Shining new, latest design and impossible to sell: Car trade in crisis

New cars wait to get loaded onto trucks

THEY sit parked in rows stretching as far as the eye can see, destined for a prolonged battering from the wind and rain as the global economic turmoil stalls sales. The world’s carmakers are also going nowhere fast, some teetering on the brink as they seek massive bail-outs to stay in business.

Britain’s manufacturers felt the chill yesterday, with Honda announcing a two-month halt to production at its Swindon plant from February.

It came as BMW’s Mini factory in Oxford closed for three days ahead of an extended Christmas break because of falling sales.

In a further sign of the gloom enveloping the industry, car production fell by a quarter last month to the lowest level for 17 years. Commercial vehicle making sank even further, down by 41 per cent.

Buyers, nervous about their financial security, are deserting the showrooms, with the trade in Scotland suffering its largest drop in sales last month since the early 1990s. Registrations plunged by 26 per cent to 10,190 compared with October last year.

Consumers are worrying about having less to spend, while also finding it increasingly difficult to secure loans because of the credit crunch. The top end of the market in the UK is facing the sharpest pinch, with Lotus producing half its previous 50 to 60 cars a month.

The industry is pinning its hopes on the Chancellor, Alistair Darling, and his Pre-Budget Report on Monday. It wants improved access to finance, vehicle road tax increases to be scrapped and more tax breaks for company fleets.

Geoff Hoon, the Transport Secretary, said: “These are tough times, but what we need to do is rebuild consumer confidence, and the Chancellor has that at the top of his agenda.”

Meanwhile, the three largest carmakers in the United States have ten days to convince Congress of the need for a $25 billion (£17 billion) bail-out package, which it declined to approve on Thursday. Ford, General Motors and Chrysler said they would collapse within weeks without the emergency lifeline after using up nearly $18 billion in reserves in the past three months. At risk are the jobs of 750,000 workers in the motor city of Detroit, along with nearly the same again among suppliers.

However, company chiefs did themselves no favours by flying to Washington DC in private jets. To compound it, they declined a call by a congressman for the executive planes to be sold and for them to return home on commercial flights.

Analysts believe the automotive giants need massive restructuring to cut costs and refocus production to smaller, more economical models. Sports utility vehicles, a mainstay of the car firms, have swiftly fallen out of favour after rises in the cost of fuel this summer.

In Germany, the GM subsidiary Opel is seeking £848 million in government aid.

Honda said it would not produce any cars in the UK in February and March following a “dramatic change” in the global market. None of its 4,800-strong Swindon workforce, which makes the Civic and CR-V, will lose their jobs. However, production in the year to March will fall from 228,000 to 175,000 cars.

Analysts said some major car makers might go out of business. Those such as Ford, which depend heavily on car-loan income rather than just sales, might be most at risk. Mike Allen, of the stockbroker Panmure Gordon, said: “The industry is under extreme pressure and there is no sign of sales improving.

“Manufacturers are continually cutting back production, but what causes them the biggest problems is in the financing side of the business rather than sales, which only makes a small profit.”

In the UK, one of the key measures being sought from the Chancellor is car finance companies being given access to similar funding to banks through special liquidity arrangements. Mr Allen said firms were storing more and more imported cars after they arrived in the UK. He said: “Sales have been falling for some time, but some manufacturers have only just started scaling back.”

Industry leaders said help from the Chancellor would be vital in protecting jobs. Paul Everitt, the chief executive of the Society of Motor Manufacturers and Traders, said: “The motor industry faces a set of unprecedented market conditions.

“The dramatic falls in demand for new vehicles … combined with the limited availability of funding and liquidity now puts at risk valuable industrial capability. Urgent action is required to boost demand for new vehicles and ease pressure on UK automotive suppliers.”

Backing the call, the AA said a bail-out like the £11 billion pumped into the ailing British Leyland in the 1970s would fail. Edmund King, its president, said: “Consumers are scared to spend and are finding it more difficult to borrow. So rather than a Leyland bail-out to avoid a massive car crash, European and UK government assistance could help with access to finance.”

Jay Nagley, the managing director of car industry analyst Spyder Automotive, said: “Britain is currently one of the cheapest places to make cars, but Honda’s announcement is worrying because they are clearly not expecting an improvement any time soon. Everyone is now assuming things will not recover until at least 2010.”

There are, however, glimmers of confidence in the beleaguered industry. Toyota yesterday launched its new Avensis at its plant in Derbyshire. Lord Mandelson, the Business Secretary, said Toyota’s total investment of more than £2.5 billion in the UK underlined its commitment. He said: “The government will continue to work closely with companies like Toyota to secure future investment and ensure that the UK remains the location of choice for manufacturers, however large or small.”

Meanwhile, at the Los Angeles Auto Show, luxury marques were optimistic, with Rolls-Royce’s US sales up by nearly a third and Maserati’s by 10 per cent from January to October.

IN NUMBERS

$25 billion
Rescue deal sought by US’s three largest car-makers

$18 billion
Cash reserves they have used in the past three months

1 billion
German government aid being sought by Opel

850,000
UK motor industry employees

195,000
UK car manufacturing employees

247,000
People employed in UK car manufacturing 15 years ago

750,000
Ford, GM and Chrysler employees in the US

25.1 per cent
fall in UK carmaking last month

26 per cent
Year-on-year reduction in Scottish new car sales last month

10,190
New cars sold in Scotland last month

2.15 million
New car sales forecast for 2008

1.92 million
New car sales forecast for 2009

45.6 per cent
Proportion of new cars sold last month which are diesels

45 per cent
Discounts on some cars on online sales sites

23 per cent
Reduction in the value of a one-year-old Mercedes Benz S320 CDI

CASE STUDY: Auction offers a real bargain

BRIAN Stoker found a bargain at yesterday when he bought a one-year-old Vauxhall Vectra estate for £6,000. The 48-year-old from Balerno, Edinburgh, made the buy at an auction in Livingston.

He said: “I had been thinking about buying a car, although in the past I had always bought from dealerships.

“When I mentioned to a friend I was thinking of buying a second-hand car as my old one was on its last legs, and that I wasn’t too bothered about the colour of it, he said I should go to an car auction.

“My friend is very experienced in these things and he said that the bottom had fallen out of the car market, but that prices were unlikely to fall any further.

“Going to the auction was nerve-racking, and I would not recommend it to anyone who didn’t know what they were doing. You have barely 20 seconds from the moment the engine is switched on to the moment it is driven into the auction ring and the bidding starts,” Mr Stoker said.

“During that time you have to listen to the engine and decide whether or not it’s OK. I had to rely on my friend who’s a trained mechanic to judge the car’s health. The auction process itself is terrifying, you can’t tell who else is bidding and you can’t even tell immediately if you have won.

“Of course, in buying from the auction, it means I don’t have the guarantees that come with a dealership.

“My last car was a Honda estate, which I bought from a Honda dealer five years ago, and I went back a couple of times with problems, so it might prove yet that I’ve got a pig in a poke. But, having said that, a brand-new Vectra estate would cost £18,000 brand new.

“Second-hand from a dealership, I’d expect to pay something like £8,000. So as long as it proves to be reliable, then it will be the best value car I’ve ever had.”

FACT BOX

LUXURY cars are becoming available without the matching price tag because of soaring depreciation rates, according to industry experts.

The looming recession has significantly cut the resale value of large luxury saloon cars, research by EurotaxGlass’s, the publisher of Glass’s Guide, shows.

The model experiencing the greatest increase in depreciation has been a Mercedes-Benz S320 CDI, which has lost 23 per cent of its value in a year – from £43,350 last November to £33,250 now.

A Jaguar XJ 2.7tdi Sport Premium automatic lost 21 per cent of its value, down to £24,100. An Audi A8 3.0tdi Quattro Sport automatic was down 14 per cent to £26,325.

Other examples include a BMW M6 coupe automatic, which lost 22 per cent of its value, to £42,850, and a Porsche 997 3.6 cabriolet automatic lost 16 per cent to £48,825.

The firm’s latest depreciation guide, for December, will show the Alfa Romeo 166 2.0/3.0/3.2 four door is the car which loses the most value in three years or after 12,000 miles, when it is worth just 12 per cent of its sale price.

Second worst is the Rover 75 1.8/2.5/4.6 four door saloon, at 14.6 per cent, with fellow Rover model, the 451.6/1.8/2.0TD & MG ZS 1.8/2.5 four or five door, third bottom at 15.9 per cent.

The Saab 9-5 2.0/2.3 four door saloon is in fourth place at 17.4 per cent, with the Kia Magentis 2.0 four door saloon fifth at 17.5 per cent.

FACT BOX

07 plate Lexus IS250 SE

Cost new – £27,888
On sale from £14,988

08 plate Ford Mondeo 2.0 TDCi Zetec/Titanium

Cost new – £19,345
On sale from £11,988

08 plate Citroën C4 1.6i VTR+ 16v

Cost new – £15,045
On sale from £8,488

08 plate Avensis T3 S 2.0 D4D

Cost new – £18,495
On sale from £12,995

Brand new Citroën C5 1.8i 16v SX

Cost new – £16,045
On sale from £12,988

SOURCE: ARNOLD CLARK

08 plate BMW 5-Series 525i SE Auto 4 Door

Cost new – £32,340
On sale from £27,664

08 plate Audi A3 1.4T FSI

Cost new – £16,650
On sale from £14,827

08 plate Ford Focus 2.0 TDCi 136PS

Cost new – £20,645
On sale from 15,659.

08 plate Volkswagen Golf 1.4 TSI 160PS GT 3dr

Cost new – £18,400
On sale from £16,367

08 plate Honda Civic 1.8 Vtec ES Auto

Cost new – £18,380
On sale from £16,717

SOURCE: BROADSPEED.COM

Published Date: 22 November 2008
By ALASTAIR DALTON

Source: The Scotsman