Riding the Blue Highways

A summary of a new Jeff Rubin of CIBC report on the excess capacity in the U.S. auto industry:

The U.S. is producing too many vehicles, according to a new report from CIBC World Markets, and sales already at a 34-year low will likely drop another 30 to 40 per cent and may never recover to previous levels.

The report projects that American consumers will only buy about eight to nine million vehicles a year over the next five years, roughly half of what was purchased in the last five years. As a result, the report projects that roughly half of the 51 light vehicle plants in the U.S. will be permanently closed in the coming years, with a loss of another 200,000 jobs on top of the 560,000 jobs already lost in the sector this decade.

…The report finds that there will be 25 million fewer cars on the road in the U.S. in the next five years. With the vast majority of sales purchased on credit, buying a new vehicle simply won’t be an option for many Americans as they struggle with record household debt levels and financing that is increasingly difficult to access.

The last paragraph, in particular, is an important one.