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Strategies & Market Trends : New US Economy Policy
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To: Arthur Tang who wrote (248)10/29/2000 7:22:08 AM
From: Arthur Tang  Read Replies (1) of 435
 
Recent news of Ford shut down of Explorer production for two weeks is followed by Chrysler shut down of their production of several models for one week. GM is now known to have poor sales of their models, not stylish enough for the American public.

This all came after the attempt to deliver 17.5 million cars last model year. The lots at the dealers are full of last year's models not yet liquidated. Most people think it is the result of overestimating the economy and its resiliency to absorb overproduction. Fortunately, the overproduction may be adjusted by one or two weeks of shut down of plants. But the price concessions will be severe this year. Analysts estimate that this year the production will be down 5% from 17.5 million cars. I am estimating the production will be 7 to 10% down from the record production. Which will still be a good year for all automakers if they don't take a loss on plant shut downs, except that the public will enjoy a better bargaining position.

Traditionally, the auto production varies from 15.0 to 16.5 million cars produced each year. It did not depend on economy, but rather it depends on styling. New car designs drive the production runs. As the designs get stale, the demand wanes. Crossover design and styling created a 17.5 million car market. But it also created a soft used car market; too much trade ins. The American consumers will finally get a break.
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