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Automakers' Overcapacity Problem
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A shocking fact about oversupply in one crucial industry. Automakers worldwide have the industry capacity to make 94 million vehicles. According to researcher CSM Worldwide the current sales in late 2008 reflects demand for 60 million vehicles worldwide. This is about 34 million extra vehicles and represents about 100 plants. Toyota has already cut production in Japan by 27% in November, the biggest cuts seen at Toyota in 30 years. The numbers for 2009 will reflect a deepening downturn from higher unemployment and lower spending. Not all of this capacity wil be cut as automakers will look for a rebound as customers replace aging vehicles, but as sales decline in Russia, China and emerging markets and in the USA and Europe, some consolidation will take place and many plants will have to close in the US, China, Portugal, Italy and Spain.
Huge manufacturing overcapacity in the global auto industry.
12/31/2008
During the boom years manufacturers kept building new plants which suggested overcapacity even at the markets levels of the time. Now with the market sales down by 30-40%, there is huge manufacturing overcapacity. As much as 34 million vehicles or 100 plants may no longer be needed, if sales remain at the new level of 60 million vehicles wordwide for years. The situation in 2009 and 2010.
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How the automakers overcapacity by about a third of the 94 million capacity worldwide will play out similiarly over time in other industries.
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The automakers with their huge overcapacity face a rapidly developing crisis, as they will be forced to close plants quickly. A similiar situation is likely to develop gradually in other industries that have overcapacity from falling sales and a reluctant consumer, who is now focussed on saving.
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