The credit crunch continues to wreak havoc on the world car industry, destroying the levels of demand already weakened levels by high oil and petrol prices.

On Friday we detailed a series of announcements by major car groups that extended the bad news for the industry. But on Friday afternoon and Friday night, the news worsened for the likes of Chrysler/GM in the US, Daimler and Volkswagen in Germany, Toyota in Japan, PSA Peugeot Citroen and Renault and for the finance sector.

In Australia, the financiers of over half the country’s car dealers confirmed Friday that they are quitting the business with GE Money and GMAC both saying they won’t be financing motor vehicles in 2009. GE Money is also getting out of mortgages and some parts of personal and small business finance, plus its so-called white label mortgages. According to a tip received by Crikey, GE sacked all 350 staff on Friday, before telling them they would have to work for the next 30 days if they want their redundancy packages.

The driver is the same factor as forcing production holidays and job cuts on Chrysler, Daimler, Renault and Peugeot/Citroen. GE said the measures will have no effect on its retail store finance, credit cards, personal loans and insurance businesses.

GE Money’s Australia and New Zealand chief executive, Mike Cutter, blamed the “unprecedented conditions” on global credit markets for the steps. But it also reflects the appalling lending performance of the US parent in mortgages, motor finance, commercial property and the decision not to allocate capital to regions like Australia. GE Money is keeping capital in the US where the parent is expecting pressure on its core businesses from the downturn in consumer spending.

GE’s Australian motor finance business is one of the biggest in the country, with Holden, Ford, Toyota, Mazda and Audi among the many brands financed with the departure of GMAC, the future of Holden in this country and Ford is now open to question as both will struggle to find replacement financiers. Both parents in the US are under enormous pressure.

Ford is sacking over 15,000 employees by the end of the year and has introduced cheap fleet finance through Ford credit; Fiat is cutting prices here as is Ford, Subaru, Toyota and a host of other producers to try and clear rapidly rising stocks of unsold vehicles.

Overseas, the news on Friday for the car and vehicle industry was appalling on Friday: truck giant Volvo is sacking over a 1500 more employees after it reported that third quarter orders fell to 115, from more than 41,000 in the same quarter of 2007. It has already cut over one thousand employees. Scania, another big truck maker in Europe, is also suffering as sales slump 69% in the September quarter.

Fiat and Daimler are both forecasting cuts in this year’s earnings. JCB, the UK construction vehicle firm, said its workers had agreed wage cuts to protect jobs, while in France, Peugeot Citroën has slashed production, warning sales will fall by as much as 17% in Europe over the rest of 2008. Renault is looking at production holidays in France and other countries.

Chrysler announced Friday that it is sacking 5,000 of its 32,000 white collar employees in the US and Europe as soon as it can as its parent, Cerberus, tries to get a cosy merger deal done with General Motors. GM is said to be ready to approach the US Government for finance and bailout.

As of Friday, shares of GM were down 76% for the year and Ford shares were down 70%.

Daimler was reported yesterday by German media to be considering a month long production holiday at all its car factories at Christmas to try and cut stocks of unwanted cars and to avoid starting to lay off employees.

The break in production would begin on December 11 and last until January 12, according to the reports. Daimler, the first luxury car maker to present its quarterly results, unveiled big falls in profits on Thursday and issued a new profit warning for 2009 because of the global banking crisis which has hit Germany and US car markets.

Volkswagen says it will make more cars this year, but 2009 is looking gloomy, so it is cutting upwards of 750 contract employees in Germany over the rest of the year. Volkswagen reports its latest financial results this Thursday night, our time.

French automobile giants PSA Peugeot-Citroen and Renault ordered huge production cuts. Renault has ordered almost all its French plants closed for at least one week and shorter shutdowns in Turkey, Russia and Slovenia. PSA Peugeot-Citroen chairman Christian Strieff said he had ordered “massive” production cuts as the group forecast a 17% drop in car sales in Western Europe in the fourth quarter (after an 8%-plus drop in September).

Toyota confirmed it sold fewer cars in the September quarter than the year before, the first quarterly fall since 2001. Japanese car companies start reporting first half and second quarter results this week with Honda due to release its figures tomorrow night and Toyota a week Wednesday.

Toyota said global auto sales retreated 4.3% in the September quarter from a year earlier, the first drop since 2001. The stock fell 6.4%. It’s off more than 40% this year and Tokyo as a whole is down more than 50%.

GM, which has been vying with Toyota for world’s largest automaker based on sales volume, plans to report third-quarter global sales results later this week. It and Chrysler are still pushing for a merger, but GM is now reported by Reuters to be trying to get federal Government bailout money.

Next week we will see the industry’s car sales figures for the US for this month (and for Australia). Neither will make happy reading. What future do you give the local operations of Ford and GM against that background?

Get Crikey for $1 a week.

Lockdowns are over and BBQs are back! At last, we get to talk to people in real life. But conversation topics outside COVID are so thin on the ground.

Join Crikey and we’ll give you something to talk about. Get your first 12 weeks for $12 to get stories, analysis and BBQ stoppers you won’t see anywhere else.

Peter Fray
Peter Fray
Editor-in-chief of Crikey
12 weeks for just $12.