US Auto Industry is about to implode - Video
#1
US Auto Industry is about to implode - Video
I found, today, this vid. It's not the first time I see/read about this theme in public. And the more time is passing, the more we see it coming.
I remember the video of Jon Oliver at the start of the year.
We also had articles in the investigation journal Spiegel and "Die Zeit", pointing into an incoming crisis in this sector. This all remembers me of what we had just before the subprime crisis kicked in.
What are your thoughts on that ?
I remember the video of Jon Oliver at the start of the year.
We also had articles in the investigation journal Spiegel and "Die Zeit", pointing into an incoming crisis in this sector. This all remembers me of what we had just before the subprime crisis kicked in.
What are your thoughts on that ?
#3
The bears are always right... eventually.
but car industry debt and consumer car loan debt has been getting worse and worse... where consumers used to borrow for 3 years to get a car, now many are doing 6 and even 7, potentially ruining their cashflow for years.
but car industry debt and consumer car loan debt has been getting worse and worse... where consumers used to borrow for 3 years to get a car, now many are doing 6 and even 7, potentially ruining their cashflow for years.
#4
That's because wages and benefits are simply not where they were (comparably) at one time. Even the much-criticized UAW jobs, adjusted for inflation, pay maybe half of what they did in the 1970s. It's all simple arithmetic and Economics 101. Lower wages mean less disposable income for items like new vehicles. Less disposable money in the household to spend means that a lower percentage of that income can be spent on a vehicle, as opposed to other inelastic needs such as food, rent/mortgage, or utilities. Less money to spend on a vehicle means the monthly payment has to be lower. That means that, in order to buy the same vehicle (or another suitable one), especially with a less-than-stellar credit rating, the loan/repayment terms have to be stretched out over a much longer period of time. That's where the term "Getting the car paid off before it dies" comes from.
Though one cannot always compare something from a century ago to today's economic climate, Henry Ford, though, clearly understood this, and, voluntarily, without any union pressure (he didn't believe in unions) doubled the wages of all of his factory employees. For a time, he was the object of ridicule from his fellow industry-barons of the time, but he knew that it would come back to him in increased car-sales, and........
Last edited by mmarshall; 12-06-18 at 07:04 AM.
#5
That's because wages and benefits are simply not where they were (comparably) at one time. Even the much-criticized UAW jobs, adjusted for inflation, pay maybe half of what they did in the 1970s. It's all simple arithmetic and Economics 101. Lower wages mean less disposable income for items like new vehicles.
John Barnard wrote in "American Vanguard: The United Auto Workers During the Reuther Years" that the average auto worker pay in 1975 was $249.53 per week. This is $1,155.69 in today's dollars, or almost exactly $60k/year before overtime. Average wage of a US autoworker in 2016 was $29.53/hour, with an average of 46 hours/week, or about $70k/year. If you leave the OT out to make for a fair comparison, you get $61.4k.
My arithmetic must not even rise to the level of simple, because I can't figure out how to divide 60 by 2 and come up with 61 or 70.
#6
You say this over and over, perhaps in the hope that enough repetition will make it true?
John Barnard wrote in "American Vanguard: The United Auto Workers During the Reuther Years" that the average auto worker pay in 1975 was $249.53 per week. This is $1,155.69 in today's dollars, or almost exactly $60k/year before overtime. Average wage of a US autoworker in 2016 was $29.53/hour, with an average of 46 hours/week, or about $70k/year. If you leave the OT out to make for a fair comparison, you get $61.4k.
My arithmetic must not even rise to the level of simple, because I can't figure out how to divide 60 by 2 and come up with 61 or 70.
John Barnard wrote in "American Vanguard: The United Auto Workers During the Reuther Years" that the average auto worker pay in 1975 was $249.53 per week. This is $1,155.69 in today's dollars, or almost exactly $60k/year before overtime. Average wage of a US autoworker in 2016 was $29.53/hour, with an average of 46 hours/week, or about $70k/year. If you leave the OT out to make for a fair comparison, you get $61.4k.
My arithmetic must not even rise to the level of simple, because I can't figure out how to divide 60 by 2 and come up with 61 or 70.
#7
Car prices, however, have risen, even adjusted for inflation. The average new car, in 1975 (and I know....I bought one), didn't have many thousands of dollars of comfort/convienience, safety, and Government-mandated equipment on it.....just a few basic emission controls and new bumpers.
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#8
Car prices, however, have risen, even adjusted for inflation. The average new car, in 1975 (and I know....I bought one), didn't have many thousands of dollars of comfort/convienience, safety, and Government-mandated equipment on it.....just a few basic emission controls and new bumpers.
The issue with people's budgets is the cost of housing, and healthcare. Those are the monthly expenses that have exploded.
#9
correct and you must have failed those classes as you're wrong on all counts.
a big factor in people deciding to take longer to pay and being in more debt is that they spend on so many things today that they didn't in the past, like huge cable/internet bills, cell phone bills, paying for cell phones, computers, cosmetic surgery and procedures like botox (got to look 'perfect' right?), and on and on.
i don't know what factor healthcare is for most as most get it through their employer so don't see the real costs.
a big factor in people deciding to take longer to pay and being in more debt is that they spend on so many things today that they didn't in the past, like huge cable/internet bills, cell phone bills, paying for cell phones, computers, cosmetic surgery and procedures like botox (got to look 'perfect' right?), and on and on.
i don't know what factor healthcare is for most as most get it through their employer so don't see the real costs.
#10
I have been saying for years that the auto industry (manufacturing, sales and financing side) is headed for a precipice. Any time you see 96 month car loans with 2-3% interest, you know you a headed for a disaster. People are financing cars way outside their means because lenders are letting them. We are going to see, in the next few years, the bottom fall out of the market just like it did with the housing markets in 2008. I predict it will have a few drastic effects:
1. It will cause new car prices to PLUMMET, because people won't be able to afford them, tons of inventory will sit on dealer lots. The new car dealers than can eat the cost and lower the price past wholesale cost, will likely survive. Those that can't or wont, will not. Because:
2. The used car market will explode, causing prices to rise slightly, but still used cars will be a better deal than new.
3. The government will step in and say "no" to ridiculous interest rates, limiting them to around 10% and 72 months.
4. Used Dealers like Carmax and Carvana will become wildly successful because they will start their own finance companies.
5. Nobody with a credit score lower than 650 will be able to finance a car without some sort of loan insurance (much like home purchases).
It's coming...get ready for it.
1. It will cause new car prices to PLUMMET, because people won't be able to afford them, tons of inventory will sit on dealer lots. The new car dealers than can eat the cost and lower the price past wholesale cost, will likely survive. Those that can't or wont, will not. Because:
2. The used car market will explode, causing prices to rise slightly, but still used cars will be a better deal than new.
3. The government will step in and say "no" to ridiculous interest rates, limiting them to around 10% and 72 months.
4. Used Dealers like Carmax and Carvana will become wildly successful because they will start their own finance companies.
5. Nobody with a credit score lower than 650 will be able to finance a car without some sort of loan insurance (much like home purchases).
It's coming...get ready for it.
#11
Yes. We had this going on for a while now. I remember having read articles around this theme 3 years ago, they also stated that the problem will be "in the future", "not an imminent threat but a point to consider", and so on. But it looks like the forecast are becoming sharper in the last year.
#12
I think you're overstating the amount of new car loans that are "subprime" loans. Auto loans actually have a VERY low default rate, cars are easy to repossess limiting the lender's exposure. And remember, the average credit score in the US is about 700, the majority of new car buyers have good credit, not bad credit.
#13
I put some of the blame on consumers too some people stretch themselves out just to get a certain type of car versus buying something that's more affordable both in payments and maintenance. I've known of people that bought older Euro cars that they really couldn't afford, agreed to a ridiculous payment length and had no means to fix the maintenance issues that came up. Had they gotten something more affordable with better reliability they would have been better.
#14
It's quite scary how quickly people forget about the crash 10+ years ago. We're seeing the same thing happen again. People are overextending themselves and financing everything in their lives. I have friends whose cars, phones, furniture, etc. are financed. Basically their entire life is financed. They live paycheck to paycheck and have ZERO savings. This is actually fairly normal, though. The facade will come crumbling down again.
#15
It's quite scary how quickly people forget about the crash 10+ years ago. We're seeing the same thing happen again. People are overextending themselves and financing everything in their lives. I have friends whose cars, phones, furniture, etc. are financed. Basically their entire life is financed. They live paycheck to paycheck and have ZERO savings. This is actually fairly normal, though. The facade will come crumbling down again.
Personal savings is actually at a long term high...