2008 and 15.4 million in 2007. CSM also is hedging that projection with a ``pessimistic'' scenario that could see the number fall as low as 11.1 million, and an optimistic possibility of 12.5 million vehicles.
JCI, in a Dec. 16 news release, noted it is taking an even more conservative approach for its business planning, with an estimate that only 9.3 million vehicles will be made in North America, with the biggest blow hitting the industry in the first quarter of 2009.
If JCI is right, it would mark the first time since 1982 that the North American auto industry has dropped below a production level of 10 million vehicles.
U.S.-based automakers are not alone in feeling the pain. Toyota Motor Corp., for example, saw its 2008 sales drop 8.4 percent in the U.S., and will post its first financial loss in decades.
Europe is expected to see its production slump as well, with CSM projecting that the region — not including Russia, which is counted separately — will make 18.8 million cars, compared with 19.7 million in 2008.
That production slowdown is now trickling down the supply chain as companies try to adjust to their customers' schedules, and not every firm will make it, said Jeff Mengel, a partner with consulting group Plante & Moran PLLC in Chicago.
``There are companies waiting in the wings [for bankruptcy] as they try to weather four weeks with no cash flow,'' he said.
Visteon Corp., based in Van Buren Township near Detroit, put the bulk of its salaried workforce at its headquarters on a four-day work week — with matching four-day pay — to cut costs.
Johnson Controls, which is better financial shape in part through its nonautomotive business units in heating and building controls, is slashing its capital expenditure plan for 2009 to about $600 million from a previously planned $975 million. The bulk of the cuts will come by eliminating expansion plans in the auto industry.
It's not just a matter of cutting salaries or putting off future projects, though, when it comes to charting a path through 2009. Nearly every company is struggling. Efficient molders may have invested in automation and robotics to control their personnel costs, but that means they have more cash put into machines and other fixed costs that cannot be scaled back, said Jim Gillette, CSM director of supplier analysis.