The 2009-2010 Automotive Market: A Year of Turmoil, a Year of Recovery?
By David Pheteplace, Cable Assembly Director, Bishop & Associates Inc.

The automotive market experienced tremendous change in 2009. Worldwide sales of light vehicles plunged 33 percent. The United States saw 2007 production fall from 16 million vehicles to 13 million in 2008, and 2009 will likely end with sales of just over 10 million units. The worldwide sales of cable assemblies for this market dropped from $33.2 billion in 2008 to approximately $22.1 billion in 2009, a 33.4 percent decline. In the U.S., cable assembly sales declined by 32 percent. A portion of the decline is due solely to the sale of less expensive vehicles, which tend to have less interconnect content.

A major shift in the automotive market occurred in 2009. China will sell more cars than the U.S., which has always been the largest market. China will sell close to 13 million units in 2009, outselling the U.S. market by three million units, and becoming the largest market worldwide. This may shift back and forth over the next few years, but it is a milestone in automotive history.

Although the U.S. Cash for Clunkers program is credited with selling approximately 700,000 vehicles, the $2.7 billion program may have had a net effect of only 125,000 vehicles, as reported by automotive research company, Edmonds. Edmonds calculates that the industry would have sold 575,000 without the rebate. By Edmond’s calculation, each incremental vehicle cost the U.S. taxpayer approximately $24,000.

The automotive companies in the U.S. received billions of dollars from the federal government in 2008 and 2009, combined. GM and Chrysler asked for financial assistance from the U.S. government, and as a result of accepting bailout funds, experienced federal input in their daily operations and management decisions. GM CEO Rick Waggoner was ousted by the government as part of the agreement to receive assistance, and the new CEO, Henderson, just resigned, with barely 12 months at the helm. Ford managed to work their way through the crisis without government assistance, much to their credit.

The parts suppliers to these automotive manufacturers took an even harder hit. For the most part, these companies did not receive substantial government assistance—or got it too late—and were hit by a severe cash crunch as their customers, Chrysler, GM, and Ford, extended their payment terms. The bankruptcy of GM and Chrysler sent some of these suppliers into bankruptcy themselves. Notable among the harness suppliers that filed bankruptcy was Lear Corporation. Lear had expanded their operations considerably from 2004 to 2007, using debt to finance the expansion. The debt burden had collapsed on them in July 2009 when they filed in bankruptcy court.

Delphi, another large automotive harness supplier, also experienced a new paradigm in 2009. Delphi had split off from GM in 1999 with an initial public stock offering (IPO). In October 2005, they went through bankruptcy proceedings and continued the reorganization process until GM decided to buy back some of their assets in 2009, in addition to some private equity groups. GM wanted to make sure they protected their source of harness assemblies in the volatile market. Notably, GM is still majority-owned by the U.S. government.

An interesting result of the problems the big cable assembly suppliers are having is that now there seems to be increased opportunity for smaller cable assembly businesses, which are better suited to handling the smaller volume of cable assemblies. Many of the assembly requests now coming from the automotive manufacturers are “specials" from a volume perspective.

Another major issue that emerged in 2008 was the soaring price of oil and gasoline. Coupled with the worldwide push for reducing greenhouse gases, the greening of the automotive industry became a major U.S. presidential campaign issue in late 2008, and part of the 2009 economic stimulus package.

The push for greener cars in the last two years has led many of the manufacturers to add or enhance hybrid models in their lineup. Many popular car models, and some SUVs, are now available in hybrid versions. The vehicles are relatively expensive, but improved gas mileage and low emissions are their selling points. The Toyota Prius (right) and Honda Civic were two of the pioneer production cars in this field.

Hybrid sales were up 21 percent from November 2008 to November 2009. According to Autodata, hybrid sales represented 2.8 percent of light vehicle sales during the first 11 months of 2009, and 2.7 percent of all new-vehicle sales.

The first fully electric vehicles, available in limited numbers to-date, should start hitting the market in higher production volumes in 2010. If the fully electric cars can overcome their limited range and enough public charging stations are put in, their sales could equal or surpass the hybrid models.

Tesla Motors has the electric Roadster and received a $465 million approval from the U.S. Department of Energy to develop more affordable electric vehicles.

Fisker Automotive has already released the high-end Karma sports car. They are also working on developing a less expensive model and seeking government stimulus funds.

Aptera Motors of Vista, California, has developed an unusual-looking vehicle. It is very aerodynamic and lightweight, allowing it to be more efficient as an electric or hybrid vehicle. It was originally slated to be released in 2009, but has been delayed until 2010.

The much-heralded Chevrolet Volt is due to be released in 2011. This came to the public’s attention during the congressional hearings in the fall of 2008, as the automakers were seeking bailout funds.

 

The hybrid and electric vehicle market has certainly had a technical impact on the interconnect design of these vehicle. Check out the related article from Delphi to learn more about the unique concerns and some of the interconnects these vehicles require.

The worldwide automotive market for cable assemblies is expected to grow in 2010 by 11.3 percent, to $24.6 billion, year-over-year. The market has been very tough in 2009 and is not expected to regain its 2008 value for the next five years. The U.S. market will only grow approximately two percent in 2010.

As for hybrids and electric vehicles in 2010, Edmonds expects them to represent 3.2 percent of the overall light vehicle sales. But all signs point to gas vehicles slowly becoming the old technology, meaning that cable assembly opportunities for the automotive market will only grow.