KPMG study says overproduction estimated at 30% of world consumption

GM the walking dead in an overbuilt market

KPMG’s 2010 Global Auto Executive Survey reports that the majority (88%) of automakers say the North American car industry is building more cars than the market can supply.

The taxpayers are funding the overproduction with billions in subsidies to GM and Chrysler. The US and Canadian governments are propping up these companies in a futile attempt to rescue companies that aren’t smart enough to scale back.

When an industry overproduces substantially more of an expensive product than the market needs, the participants are playing chicken to see who will go out of business first. That is the game world automakers are engaged in with production of cars estimated at 11% to 30% more than the demand.

“More than 10 per cent of survey respondents said the North American industry is overbuilt by at least 40 per cent.”

“General Motors received $52 billion US in government aid from Washington, and has already begun repaying $6.7 billion of that. GM chair Ed Whitacre surprised watchers on Friday by announcing the company plans to return to profitability this year.

A profitable year at GM would be the automaker’s first since 2004, when it made $2.7 billion US. It has posted more than $88 billion in losses since then.

North America is perceived to have the greatest overcapacity, but a majority of survey respondents said it also exists in Western Europe, Japan and emerging markets. CBC

Companies like GM and Chrylser are the walking dead. They are not smart or nimble enough to survive the overbuilding phase of the auto industry. They will be perennially be looking for handouts from government until they finally collapse. The inevitable is only being delayed.

For months, GM was presenting rosy press releases to the public. This week they admitted their sales dropped 6% in December and 30% overall for the year while Toyota enjoyed a record sales month.

Ford December sales surge 33%, Toyota up 32%, Honda up 24%, GM down 6%, Chrysler down 4%

December sales of Ford cars and trucks shot up 33 percent compared with December 2008, solidifying the automaker’s primacy among Detroit’s Big Three.

Toyota, the world’s largest automaker, said December sales rose 33 percent compared to December 2008, and total 2009 sales were down 20 percent.

GM said its December sales were down 6 percent for December. For all of 2009, GM’s sales were down 30 percent compared to 2008. Washington Post

Government can only throw more money at the walking dead like GM. It breaks my heart since I was a loyal GM customer for almost 4 decades but they abused the market including their customers for too long.

Corporate welfare and greed

While the middle class and poor of North America feel the brunt of the recession, the rich upper-class who control corporations like GM receive forward tax dollars. We have seen the banks and the auto makers pay bonuses to their executives while ignoring those who lose their jobs. If the money was coming out of the bank it would be depressing. The fact is all taxpayers have given away future taxes to these incompetent but needy businesses. We will be paying the billions back long after GM is gone.

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