Blog: Dave LeggettA chink of light

Dave Leggett | 15 May 2009

It has been hard to take our eyes off developments in the US this week (though I have at times found my nose stuck into Ireland and Russia – which were pleasant diversions, though both of those places also have auto sectors in deep crisis). Plans for dealer network culls in America have taken centre stage.

It's almost tortuous to hear the initial skirmishes played out in the media. You can understand why the dealers are not exactly rolling over – they have nothing to lose in resisting as hard as they can. But for the manufacturers concered, reducing dealer numbers looks like something they simply have to do. Painful. And not acting earlier makes it even worse now.

US: Chrysler tells court 798 dealers to go

While the US auto industry is clearly severely stressed and facing further upheaval in the short-term, there is at least a growing conviction that the market is now about as low as it can go.

Echoing what I heard from JD Power's Jeff Schuster a few weeks ago, Dan Cheng at AT Kearney has forecast that 'pent-up' demand will help the market to over 16m units by 2012. AT Kearney's analysis of past recessions suggests that once a recovery gets under way, it can pick up much momentum from people who have been putting off vehicle replacement.

Analysis of history can be extremely informative in terms of extrapolations for the future and so it may prove in this case. There is, however, the nagging thought that this recession is different in nature to what we have had over the last 35 years and that could mean that the recovery is a bit different, too. Will attitudes to consumption be permanently altered? 

That said, a lot of people are hanging on to vehicles for longer than they normally would. A proportion of those will surely want to unload and upgrade as soon as economic prospects are a bit brighter. AT Kearney's analysis is at least a chink of light in the gloom, though the gloom is still dominating.

US: Pent-up demand could drive 16m+ market by 2012 - AT Kearney


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