LONDON The car industry reeled from another day of grim headlines on Tuesday, with further news of production cuts and tumbling vehicle sales in Europe, Asia and Africa.
As the global financial crisis makes consumers increasingly reluctant to part with cash and lenders unwilling to offer credit, carmakers across the world have struggled to find buyers to keep their production lines running.
The extent of the crisis was underlined as Europe's finance ministers squabbled over whether to spend their way out of trouble or keep their budgets balanced, while a 1 percentage point rate cut by Australia set the scene for likely steep cuts later this week by the Bank of England and European Central Bank.
New car registrations in Germany, Europe's largest car market, dropped 17.6 percent in November from a year ago, the VDIK association of foreign carmakers said on Tuesday, adding to a string of similar news across the continent on Monday.
It was the same story in Africa's top economy, South Africa, where new vehicle sales plunged 28.3 percent in the month.
In response to the downturn, Japan's Toyota Motor Corp 7221.T, the world's biggest auto manufacturer, and Tata Motors (TAMO.BO), India's biggest, both revealed new production cuts to avoid a build-up of unsold stock.
Toyota is halting production at assembly lines in two factories in Japan for two days later this month, cutting production primarily of its premium Lexus marque, which has seen a 24 percent drop in sales so far this year in Japan and sharp falls in the U.S., its main market.
Toyota also said it would trim bonuses for nearly 9,000 of its managers.
Tata said it was suspending production at its commercial vehicle plant in Pune for three days from December 5, while local rival Mahindra & Mahindra (MAHM.BO), India's top maker of utility vehicles and tractors, said its November sales slumped 39 percent.
Sweden's Volvo (VOLVb.ST), the world's number two truck maker, said its order intake had dropped substantially in several markets, and it would make cuts in production mostly in December to adapt to the fall.
Shares in Toyota, Volvo, Tata and Mahindra were all down between 1.2 and 8.2 percent on Tuesday.
WORSE TO COME
"The crisis has again worsened dramatically, as expected," Germany's VDIK President Volker Lange said, forecasting 2008 car sales would be the worst since German reunification in 1990.
South Africa's National Association of Automobile Manufacturers (NAAMSA) echoed his gloomy diagnosis.
"Sales in all segments of the South African new vehicle market had weakened significantly, suggesting that conditions in the South African economy had continued to deteriorate rapidly," it said.
On Monday, Spanish figures showed car sales there had almost halved in November, while French, Belgian and Italian markets also shrank. Italian think-tank Promotor forecast on Tuesday that 2009 would be worse still, with a 13.5 percent fall in new car sales there.
In the U.S. later this week, the country's top automakers will again seek to convince Congress to approve a bailout to help them survive the crisis, but politicians remain wary of throwing more taxpayers' cash around after the controversial government rescue of financial services firms.
Companies supplying the car industry are also showing cracks.
On Tuesday, as credit default swaps for the world's biggest steelmaker, Arcelor ISPA.AS, traded above 1,000 basis points, ING credit strategists predicted that buyers of protection against Arcelor defaulting would soon have to pay upfront, instead of over the course of the contract, as they already do for German tires and autoparts maker Continental (CONG.DE).
(Additional reporting by Michael Shields, Stella Mapenzauswa, Chang-Ran Kim and Gilles Castonguay; editing by John Stonestreet)