Auto Uncertainty Affecting Manufacturing
Add comment April 22nd, 2009
I hear almost on a daily basis, another local company laying off workers, or planning on further reductions of expenses. It seems that the past few weeks has seen a major drop in incoming orders. So being prudent business people, we prepare for the worst. Too bad we just can’t raise prices, like the state government wants to do!
It doesn’t take much genius or economic theory to understand what is taking place. I think the uncertainty of what is going to happen with Chrysler and GM is causing a major pause in manufacturers from placing orders for equipment.
Why? In my own surveys, we can tell the interconnectivity of the auto makers and their suppliers and their suppliers. It’s called “supply chain”. So even though I don’t supply directly to, say, Chrysler in Belvidere, maybe one of my customers does. So he says “whoops, let’s wait to see what is going to happen” Multiply that by the # of plants (assembly, engines, transmissions, foundries, etc.) that Chrysler and GM combined have in the US and Canada and pretty soon the multiplier effect takes hold.
So where and how is the Stimulus helping? I don’t think it’s helping one bit.
What can help is for the Washington Auto gurus get the auto situation settled ahead of schedule. May 1st is Chrysler’s deadline, June 1st is GM’s. Manufacturers like certainty too.
It can’t come soon enough.
