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Auto sector headed for repeat failures
Auto sector headed for repeat failures: Fitch
Posted on Tuesday, November 24th, 2009 at 2:23 PM EST. (Employee News)
The U.S. auto industry may be caught in an “airline-style” cycle of repetitive bankruptcies because of weak sales and a glut of production capacity, Fitch Ratings said on Monday, Reuters reported.
High fixed costs, the lengthy periods required to develop new products and chronic overcapacity will leave the industry “littered with failures—plants, product lines, brands and companies,” Fitch said in a report, the news service said. Like the airline industry before it, the auto sector, including suppliers, will grapple with “boom and bust cycles without the boom,” Fitch said, Reuters reported.
Even in peak conditions, companies will not generate enough cash to repair their balance sheets, leaving them vulnerable to severe financial stress in downturns, the agency said, the news service reported. Fitch is forecasting a 7.8 percent rise in U.S. light vehicle sales next year to 11.1 million units. Even that rebound, however, will leave much of the industry burning cash in 2010, the story said. (Reuters)
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Rick
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