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USA - Car parts suppliers win $5bn government guarantee

American car parts suppliers were given a guaranteed $5bn in federal financing by the US Treasury's car taskforce on the 19th March, in a deal that protects the core of the industry but could spell the end for weaker companies.

The Financial Times reports that the loan guarantee package is much smaller than car parts suppliers requested but was broadly welcomed by the automotive industry and investors. Shares in large car parts suppliers rose sharply.

"The programme will provide supply companies with much needed access to liquidity to assist them in meeting payrolls and covering their expenses, while giving the domestic auto companies reliable access to the parts they need," said Tim Geithner, the Treasury -secretary.

Car Parts Suppliers had asked for $10.5bn of federal loan guarantees to back their accounts receivable from the "Detroit 3", General Motors, Ford Motor and Chrysler, which were no longer being accepted by banks as collateral for new loans.

The car parts suppliers submission to the Treasury included a request for government loan guarantees worth $8bn and $7bn to create a "quick pay" scheme.

Under the support plan outlined yesterday, which applies only to American companies, suppliers will be able to get government-backed credit insurance for money owed by General Motors ( Vauxhall in the UK) and Chrysler. They will also be able to sell receivables to the scheme for cash at a "modest discount".

General Motors and Chrysler will choose which car parts suppliers are eligible for the scheme. Ford has the option of participating. Car makers are expecting a flood of suppliers to lobby to be included in the scheme.

Report compiled by Find-a-Part Car Parts Search Specialists since 1978.

New Car Sales Slump in the USA - Is Depreciation a Factor ?

US car sales continue to slump, with american consumers apparently unwilling to stomach the large loss in value of new cars after the first year of ownership. A lack of available finance has been mainly responsible for the slowdown of car sales, but when as much as a third of the cost of the overall cost of ownership can be spent by simply driving off the forecourt ( according to "Cost to Own" figures produced by aol.autos.com in conjunction with Vincentric), who can blame American consumers for thinking twice before buying new ?

Top 10 Selling US Cars (Dec / Jan 2009)

1 - Ford F-150
Jan 2009 Sales : 25,237
VS Jan 2008 : -38.6 %
Fuel Economy Range : 19 mpg Hwy, 14 mpg City
Cost of ownership per year :
Year 1 : $18,600
Year 2 : $5,002
Year 3 : $4,854
Year 4 : $4,714
Year 5 : $5,700
Total : $38,871
Year 1 Depreciation $13,139 (33.8% of 5 year cost of ownership)

2 - Chevrolet Silverado 1500
Jan 2009 Sales : 23,987
Vs Jan 2008 : -33.6 %
Fuel Economy Range: 19 mpg Hwy, 14 mpg City
Cost of Ownership Per Year
Year 1 : $18,785
Year 2 : $5,329
Year 3 : $5,057
Year 4 : $5,015
Year 5 : $5,685
Total : $39,873
Year 1 Depreciation : $13,169 (33.0% of 5 year cost of ownership)

3 - Dodge Ram
Jan 2009 Sales : 12,843
Vs Jan 2008 : -35.5 %
Fuel Economy : 20 mpg Hwy, 14 mpg City
Cost of Ownership Per Year
Year 1 : $21,017
Year 2 : $5,331
Year 3 : $5,329
Year 4 : $5,381
Year 5 : $6,125
Total : $43,184
Year 1 Depreciation : $15,036 (34.8% of 5 year cost of ownership)

4 - Chevrolet Malibu
Jan 2009 Sales : 9,312
Change vs Jan 009 : -34%
Fuel Economy Range: 30 mpg Hwy, 22 mpg City
Cost of Ownership Per Year
Year 1 : $13,318
Year 2 : $4,298
Year 3 : $4,047
Year 4 : $4,311
Year 5 : $4,869
Total : $30,845
Year 1 Depreciation : $ 8,882 (28.8% of 5 year cost of ownership)

5 - Ford Escape
Jan 2009 Sales : 8,360
Change vs Jan 2008 : -25.3 %
Fuel Economy Range: 28 mpg Hwy, 22 mpg
City Cost of Ownership Per Year
Year 1 : $12,744
Year 2 : $4,802
Year 3 : $4,094
Year 4 : $4,098
Year 5 : $4,796
Total : $30,537
Year 1 Depreciation : $8,365 (27.4% of 5 year cost of ownership)

6 - Ford Fusion
January 2009 Sales: 8,152
Change vs. January 2008: -11.2%
Fuel Economy Range: 29 mpg Hwy, 20 mpg City
Cost of Ownership over 5 years :
Year 1 : $12,533
Year 2 : $4,431
Year 3 : $4,292
Year 4 : $4,457
Year 5 : $5,252
Total : $31,810
Year 1 Depreciation : $8,910 (28% of 5 year cost of ownership)

7 - GMC Sierra
January 2009 Sales: 8,020
Change vs. January 2008: -39.2%
Fuel Economy Range: 19 mpg Hwy, 14 mpg
City Cost of Ownership over 5 years :
Year 1 : $19,323
Year 2 : $5,376
Year 3 : $5,112
Year 4 : $5,068
Year 5 : $5,750
Total $40,631
Year 1 Depreciation : $13,609 (33.5% of 5 year cost of ownership)

8 - Ford Focus
January 2009 Sales: 7,769
Change vs. January 2008: -33%
Fuel Economy Range: 35 mpg Hwy, 24 mpg City
Cost of Ownership over 5 years :
Year 1 : $9,816
Year 2 : $3,849
Year 3 : $3,744
Year 4 : $3,832
Year 5 : $4,419
Total : $25,663
Year 1 Depreciation : $6,148 (24.0% of 5 year cost of ownership)

9 - Chevrolet Impala
January 2009 Sales: 7,062
Change vs. January 2008: -61.8%
Fuel Economy Range: 29 mpg Hwy, 19 mpg City
Cost of Ownership over 5 years :
Year 1 : $16,653
Year 2 : $4,970
Year 3 : $4,720
Year 4 : $4,841
Year 5 : $5,789
Total : $36,975
Year 1 Depreciation : $11,741 (31.8% of 5 year cost of ownership)

10 - Jeep Wrangler
December 2008 Sales: 6,362
Change vs. December 2007: -66%
Cost of Ownership over 5 years :
Year 1 : $14,513
Year 2 : $5,667
Year 3 : $5,230
Year 4 : $4,957
Year 5 : $5,713
Total : $36,082
Year 1 Depreciation : $9,253 (26.4% of 5 year cost of ownership)

Report compiled by Justin Woodcock on behalf of Find-a-Part - now available for Auto Parts in the USA and Canada !

Vauxhall & Opel car sales hurt by state aid confusion

The public debate over a bail-out of Car manufacturer Opel is hurting its business, analysts warned on Monday, just as the German economy minister began a US mission to help the ailing carmaker.

Opel and British Vauxhall car sales dropped by 21.9 per cent on a yearly basis in February, more than the European market average of 18 per cent.

 “This indicates that the company’s much-publicised troubles are beginning to hurt its ongoing sales operations,” he warned.

“Whatever course of action the German government ... opts to take in rescuing Opel and Vauxhall, it should do so quickly,” Mr Urquhart said.

Story brought to you by Find-a-Part, Vauxhall Parts Search Specialists since 1978.

Car industry demands more government help, Toyota cuts hours, Land Rover gets grant

Ministers faced demands for urgent action to support car and car parts manufacturers following a meeting with the industry last Wednesday, as Toyota announced a 10 per cent cut in pay and hours for its UK workers.

The Japanese company’s move, due to take effect on April 1, is an indication of the wider problems that the car and car parts industries face.  Sharp falls in demand caused by a lack of loans from banks and employment uncertainty are forcing car companies to cut production and jobs.

“The big risk is that we end up destroying one of the few world-class manufacturing sectors that we have here in the UK, not for the next four or five years but for good,” said Paul Everitt, the chief executive of the Society of Motor Manufacturers and Traders, when speaking to the Financial Times. 

Ian Pearson, the business minister, set up a meeting of car makers, car supply companies and banks to encourage them to apply for aid under the scheme.  Officials set out detailed criteria for the scheme, which centres on £2.3bn of government guarantees for loans to back low carbon research and development.

One attendee said after the event that “realistically, it will be one to three months” before loans start to be made under the scheme, first announced back in January, which could amount to a six month wait for an industry that needs immediate financial help.

Lord Mandelson, the business secretary, unveiled a £27m government grant for Jaguar Land Rover to coincide with Wednesday’s summit. The funding, designed to support a £400m project to develop a new, greener Land Rover vehicle, has been agreed under the business investment scheme. It was “not at all” a form of covert bail-out for the company, the government insisted.

The industry on Wednesday welcomed the government’s commitment to the £2.5bn R&D package. But it said the scheme would not be a substitute for necessary short-term support measures.

The British Chambers of Commerce said: “There has been much talk about helping the industry but we now need to see action.”

Story brought to you by Find-a-Part, Car Parts Search Specialists since 1978.

£2000 Car Scrap scheme "Almost certain to push up average cost of cars" - Transport Expert.

According to an article in todays' Times Online , plans to give drivers £2,000 to trade in an old car for a new one will help to prop up car plants in France and Germany but do very little to protect British jobs.

The article, based on an interview with Professor Rhys, of Cardiff University Business School, points out that the plan which is currently at an advanced stage, would fail to help British businesses because only 4 per cent of the cars bought u0nder the car scrappage scheme would be made in Britain.

Lord Mandelson plans to spend up to £500 million on the scheme after being impressed by the success of scrappage grants elsewhere in Europe.

But Professor Rhys points out that such a move would ignore a unique feature of the British car industry: 78 per cent of cars made here are exported and 86 per cent of cars bought here are imported.

The situation is quite different in other countries that have introduced scrappage schemes. In Germany, where drivers receive €2,500 (about £2,300) for scrapping a car that is at least nine years old and buying one less than a year old — more than 65 per cent of cars bought are made in German factories.

French factories account for 62 per cent of cars sold in France, where the Government is offering €1,000 for trading in an old car.

Professor Rhys said that any potential benefit of the scheme to the British car industry was further eroded by the absence of small, cheap models made in this country. Experience on the Continent shows that almost all drivers taking part in the scheme would spend their £2,000 grant on a small, highly fuel-efficient car.

Professor Rhys is quoted as saying : “A person who has been driving a nine-year-old car is not going to be able to afford a Jaguar, a Land Rover or even a Toyota Avensis (built in Derby). “We only make two cars that they are likely to buy: the Nissan Micra and the Mini, and these account for 4 per cent of the British market. A scrappage scheme would result in the British taxpayer subsidising vehicle factories in other countries.”

British car dealers would benefit from the scheme, Professor Rhys said, but were likely to take advantage of the grants to reduce the discounts they were currently offering.

“The scheme is almost certain to push up the average retail cost of cars,” he said.

“If people try to say it’s got anything to do with rescuing the British motor industry they either don’t know what they are talking about or they are being disingenuous.”

The Treasury is understood to doubt the benefits of Lord Mandelson’s plan but is under pressure to approve it because the Government thinks it would be popular with motorists. The scheme could be introduced as soon as next month’s Budget.

Last month Angela Eagle, the Treasury Minister, told the Commons Environmental Audit Committee: “Not everybody can afford to buy a new car, even if they have a government grant for scrapping their old one. That is one of the difficulties.

“We are not ruling it out at all but we are still quite sceptical that it is a good use of taxpayers’ money.”

A note from the Treasury to the audit committee said: “Those who are able to purchase new cars after scrapping an old car may have planned to do so anyway. A scrappage scheme is likely to have a large deadweight cost.”

Analysis by the Department for Transport challenges the claim that a scrappage scheme would help the environment. The emissions savings from taking older, fuel-hungry cars off the roads early would largely be cancelled out by the environmental cost of manufacturing new cars.

The Treasury note said: “Initial analysis demonstrates that the costs outweigh the benefits even when the replacement vehicle has better-than-average fuel efficiency.”

Philip Gomm, of the RAC Foundation, said: “Research shows that the optimal trade-in age, from an environmental perspective, is about 18 years.

“We would not want to see any old vehicle being scrapped, irrespective of age, without fully assessing the carbon emission implications of building a new one. Nor is there any point in spending public money on such a scheme where individuals might scrap the vehicles of their own accord.”

The Society of Motor Manufacturers and Traders said that the scrappage scheme would help to protect 600,000 jobs involved in car retailing, servicing and the insurance industry.

Paul Everitt, the society’s chief executive, said: “The scrappage incentive scheme is a popular way for the Government to support the automotive industry and provides good value for money for the taxpayer.

“The increased VAT revenue to government largely offsets the cost of the scheme, yet the positive impact it could have on building consumer confidence and boosting the new vehicle market are extremely valuable to the UK automotive sector.”

Find a Part - Car Parts Search Specialists since 1978.

Car Parts Search Sites Launched - Find a Part USA & Canada

Car Parts, or more accurately, auto parts searchers in the USA and Canada now have another tool to find the parts that they need, as Find a Part have launched USA auto parts and Canadian auto parts sites.  Utilising the network of contacts that Find a Part chairman Terry Gray has created in the states and canada over the last 30 years (Terry was the only non-US membership chairman for the Automotive Recyclers Association a couple of years ago), the aim is to provide a parts service that guarantees quality recycled auto parts for the American and Canadian public.  The guarantee of quality will come from the strict criteria for suppliers - only state association or Automotive Recyclers Association members will be allowed to join the service.

Find a Part Chairman attends ARA Conference in Kansas City

Find a Part Chairman Terry Gray will be attending the Auto Recyclers Association Convention and Exposition in Kansas City this October.  The 65th annual exposition will host the key players in the car parts recycling industry from America and Europe.  The seminar schedule includes talks on how to dismantle hybrid cars safely, women in the car recycling industry, and how to train staff for e-commerce.  The exposition runs from the 21st-25th of October.

Terry aims to use the occasion to gain further backing for his Green Footprint Network Initiative, which aims to promote green concepts in the car parts recycling industry.  Terry has formerly been Membership Chairman of the Auto Recyclers Association, and has attempted to increase awareness of the work of the ARA in the UK.