Have we heard or seen that line enough this election season already?
Many of us are already putting final plans for 2008 in motion, and are looking ahead to 2009. With a Presidential election less than 30 days away, I'm certainly not in any position to predict the future of our economy, our automotive industry, or the election turnout itself. But the truth is, I just can't help myself. Besides, there are indicators and discussions of which we should all take note as we prepare our businesses for 2009.
From the DOT: American Driving Reaches Eighth Month of Steady Decline
Data released by the U.S. Department of Transportation shows that, since last November, Americans have driven 53.2 billion miles less than they did over the same period a year earlier – topping the 1970s’ total decline of 49.3 billion miles. ...Americans drove 4.7 percent less, or 12.2 billion miles fewer, in June 2008 than June 2007. The decline is most evident in rural travel, which has fallen by 4 percent – compared to the 1.2 percent decline in urban miles traveled – since the trend began last November. The decline in miles driven is similar to the two oil crisis of the '70s. (Data Source: August 13, 2008,
Calculated Risk: Finance & Economics.)
When Americans drive fewer miles on their vehicles, consumables (tires, parts, etc.) and preventative maintenance (oil changes, filter changes, etc.) tend to be required less. As certain services are being performed less, mechanics are faced with two certainties:
they will have to find other jobs to pick up the slack within their employment - for instance, a shop will try to perform more oil changes or PM checks, when people begin to reduce their scheduled maintenance because they're not hitting the mileage points
or they reduce time on current job (because the business is not coming to their door) and find other jobs to pick up the slack.
Historically, during a period of recession, the mobile tool jobbers business will pick up, as more technicians perform "shadetree mechanics", working on weekends outside their shop to supplement their income.
However, mobile jobbers business is reported as relatively soft in the U.S. through the second quarter (Snap-on US sales down 4.1%, Danaher down 4% in their tool segment, Stanley's revenues within North American automotive repair tools continue to be adversely impacted by the U.S. economy. Segment profit as a percent of sales declined versus the prior year driven by inflation, unfavorable product mix and strategic investments in emerging markets and Stanley Fulfillment System initiatives, according to annual reports) and into September (anecdotally). The same can be said for many other tool and equipment companies this year. Many faced a soft 1st quarter, saw a slight rally in the 2nd quarter, expected flat to a slight increase in the 3rd quarter, but instead had more dismal sales. Equipment sales are really lagging, primarily due to the credit crunch. Right now, I am not hearing much positive commentary from the field about the 4th quarter or into 2009.
There are talks of cutbacks and layoffs, and some customers have already begun to lay people off or reduce hours. Warehouse distributors are not taking advantage of quarterly rebates, because their warehouses are already full and they can't afford to risk cash-flow for inventory that may or may not move in 30-90 days. Mobile distributors are having a tough time getting new dealers set-up because they can't get financing for their new businesses. That being said, everyone is starting to get more creative in how they approach the market and as they look for new markets.
When technicians aren't working as much, they're not replacing older tools, nor are they interested in investing in new tools when they have to make a choice between groceries, gas, or tools. Especially, now that the first several waves of price increases on tools and equipment have hit the streets. There are some tools and equipment being sold today for 10% to 30% more than they would have cost a technician a year ago, simply because of the rising costs of raw materials that manufacturers have seen over the past 18 months. They've finally been able to pass some of their costs along to the distributor and ultimately the consumer.
So - no quick answers, no clear direction. However, here are my predictions for the final months of 2008 and early 2009:
1 - We will have a Presidential election and a man will win.
2 - The "Wall Street/Main Street Bailout" will pass.
3 - Credit will remain tight as the government sets tighter standards - thus continuing to make it difficult for some businesses to grow. In theory, this will weed out the weaker businesses, and ultimately the stronger, better-run companies will thrive.
4 - Most indicators for the automotive industry will continue to decline (miles driven, tires replaced, new cars manufactured/sold) for the next 6 months at a minimum.
5 - In an effort to keep people fully employed, our government will continue to run a deficit, because the private sector will not invest enough to increase production and reverse the recession. Additionally, we will see an increase in subsidies (this may help the automotive sector if the subsidies are available to the domestic Big 3).
6 - The price of oil, and subsequently gasoline, will continue to play a big part in the public's sense of well-being and trust in the government.
7 - no matter what any politician says between now and the election - taxes will go up.
Many of us are already putting final plans for 2008 in motion, and are looking ahead to 2009. With a Presidential election less than 30 days away, I'm certainly not in any position to predict the future of our economy, our automotive industry, or the election turnout itself. But the truth is, I just can't help myself. Besides, there are indicators and discussions of which we should all take note as we prepare our businesses for 2009.
From the DOT: American Driving Reaches Eighth Month of Steady Decline
Data released by the U.S. Department of Transportation shows that, since last November, Americans have driven 53.2 billion miles less than they did over the same period a year earlier – topping the 1970s’ total decline of 49.3 billion miles. ...Americans drove 4.7 percent less, or 12.2 billion miles fewer, in June 2008 than June 2007. The decline is most evident in rural travel, which has fallen by 4 percent – compared to the 1.2 percent decline in urban miles traveled – since the trend began last November. The decline in miles driven is similar to the two oil crisis of the '70s. (Data Source: August 13, 2008,
Calculated Risk: Finance & Economics.)
When Americans drive fewer miles on their vehicles, consumables (tires, parts, etc.) and preventative maintenance (oil changes, filter changes, etc.) tend to be required less. As certain services are being performed less, mechanics are faced with two certainties:
they will have to find other jobs to pick up the slack within their employment - for instance, a shop will try to perform more oil changes or PM checks, when people begin to reduce their scheduled maintenance because they're not hitting the mileage points
or they reduce time on current job (because the business is not coming to their door) and find other jobs to pick up the slack.
Historically, during a period of recession, the mobile tool jobbers business will pick up, as more technicians perform "shadetree mechanics", working on weekends outside their shop to supplement their income.
However, mobile jobbers business is reported as relatively soft in the U.S. through the second quarter (Snap-on US sales down 4.1%, Danaher down 4% in their tool segment, Stanley's revenues within North American automotive repair tools continue to be adversely impacted by the U.S. economy. Segment profit as a percent of sales declined versus the prior year driven by inflation, unfavorable product mix and strategic investments in emerging markets and Stanley Fulfillment System initiatives, according to annual reports) and into September (anecdotally). The same can be said for many other tool and equipment companies this year. Many faced a soft 1st quarter, saw a slight rally in the 2nd quarter, expected flat to a slight increase in the 3rd quarter, but instead had more dismal sales. Equipment sales are really lagging, primarily due to the credit crunch. Right now, I am not hearing much positive commentary from the field about the 4th quarter or into 2009.
There are talks of cutbacks and layoffs, and some customers have already begun to lay people off or reduce hours. Warehouse distributors are not taking advantage of quarterly rebates, because their warehouses are already full and they can't afford to risk cash-flow for inventory that may or may not move in 30-90 days. Mobile distributors are having a tough time getting new dealers set-up because they can't get financing for their new businesses. That being said, everyone is starting to get more creative in how they approach the market and as they look for new markets.
When technicians aren't working as much, they're not replacing older tools, nor are they interested in investing in new tools when they have to make a choice between groceries, gas, or tools. Especially, now that the first several waves of price increases on tools and equipment have hit the streets. There are some tools and equipment being sold today for 10% to 30% more than they would have cost a technician a year ago, simply because of the rising costs of raw materials that manufacturers have seen over the past 18 months. They've finally been able to pass some of their costs along to the distributor and ultimately the consumer.
So - no quick answers, no clear direction. However, here are my predictions for the final months of 2008 and early 2009:
1 - We will have a Presidential election and a man will win.
2 - The "Wall Street/Main Street Bailout" will pass.
3 - Credit will remain tight as the government sets tighter standards - thus continuing to make it difficult for some businesses to grow. In theory, this will weed out the weaker businesses, and ultimately the stronger, better-run companies will thrive.
4 - Most indicators for the automotive industry will continue to decline (miles driven, tires replaced, new cars manufactured/sold) for the next 6 months at a minimum.
5 - In an effort to keep people fully employed, our government will continue to run a deficit, because the private sector will not invest enough to increase production and reverse the recession. Additionally, we will see an increase in subsidies (this may help the automotive sector if the subsidies are available to the domestic Big 3).
6 - The price of oil, and subsequently gasoline, will continue to play a big part in the public's sense of well-being and trust in the government.
7 - no matter what any politician says between now and the election - taxes will go up.
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