Volvo Truck Orders Decline 99.63 percent; Auto Industry Faces Crash in US

Mark Gilbert writing for Bloomberg says The Shipping News Suggests World Economy Is Toast.

In the third quarter of 2007, Volvo AB booked 41,970 European orders for new trucks. Guess how many prospective purchases Volvo, the world's second-biggest maker of heavy rigs, received in the third quarter of this year?

Here's a clue. Picture a highway gridlocked by 41,815 abandoned trucks -- because Volvo's order book got destroyed to the tune of 99.63 percent, with customers signing up for just 155 vehicles in the three-month period, the Gothenburg, Sweden-based company said last week.

The pathogen that has fatally infected swathes of the banking industry is now contaminating non-financial companies. "We're heading toward the sharpest downturn I've ever seen in Europe," said Chief Executive Officer Leif Johansson.

If nobody is buying your trucks, you don't need to rent a vessel to carry that shiny new 18-wheeler to its new owner. Hence the Baltic Dry Index, which tracks the cost of shipping goods and commodities, fell below 1,000 this week for the first time in six years.

Put another way, it is now almost 90 percent cheaper to ship goods over the oceans than it was at the beginning of the year. And because the huge vessels known as capesize ships can't currently charge much more than their daily operating cost of about $6,000 per day, their captains have slowed down to economize on fuel and save money, to about 8.68 knots from 10.33 knots in July, according to data compiled by Bloomberg.

It isn't just the oceans that are emptying. Air freight traffic dropped 7.7 percent in September, according to the latest figures from the International Air Transport Association. That's the steepest decline since the trade group began compiling the data in January 2003.

Obama Promises Help For US Auto Industry

In the US, Fed, Paulson Pressured to Assist Auto Industry or Face 'Crash'

General Motors Corp.'s pursuit of federal aid ahead of a merger with Chrysler LLC gathered momentum as six governors and presidential candidate Barack Obama prodded the government to help the auto industry.

Obama said that should he win next week's election, he would meet with the chiefs of GM, Chrysler, Ford Motor Co. and the United Auto Workers union to develop a plan for an industry overhaul, according to a transcript released by NBC.

Paulson would prefer any funding for Detroit-based GM come from the low-interest loans that will be distributed by the Energy Department, not the banking-system rescue, people familiar with the matter have said. The Energy Department said yesterday it is still writing rules for the loans.

The government needs to take action, said Kim Rodriguez, who leads accounting firm Grant Thornton's automotive restructuring group in Southfield, Michigan. "Chrysler as we know it will cease to exist very soon," she told reporters at a briefing yesterday.

A GM victory in its quest for federal funds probably would assure a tentative merger agreement before the Nov. 4 election, Rodriguez said. Yet even with a merger, the industrywide disruptions would include the loss of 74,000 jobs at Chrysler and its suppliers and the closure of half of the company's plants, Grant Thornton estimated.

With automakers struggling to revive sales and profits, the vise on the industry was underscored by auto lender GMAC LLC, which has begun telling some dealers it will no longer provide the financing they need to buy vehicles.

"GMAC is going to zap them of their existing capital," Peter Welch, CEO of the California New Car Dealers Association, said in an interview. "You could see a lot dealers going out of business," he said.

The grim statistics pile up every day. Yet some of it has to be shocking even to the biggest of bears. A 99.63 percent drop in truck orders at Volvo certainly qualifies as a shocking statistic.

Addendum

It seems there were 20K new orders come in and 20K cancellations from the AB Volvo Q3 2008 Earnings Call Transcript

Leif Johansson - President and CEO

"Yes, obviously you have seen the order in take on greater Europe there up 20,000 orders. Gross orders then offset by cancellations, but I think that the 20,000 number is a better number to look at, which means that the market is in debt. It means that it's slower than last year but its great difficulty to make any forecast there as we said. We won't make forecast for 2009, the forecast for 2008 has come down which of course with three quarters already gone that's a sign that the end market is heading south."

Here are the official numbers: Volvo Orders Down 55%

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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