Will you be laid off? The bigger question is "Will General Motors and Ford go bankrupt?"
Market conditions outlined below indicate the threat environment for GM, Ford and Stellantis. These market conditions are going to get worse as the downturn accelerates. We are already seeing bank runs in some areas. Yesterday, a major bank (Silicon Valley Bank) collapsed. The stock market has been volitle for a year. Many lost 30% of their total net worth in 401ks and pensions. The housing market is about to crash and mass layoffs have begun outside silicone valley. Geopolitical issues such as the Russia/Ukraine war are threatening supply chains as natural gas and oil from the region are not available, causing inflation. Interest rates have been raised by the Fed, which is causing the economy to slow down as prices rise (stagflation).
With high interest rates, high auto loan repossession rates, high market saturation, mass layoffs, record credit card debt and a sinking stock market, the problem for the auto industry will not be a chip shortage, it will be a dramatic dip in sales revenue.
Key metrics: 34% of auto loans are sub prime borrowers with an 11% repo rate. Average interest rate is between 8.6% and 22.41%. Monthly payments average $718 to $1000. $1.5 Trillion in auto loans issued in 2022 alone, leaving huge liabilities for banks.
Car loans are such a disaster with repossessions that many banks are refusing to finance them. This has never happened before.
"U.S. lender Citizens stepping back from auto loans - CEO"
https://www.reuters.com/business/finance/us-lender-citizens-stepping-back-auto-loans-ceo-2023-01-30/
Mechanics Bank exits indirect auto lending
The bank had $3.6B in auto oustandings at year end 2021
https://www.autofinancenews.net/allposts/risk-management/mechanics-bank-exits-indirect-auto-lending/
"Wells Fargo will no longer accept loan applications from most independent car dealerships"
https://www.usatoday.com/story/money/cars/2020/06/02/wells-fargo-wont-make-auto-loans-most-independent-car-dealerships/3125301001/
General Motors profits are heavily reliant on the Chia market. What happens to GM's bottom line if geopolitical issues surrounding Taian threaten that?
"GM is one of the top-selling car companies in Chi*a and earned about $2 billion there last year as smaller rivals racked up losses, but expects weaker results this year." (link in the next paragraph)
Beyond the profits from the Chi*a market, American cars are produced with a very high number of parts from the region. What happens if that supply chain is cut off? No products. GM goes belly, and government bailouts can't produce parts.
Massive bad investments - In 2019 alone, GM spent over $1 billion on the Cruise project and hired an extra 2000 workers.
"The auto maker plans to spend $1 billion this year on its San Francisco-based Cruise autonomous-car division, including doubling its employee count to about 2,000 workers."
https://www.wsj.com/articles/gms-operating-profit-hurt-by-china-results-u-s-production-cuts-11556626628
GM spent a whopping $7 billion on battery development with no existing return on investment. This includes 4,000 more jobs and factory conversions.
"General Motors is investing nearly US$7-billion in electric vehicles (EVs) and battery plants, creating up to 4,000 jobs and keeping another 1,000 already employed. The investment will be used to convert an existing factory outside of Detroit to produce electric pickup trucks by 2023"
"https://www.theglobeandmail.com/business/international-business/article-general-motors-to-spend-nearly-7-billion-on-ev-battery-plants-in/
Generation Z isn't interested in cars! The market for GM and Ford autos is SHRINKING!!!
From the dawn of the automobile until the Baby Boomer generation, every generation drove more than the one that preceded it. That trend, though, seems to be reversing now, and, like the Millennial's before them, members of Generation Z, or Zoomers, are driving fewer miles than the people who preceded them.
https://www.carscoops.com/2023/02/zoomers-are-driving-even-less-than-millennials-did-before-them/
Cornavirs changed people's driving habits. Fewer people need to drive to work, others, people still afraid to leave the house, others are just too broke to shop and take trips.
https://www.brookings.edu/research/coronavirus-has-shown-us-a-world-without-traffic-can-we-sustain-it/
*Average new car price is $48,763
"The average price for a new vehicle was $48,763 in February – a decrease of 1.4% ($705) – compared to the previous month, according to a KBB news release."
https://clark.com/cars/average-new-car-price/
*Average used car is $20,000
*Auto loan interest rates average from 8.6% to 22.41%!!!
https://cars.usnews.com/cars-trucks/advice/average-auto-loan-interest-rates
*Average monthly new car payment is up 26% since 2019 to $718/month.
*1 in 6 owe $1,000/month for their new car
*Auto repossessions for subprime loans is 11%, 4$ for prime borrowers
https://www.autoblog.com/2022/07/11/car-repossessions-on-the-rise/
*As the auto loans were created in a frenzy of government stimulus checks, the prices of autos scaled up dramatically, leading to longer loans (72 months and higher!)
*34% of auto loans are sub prime borrowers
*Metrics for auto loans are far worse today than they were before the Great Recession
*"Stimulus Ballers" didn't pay rent, collected government stimulus checks and were given loans with no scrutiny
*Sub prime loans from "Stimulus Ballers" were packed and shopped from bank to bank
Will Subprime Auto Loans Trigger The Next Financial Crisis?
https://www.youtube.com/watch?v=okhzUoxaUO0
American Debt: Auto Loan Balances Hit $1.5 Trillion in 2022
https://www.investopedia.com/personal-finance/american-debt-auto-loan-debt/
"I am in the auto industry and this video is spot on! We now have customers financing 96 months and our best rates for 800 credit is currently around 8%."