New vehicle sales in the U.S. finished 2008 at a dismal annual sales rate of 13,194,563 units-that's a considerable 22 percent less than 2007 sales of 16,089,222. Unfortunately for the struggling auto industry, the outlook is not much better for 2009.
As quoted in the Detroit Free Press, Autodata Corp. states that, "Earlier this month, automobile industry analyst CSM Worldwide revised its 2009 U.S. auto sales forecast from 10.7 million down to 9.7 million, partly based on the assumption that the nation's unemployment rate will peak at 9.4 percent later this year." To put the gravity of these numbers into perspective, U.S. consumers have never purchased fewer than 10 million vehicles in any calendar year since 1970. The depth of the problem becomes even more apparent when you consider that there only were 203 million people living in the U.S. in 1970, compared to 307 million today. The decline in sales has also reached global proportions.
While all of the talk lately, and for quite some time now, has pointed the spotlight directly on the "Big 3" domestic carmakers, they aren't the only ones suffering. While General Motors, Ford and Chrysler are likely to report unprecedented sales declines of between 46 and 49 percent for March 2008, Edmunds.com predicts sales at Honda, Nissan and Toyota will fall 43 percent, 43 percent and 40 percent, respectively.
What does this mean for the collision repair industry?The shuttering amount of assembly plants, sheet metal stamping plants and parts suppliers teetering on the verge of bankruptcy could spell trouble for the nation's collision repairers, auto insurers and vehicle owners. And like the rest of the industry, the plight of OEM parts suppliers has not escaped the new administration's attention. In late March the Obama administration signaled its intent to provide broad relief to the American auto industry by creating a $5 billion fund to aid troubled OEM parts suppliers. If these companies fail, the effect would be epic, shutting down the flow of vital parts to automakers and almost immediately further slowing both new vehicle production and cycle time of collision repairs as shops would need to search for alternatives to backordered parts.
According to Treasury Secretary Timothy Geithner, the $5 billion fund, which is part of the Troubled Asset Relief Program, would keep factories like tier one auto parts supplier Visteon running while the industry undergoes a much needed wider restructuring. Despite many analysts predictions that Visteon would miss it's bond payments, it met a deadline and made a major payment on outstanding bonds, avoiding a default that had threatened to send the company into bankruptcy protection and threaten the operations of many of Detroit's heavy hitters. Though it was spun off from Ford Motor Company, in 2000, Visteon is still a major supplier to Ford and other Detroit based automakers. Despite all of the economy's turmoil, many in the auto industry remain positive.
I recently spoke with General Motors Collision Parts Manager, Ron Doerr, who said, "Our collision parts supply chain fill rates through our dealers is constantly monitored and continues to perform at levels well in excess of 90 percent as designed. Over the years we have developed a very structured approach to addressing potential shortages for any service part. But I think it's also fair to say that we have been going the extra mile to identify and mitigate threats to our parts availability performance. At this stage, we don't expect the market to experience any unusual changes in our Genuine GM Parts availability at your local dealership."
Similarly, George Gilbert, Crash Parts Sales Manager for Ford Motor Company, commented saying, "During these difficult economic times, we all constantly struggle with the conflict between meeting the needs of your customers and cost containment. However, I am pleased to tell you that from my perspective, Ford Motor Company has decided that customer satisfaction has the edge over cost containment. That means we are committed to supplying our dealer network with as many collision parts as they are willing to order. And on the dealer front, a recent survey indicated that while there has been some reduction in dealer inventory levels, the reduction is not as dramatic as one would have expected. I expect our supply fulfillment levels to continue unless economic conditions take a dramatic turn for the worse."
The entire auto industry is in a state that we have never experienced before. The news that Visteon avoided bankruptcy combined with reports from both Ford and GM stressing that they are doing everything they can to keep the collision industry supplied with OEM parts, collision parts will remain in the supply chain at current rates-at least for now. What will the situation be at the end of the year? It depends on new car sales volume and if the Obama administration accepts GM and Chrysler's revised restructuring plans. For now, if you are experiencing parts shortages, it's likely to be due to the reduced collision parts inventory at the dealer, not an issue with the manufacturer or supplier.
