THE INSIDE MAN

De-stocking and De-leveraging

De-stocking and De-leveraging image

Text: Tito F. Hermoso / Photos: | posted May 20, 2009 19:23

As the global recession continues

As the global recession continues to dampen world wide demand for automobiles, the prudent businessmen have engaged in de-stocking and de-leveraging. De-stocking means a reduction in new car orders as stocks have been moving slowly. The chain reaction resulting form de-stocking is reduced orders to factories, who in turn lay-off workers and cut orders from parts makers. De-leveraging on the other hand means reduced financing for car purchases and inventory financing, as businessmen reduce their debt loads in anticipation of slower sales.

If we got to a stage when international new car launches only took 90 days to get here- about a cargo ship's multi-stop journey to our side of the world - we now have to settle with time lags that are a bit longer. Thus we see a slow down in new car launches and events, mainly from importers. As we enter the middle of the 2nd quarter and the stocks of importers empty, we will be seeing these new models breaking cover sooner rather than later.

If BMW has been quiet, it is because it is now sufficiently warmed up to begin the roll out of the new 7-series, which will be followed by the new Z4. Latest model 1, 3 and 5 series are already clearing customs. PGA has always had its steady Porsche and Audi R-8 clientele, as its lean just-in-time inventory system keeps its order books busy. CATS, Motors, after spending the 1st quarter clearing stock of Chryslers, Dodges, Jeeps and Mercedes Benz's have now started ramping up its E-class supply. Volvo, fresh from peaking sales of the trendy C30 coupe-hatchback, has been delivering XC60's as fast as it can order them from Sweden. Stock clearing too, is the order at the day for Jaguar XF's and Land Rover Freelanders.

Of the car manufacturers, it is the global brands that ASEAN operations that do not miss a beat, giving evidence that the business downturn in ASEAN is far more benign than elsewhere. Even upgrades and re-faces are showing no delay. The upcoming re-face of the hot selling Honda Civic is already on stream. Almost all of Toyota's refreshed product line-up, whether ASEAN or Japan sourced, has been promptly re-launched. Both Ford's ASEAN and North American products - Ranger, Everest, E-150, Expedition EL - are now in synch with regional model sales offerings. GM has just introduced the 7-seat Captiva and the Opel Astra-based Chevrolet Cruze is due.

Mitsubishi continues to feed the market hunger for the hit Strada and Montero. Factory bottlenecks prevent it from delivering more Lancer EX's and Grandis. Though we haven't had much exposure to Mitsubishis made in Normal, Illinois - Galant, Endeavor and Eclipse - the convulsions at GM's Saturn unit and the possible loss of GM-Europe-Opel as a source of cars, opens up model sharing between Mitsubishi and Saturn. Subaru's sales strength keeps a steady through put of models coming from Motor Image's Singapore HQ. Suzuki continues to consolidate its niche presence and will be launching a new Alto and another variant of the SX-4.

The Koreans have been awfully quiet as there are several new models in the pipeline that have a good chance of making it to our market. There's the new Kia Sorento, Borego and Euro-hit Soul as sales of Carens and Carnival keep steady. Hyundai is concentrating on feeding the demand for crdi Tucsons, Grand Starex and the little i10 as a new Tucson is being prepared at the Korea HQ. Factory production bottlenecks prevent HARI from bringing the i30 crdi in considerable numbers. Even with Ssangyong's financing and labor problems, the latest models are available in the country.

And despite the downturn, again, the Chinese makers like FOTON and Chery continue to bring in fresh models, while new entrants are sure to join Lifan, JAC and Chana. The 2nd quarter may seem like a languid summer, but the signs of stirring from a long sales vacation are convincing.