Quote:
Originally Posted by Spuds
To be fair, I used the metric as a visual representation of how this is different than the 2008 recession, not Tcoat. Perhaps I illustrated his point ineffectually, but I trust his observations and conclusions over armchair generalizations by someone who is not in the automotive production industry.
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No your illustration of the point is accurate. The point isn't whether all those people are receiving full benefits or returning to work soon but the simple fact that NOTHING beyond essentials is being made.
The impact goes well beyond the obvious.
The 2008 recession permanently closed hundreds of smaller parts suppliers. This shifted the power base in the industry from the car companies to the remaining parts suppliers. The car companies could no longer run rough shod over the parts companies since they could not just go next door and get the same thing. One of the results of the situation was the common contract clause that parts ordered were paid for if delivered or not. As I have said too many times now the only way the car companies could get out of those were if there was a disaster that prevented them making cars. That would have little impact on the overall industry if one plant burned to the ground and they could not build a certain model or two. The impact when it is all plants in the world is beyond imagination. The trickle down from this extends to the parts manufacturers, the people that make the components for those parts, the people that refine the materials to make the parts for the parts and the people that mine the minerals that start it all. It is not just the assembly plants involved here.
Now, on this whole "it will just eat into profits" thought process. Profits are not what makes a company run. Cash flow is. There is NO cash flow in the whole industry right now. None. Nada. Zip. This will kill places no matter what their end of year profit is or would have been. In order to stop the cash bleed there will be massive cuts in those areas that do not create flow. Areas such as R&D, new product launch, low volume/profit products are going to be shelved indefinably. Even when things start up again these areas are going to remain on that shelf since THEN they will be looking at profit.
I wish I could share much of what is discussed by the very high level industry leaders on our calls but I simply can't. I will just say that what is going to happen has never occurred before and it will be deep and long term. All this is not going to just go away when things return to "normal" even if the stock market soars and other industries hardly get touched.