AUTOS CONTINUE TO RUST IN PORTS

US Automobile sales are expected to continue to decline about 42% from last year at this time, Reuters reports..  That is only 685,000 cars and light trucks were sold in February, although that number should be up slightly  from January sales.  Annually, that projects to 9.5 million cars and trucks - that is the same sales level as in 1982.  Yikes.  

The decline, however, should not have been unexpected from the auto industry.  Over the past five years, the industry ramped up production and sold cars on credit to borrowers with lower risk profiles than normal.  The availability of credit and low interest rates artificially accelerated demand by a couple years.  The decline in auto sales is heading towards the mean, although as can be expected, the sales decline will need to overshoot the mean before coming back.  

This is not the first time in history that we have experienced such a cycle in manufacturing and in the auto industry in particular.  Granted, this occurs at the same time a global financial crises occurs (due in part to the auto makers' foray into the credit industry), but it is hard to have any sympathy for an industry who's business practices caused sales demand to increase beyond what was sustainable.  Instead of taking the profits and putting them to use restructuring the company and preparing for the inevitable decline in demand, the auto makers squandered the resources and find themselves begging Washington for more bailouts.  

Bailouts are not the solution to poor business practices.  Forced restructuring is the solution.  Chop the companies up into bits and sell off the parts to the highest bidder.  The industry won't go away, and will be much stronger  as a result.  Manufacturing can be profitable, and America can sell price competitive products once the legacy systems burdening the industry are put to rest.