Study Shows American Automotive Industry Woes Will Continue

In a study entitled "The Challenges of the Global Restructuring of the Automotive Industry," economic and business experts of global trade credit insurer and accounts receivable management partner Euler Hermes reviewed the industry's current status and outlook. According to the study, the volume declines observed in the United States demand an adaptation that will require restructurings. Globally, the move toward new consumption regions is under way, intensified by wage differentials that explain the radical reshuffling that is taking place among production regions.

(PRWEB) May 18, 2007 -- While the recent sale of the Chrysler Group has provided a new direction for Detroit's "Big Three" automakers, a study of the U.S. automotive landscape shows a continued negative outlook for the troubled industry.

In a study entitled "The Challenges of the Global Restructuring of the Automotive Industry," economic and business experts of global trade credit insurer and accounts receivable management partner Euler Hermes reviewed the industry's current status and outlook. According to the study, the volume declines observed in the United States demand an adaptation that will require restructurings. Globally, the move toward new consumption regions is under way, intensified by wage differentials that explain the radical reshuffling that is taking place among production regions.

The study shows that the American product line is out of sync with local demand, causing a loss of market share to Japanese automakers. In 2007, the market share of the American automakers could drop to 50%, down from 59% in 2004. The source of their difficulties is not a collapse in new car registrations, but declining market share on their own continent due to an ill-adapted product range. In four years, they will have lost nearly 10 percentage points to the Japanese automakers. According to the Euler Hermes Research Department, "Before they can offer models that align with demand, the American automakers will have no other choice than to restructure their largely oversized production tool. With volumes sold continuing to slide, 2007 will again be a loss-making year in general. On the American continent, GM hopes to be back in the black in 2008 and Ford in 2009."

Meanwhile, due to the loss of market share, American equipment manufacturers are barely staying afloat and have been in crisis since 2003. A net margin of between 0 and 0.7% is not enough to capitalize on opportunities in the new growth regions (China and India). As a result, they are losing market share to their competitors. In the American automotive industry (car makers and equipment vendors), the Euler Hermes Research Department is seeing a loss of 300,000 jobs between 2000 and 2006. After a relative return to stability in labor force numbers between 2002 and 2004, the United States is seeing a new restructuring plan (2006-2009) that will affect 285,000 jobs.

In addition, the recent rise in gasoline prices marks another challenge for the U.S. automotive industry, said Euler Hermes ACI Risk VP-Industry Manager Tony Clary. "As we have seen in the past, an increase in gas prices can have a rapid effect on buying habits, so the long period of stability the OEMs were hoping for to help generate interest in the profitable SUV and truck segments once again is obviously not coming to fruition," he said.

And finally, the weakening national economy is hurting the automakers two-fold: through increased costs of doing business and faltering consumer spending. "A key issue with the automotive industry is that unit labor costs are continuing to rise, but auto makers cannot raise prices because of increased competition," said Euler Hermes ACI Chief Economist Daniel C. North. "That means profit margins are being squeezed even tighter than in the past, which is hurting everyone down the supply chain." Also, the U.S. automakers' reliance on consumer spending will cause continued tougher times as the nation's housing market equity -- a major source of fuel for consumer spending in the past -- continues to fall. "A faltering consumer will surely lead to a faltering economy, causing business defaults to rise and credit conditions to deteriorate," North concluded.

As business and economic conditions continue to decline, companies involved in the business-to-business arena need to be increasingly vigilant about their accounts receivable. Euler Hermes ACI offers a complete range of accounts receivable management solutions. For more information, call 877-909-3224 or visit www.eulerhermes.com/usa.

Euler Hermes ACI is North America's oldest and largest provider of trade credit insurance and accounts receivable management solutions and is the US subsidiary of the Euler Hermes Group. Headquartered in Owings Mills, MD, the company protects and insures more than $150 billion in US trade transactions annually. Additionally, Euler Hermes ACI provides a suite of receivables management services that includes commercial third party collections, receivables management outsourcing, and international collections. For more information, visit www.eulerhermes.com/usa.

Euler Hermes is the worldwide leader in credit insurance and one of the leaders in bonding and guarantees. With 5,500 employees in 49 countries, Euler Hermes offers a complete range of services for the management of customer receivables and posted a consolidated turnover of 2.01 billion euros in 2006.

Euler Hermes, a subsidiary of AGF and a member of Allianz, is listed on Euronext Paris. Standard & Poor's rates the group and its principal credit insurance subsidiaries AA-.

Press Contact:
Rick Ostopowicz
Euler Hermes ACI Public Relations and Communications Specialist
Phone: (410) 753-0652
Email: rick.ostopowicz @ eulerhermes.com

These assessments are, as always, subject to the disclaimer provided below.
Cautionary Note Regarding Forward-Looking Statements: Certain of the statements contained herein may be statements of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words 'may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, potential, or continue' and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (i) general economic conditions, including in particular economic conditions in the Allianz SE's core business and core markets, (ii) performance of financial markets, including emerging markets, (iii) the frequency and severity of insured loss events, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) the extent of credit defaults (vii) interest rate levels, (viii) currency exchange rates including the Euro-U.S. Dollar exchange rate, (ix) changing levels of competition, (x) changes in laws and regulations, including monetary convergence and the European Monetary Union, (xi) changes in the policies of central banks and/or foreign governments, (xii) the impact of acquisitions, including related integration issues, (xiii) reorganization measures and (xiv) general competitive factors, in each case on a local, regional, national and/or global basis. Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences. The matters discussed herein may also involve risks and uncertainties described from time to time in Allianz SE's filings with the U.S. Securities and Exchange Commission. The Group assumes no obligation to update any forward-looking information contained herein.

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