United States Autos Report Q2 2009

The future of two major US carmakers looks increasingly uncertain after viability plans submitted to the government failed to secure the aid they were looking for. At the end of March, General Motors (GM) was given 60 days to step up its restructuring efforts after CEO Rick Wagoner was asked to leave, while Chrysler LLC has half that time to secure a tie-up with Italy's Fiat. On the upside, a bounce in March's sales figures has brought the annualised rate for 2009 further in line with BMI's forecast in its latest US Automotives Report. This was achieved by record incentives to the tune of US$3,169 per vehicle.

In other positive news, the supplier segment has been thrown a US$5bn lifeline from the Department of the Treasury. Its Supplier Support Program will provide guarantees for outstanding supplier debts. An industry source quoted by Automotive News has said that the US$5bn covers around 45 days of supplies, which represents a standard payment cycle. The Treasury said that suppliers will gain access to the funds by selling receivables to the government for a fee. On the downside, the aid is nowhere near the US$18.5bn that suppliers associations have been asking for since December. Moreover, in the short to medium term, suppliers should be braced for further slumps in vehicle production. BMI forecasts further declines to below 8mn units by 2012.

Despite its current crisis, the US currently ranks second in BMI's Business Environment Ratings for the Americas, on 63.9 out of a possible 100. The US has a negative forecast in terms of output and sales growth. While this is testament to the extent to which the market has developed its potential, it also reflects the limits that carmakers operating in the US are currently facing. As a developed market, however, it scores highly for its country structure and transparency of business.

The uptick in March sales does not reflect a turnaround in the fortunes for either the industry or individual carmakers. GM, Chrysler and Ford Motor registered respective declines of 44.7%, 39.3% and 40.8% that month. GM and Ford, following the lead of South Korea's Hyundai, have introduced schemes to cover loan payments for customers facing redundancy. The company could prove to be a well-chosen role model. On the back of this Hyundai Assurance Plan, sales for March and Q1 in total were respectively down by 4.8% y-o-y and up by 0.5%. Its South Korean affiliate, Kia Motors, also registered a strong performance, with sales down by just 0.6% in March and up by 1% in Q1.