‘Auto industry won’t shift gear until 2010’

After the disastrous monthly reports we’ve been publishing in recent times in our electronic sister publication, Cargo Info News, the National Association of Automobile Manufacturers of SA (Naamsa) has just issued an equally disappointing quarterly summary. The key features in the first quarter report, according to Naamsa director Nico Vermeulen, were: • Industry employment levels remained under pressure during the first quarter of 2009. Net industry employment fell by 2 571 jobs as a result of downsizing and operational adjustments at most of the industry’s assembly operations; • Lower industry capacity utilisation levels reflect cutbacks in production; • Industry capital expenditure going forward remains relatively stable; • Industry domestic sales projections continue to reflect difficult trading conditions while the global economic slowdown will impact negatively on automotive industry exports in 2009; • New car and light commercial vehicle sales expected to remain under pressure through the third quarter of 2009. Lower interest rates on the back of declining inflationary pressures and an improvement in the financial position of consumers is expected to contribute to a modest improvement in new vehicle sales towards the end of the year. New passenger car sales (at 60 043 units) plummeted 30% in the first three months of this year compared with the same period in 2008, while the combined commercial vehicle sales (at 33 242 units) nosedived by 40%. And, said Vermeulen in his submission to the director-general of the department of trade and industry, the full year of 2009 shows little promise of much recovery. “It will be an extremely difficult year for the entire SA automotive industry,” he added. “All sectors – retail, auto parts manufacturing and vehicle production – continue to experience severe and unprecedented viability challenges. “The operating environment in all three sectors of the industry during the first few months of 2009 has continued to deteriorate substantially. Domestically, it is only expected to show modest improvement during the second half of the current year and, internationally, once the severe global financial and economic crisis dissipates.” “This is only likely to occur in 2010.” Employment suffered during the first quarter, falling by 7.3% as it dropped 2 5721 jobs from 34 963 positions at the end of 2008 to 32 392 jobs. Alongside this employment drop, most manufacturers are currently operating on a single production shift basis, while some operate double shifts in selected areas such as machining, press shops, paint shop operations and body shop. Also, according to Vermeulen, most vehicle assembly plants operated the first quarter on the basis of a shortened production week.