Car industry collapse could decimate Kiwi economy

MEDIA RELEASE - 08/12/2008

The meltdown in the world’s car industry could have far-reaching effects for New Zealanders, says a car industry expert.

Clive Matthew-Wilson, editor of the car buyers’ Dog & Lemon Guide says the global car industry crisis is far more serious than problems faced by the world’s banks.

“Unlike the financial sector, which essentially produces numbers, the motor industry makes real products and employs real people. Virtually all our major trading partners have motor industries that are in decline or collapse. There’s no way this won’t drag our economy down, too.”

“The figures are just staggering: in Europe, sales of Volvo heavy trucks fell by over 99% in the third quarter of this year.

In America, Chrysler’s sales were down 41% in November.

Sales of Lexus cars in Australia have dropped 62% since last year.

“Both Ford & General Motors are currently on life-support in America. Ford hasn't made a full-year profit since 2005, while General Motors last posted an annual profit in 2004.”

Matthew-Wilson believes that the collapse of Ford and General Motors in America will put a quick end to car manufacturing in Australia.

“The U.S. government will eventually rescue Ford & General Motors because it has no choice. However, as part of their rescue package the U.S. government will almost certainly force Ford & General Motors to dispose of their unprofitable overseas assembly plants. The Australian Ford & General Motors plants will be near the top of the list for closure.”

“Australia is a our largest trading partner, currently being hit both by a downturn in its car industry and a downturn in its mining sector. The car assembly industry employs 65,000 Australians directly and 250,000 indirectly.

Every worker who loses his job is one less customer for products from New Zealand.”

Even more frightening, says Matthew-Wilson, is the likely consequences of a severe downturn in China. China’s car industry is now larger than Japan’s, and is on track to produce nearly ten billion cars this year.

“However, China is rapidly running out of customers for its cars. The Chinese government has already warned that the Chinese car industry is about to face a 'financial tsunami'.

China exports most of its fully assembled vehicles to Russia, Ukraine and Vietnam, but customers in these countries have suddenly stopped buying new cars. China’s Great Wall Motor has seen its sales to Russia drop by 40% in the last three months.

At the moment China’s car industry is being kept alive by sales within China, but the Chinese economy is heavily reliant on exports of all kinds and domestic demand for cars is already dropping sharply.

The Dog & Lemon Guide believes a major Chinese economic downturn is inevitable. China is New Zealand’s fourth largest trading partner, so any downturn in China is likely to impact heavily on New Zealand exporters.

Matthew-Wilson believes that many people are still in denial about the seriousness of the global recession.

“My advice is to look at what’s happening in the world’s car industry. Whatever happens there will affect every human being on the planet. I can’t see any happy ending in the near future.”