German Car Industry Kaput

Spiegel.de,  a national news magazine in Germany, has an article dated 09-02 about the disaster some foresee in the German auto industry. Basically the scraping of old cars and the credit for a new car purchase is about to end. It is similar to the US cash for clunkers stimulus and France's prime a la casse. But on a larger scale than either. The article is in German and the translation was not that easy to understand. But here goes.

Basically certain consultants, etc., expect German car sales to plummet dramatically, with about a 10% - by some guesses - of auto related jobs terminated. Some estimates are predicting German auto sales next year to decline about 1/3. An estimated  30%-50% of   "European" auto suppliers could be on the verge of bankruptcy, according to a study by AlixPartners.

Those most effected, according to the Speigel article, would be the manufacturers of smaller cars - like VW, Ford, Opel, etc. .

Ironically, or maybe it's to be expected. certain car manufactures appear to be sanguine about everything  and are making optimistic comments about their future like "I expect companies have established themselves to come through a weaker 2010" < It's hard to give an accurate translation >. Car industry "experts" don't predict a recovery until 2013. Other manufactures and dealers say part of the car industry's problem is unrelated to a recession. Simply put, they claim there's too much overcapacity.

Is something similar going to happen in the US? And if so, are the people responsible also going to tell us everything is fine? According to one survey years ago, the same "Everything is fine" cheer was being said all the way  down in the 1930s for the US economy and its' stock markets by newspapers and industry leaders.

Germany is one of the largest economies in the world, and the largest economy in Europe. When it sneezes, it's hard for the rest of Europe not to catch cold.

Looks like a bad flu season may be coming.

< As always, this article in no way is giving investment advice or otherwise making any recommendations.>