- The credit quality of car companies is either stagnant or in decline globally.
- The trend in credit quality among British automakers has fallen off a cliff.
- In Europe, the decline has been less pronounced.
- In the US, faring best of all, performance has been "stagnant," Credit Benchmark says.
The credit quality of car companies and auto parts suppliers is either stagnant or in decline globally, according to data from Credit Benchmark.
The decline was underlined today by Ford’s decision to close its engine-making plant in Bridgend, Wales, with the loss of 1500 jobs.
Credit Benchmark looked at the internal assessments of more than 30 banks and financial institutions who lend money to carmakers, and suppliers of tires, shock absorbers, engine parts, brakes and such. The data creates an average of banks’ "views" of companies’ changing credit quality.
This chart says it all: since 2018, the trend in credit quality among British automakers and their supply companies has fallen off a cliff. In Europe, the decline has been less pronounced. And in the US, faring best of all, performance has been "stagnant," Credit Benchmark says:
Credit Benchmark
"The overall deterioration probably reflects some of the headwinds facing the auto sector (consumer uncertainty about Petrol vs Hybrid vs electric technology; trade tensions)," Credit Benchmark’s head of research, David Carruthers, told Business Insider.
"UK auto parts suppliers are particularly embedded in the European supply chain, so the continued uncertainty around Brexit is likely to be causing damage to the sector in the form of delayed or lost orders. There is some evidence that European supply chains are being re-organized due to Brexit and the US-China trade war," he said.
The auto business is going through wrenching change. About 40,000 jobs have been cut from the car business globally. Sales of new cars are in decline, and the total population of all registered cars is shrinking.
The trend is driven by multiple factors, such as the popularity of ride-sharing apps like Uber, higher-quality manufacturing that allows drivers to keep older cars for longer periods, the move out of diesel cars into electric vehicles, and increased tariffs in the trade wars between the US, China, and Europe.
Credit in the US is holding up, however. "The average credit risk of US auto and auto-parts companies has been stable, reflecting the relative success of the Trump administration policies that have brought tax cuts and some tariff protection for companies in the sector," Carruthers said.
- Read more about the decline of cars:
- ‘The pain is just beginning’: After 38,000 layoffs, Wall Street wakes up to ‘peak car’
- Moody’s is sounding the alarm on risky car loans
- Carpocalypse now: Lyft’s founders are right — we’re in the endgame for cars
- The failing automobile industry is pushing us toward a global recession
- Cars are driving us toward recession
- Apps like Uber and DriveNow may be hurting the demand for new cars, studies suggest
- The UK car business has ‘exactly the same problems’ as the mortgage market 10 years ago, according to Morgan Stanley
- British people have suddenly stopped buying cars
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See Also:
- The Fed just warned that companies are stockpiling debt and using it for all the wrong reasons — and that could be disastrous if the economy sinks
- ‘The pain is just beginning’: After 38,000 layoffs, Wall Street wakes up to ‘peak car’
- Wall Street’s massive tech spend has reached an ‘inflection point’ as billions in investments are starting to pay off
Source: Business Insider – jedwards@businessinsider.com (Jim Edwards)