Carmakers announce cuts in wake of economic downturn

The car industry has been struggling of late and earlier this month, the Society of Motor Manufacturers and Traders (SMMT) reported that car sales plummeted 21% in September compared with last year.

September is a major month for car dealers, due to the introduction of new registration plates in August.

However, in the wake of the credit crunch, consumers have continued to cut back on non-essential items. The fall in car sales follows a similar decline in August and, as a result, car sales for the year are down 7.5%.

Today Honda Motor, which is Japan’s second-largest carmaker, has announced a 41% fall in three-month profits, due to falling sales and the strengthening yen. Honda added that car production is to be cut at its plant at Swindon, Wiltshire.

Meanwhile, just last week, Peugeot said it will cut its 2008 profitability outlook and commence huge cuts in production.

Also last week, Chrysler announced it is to axe 1,825 jobs in the US.

GKN, the automotive and aeroplane parts manufacturer, is reducing its workforce by 1,400 jobs and is to cut factory production time.

At least 500 jobs have already gone in the US while a further 900 globally will go by the end of the year.

However, there is some good news in the industry after Germany-based Volkswagen (VW) is to become the world’s largest company by market value after Porsche has increased its stake to 75%, stating that it needs a strong influence at VW, which makes components for around 30% of Porsche cars.

Porsche, the maker of the 911 sports car, has also announced its intention to form an alliance with VW but revealed that it did not want to merge with the company.

Following the news, shares in Volkswagen were up 55% in late-morning trading in Frankfurt trading.

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