Carlos Ghosn sees Old Testament wrath facing auto industry.
Dire forecasts continue to proliferate around the car business but the prize probably goes to Renault-Nissan Carlos Ghosn, who is warning that the global automakers are facing the equivalent of the Old Testament’s seven lean years.
Ghosn warned during an economic conference in Saudi Arabia that, “This is going to be a long recession.,” He predicted world auto sales would fall to 55 million vehicles in 2009, a decline of almost 14 percent, compared to 63 million in 2008. The trend was certainly set, in 2008, with sales down 9 percent from the 69-million figure of 2007.
“We are the first victim of the financial meltdown,” Ghosn said. The global financial crisis had slashed credit for car buyers, two-thirds of whom buy on credit, Ghosn noted. The recovery would not take place before 2011 and it could take as long seven years before sales reached the pre-recession peak, he added.
“Credit markets have become virtually frozen. Governments have stepped in to pump capital into the banking systems and to help get the credit system working again. But these emergency actions are not enough to remedy the widespread economic ills,” according to the text of Ghosn’s remarks provided by Renault Nissan. The recession that began in the United States has spread across the globe, affecting everyone.
“Slumping global demand led to drops in factory output. In the last quarter of 2008, industrial production fell more than 20 percent in Japan, 15 percent in the United States and 15 percent in Germany.
“Global trade is forecast to shrink in 2009 for the first time since 1982.
“Everyone is hoping that pent-up demand is building and consumers will soon start buying again, but we really don’t know when that will happen,” cautioned the Brazilian-born executive. “Will consumers return to spending and relying on credit as they have in the past… or will their worries about a prolonged recession and their current load of debt cause them to change their buying habits for good?” he added.
“For some companies – those that have enjoyed a long history of growth and positive returns – the current crisis is a new, unsettling experience,” Ghosn said.
“For others, the fallout may continue for some time to come. History has shown that in times of financial crisis, the likelihood for industry consolidations increases. We have already seen this occur in the commercial banking and airline industries, and the same will happen in the auto industry. If this crisis continues and deepens, we may soon see fewer actors and actors seriously weakened by their struggles,” Ghosn added.
Ghosn said he expected more consolidation in the automotive industry but didn’t offer any kind of predictions on how it might unfold.