Report: Automakers will be making money at lower U.S. sales volumes
While the auto industry is still a long way from regaining its old swagger, it reaps little successes here and there that seem to indicate that it’s already on its way up. A J.D. Power and Associates analyst says that because of declining costs for labor and auto parts, automakers will be making money at lower U.S. sales volumes next year.
Rich Sands, the market research firm’s executive director of automotive operations, said that the industrywide breakeven point will be 11 million next year, down from 13 million in 2009. He explained that seasonally adjusted annual sales rate has averaged 10.2 million this year, signifying that the average domestic and international automaker won’t make a profit at current U.S. sales volumes. Continued after the jump!
But if demand leads to sales of 11.5 million units sold in 2010, automakers will make profits. Sands said that if the cost line can be held at around 11 million units or below and the “smart guys are putting it down at 10 million,” he calculates that any amount above that 10 million is profit. How long a company can keep the cost line at that point is the challenge. From the latest 1990s until 2007, US auto sales had averaged 16.4 million annually. In 2008, sales plunged to 13.2 million. In 2009, rates dropped further, the worst that the industry has had in 27 years, before bottoming out.
This had forced the Detroit Big Three to enter bankruptcy and be restructured. General Motors Co. and Chrysler Group had the backing of the government while Ford Motor Co. used its own resources. For the next several years, analysts are predicting a gentle recovery. Just last week, Ford reached a tentative agreement with the UAW to bring its costs in line with those of GM and Chrysler. The three companies are now said to be poised to profit at new sales levels.
[via autonews]
Tags: 2010 car sales, car news, car sales, cars
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