The automotive industry at the moment resembles the proverbial house of cards - what was thought to be a fairly secure base was all the while teetering at the edge of a precipice. The world just had to wait for the fog to clear to reveal a tenuous situation in the US, the world's largest automotive market.
That General Motors, Chrysler and Ford, the traditional American automotive powerhouses comprising the Big Three, have been scrambling for survival and begging for federal assistance in the form of a 25 billion dollar lifeline, is particularly telling.
But many would argue that the current situation plaguing the American automotive industry is not completely unexpected, the result of decades of poor management practices and unsustainable product lines. However, the effect on global markets is more significant as worldwide, manufacturers are announcing production cuts and the delay of certain model lines to avoid taxing an already-strained market.
Land of the free market
A sub-prime market collapse, followed by the failure of key banks and insurers and the subsequent drop-off in consumer spending again qualifies the old adage - when America sneezes, the whole world catches a cold.
And as far as the economic meltdown's impact on the world is concerned, South Africa is no exception.
Although our own economic cocktail has impacted on the performance of the local automotive industry, the current global situation merely adds to the malaise. The cracks first appeared with the introduction of the National Credit Act before successive interest rate hikes started taking their toll.
Now most local manufacturers admit the current situation is "challenging", but all appear optimistic that their individual strategies should allow them to emerge from the meltdown intact.
"There are macroeconomic forces influencing the global market slump," said Bill Stephens, communications head for Volkswagen South Africa.
"The full extent of these forces is not known, but the situation is very volatile."
Stephens expects VWSA to go through a tough time in the coming months.
"The market is down about 23% year-on-year and we (VWSA) expect it to be down a further 10% on that in 2009. The uncertain global market will negatively impact export contracts for 2009, although we still aren't sure by how much."
"But VWSA will continue with its investment in the local industry," Stephens said, citing a R3-billion investment that was initiated in 2007.
And, for now, the manufacturer will also not be retrenching any employees at its manufacturing facilities. Normal shifts remain in place and Volkswagen will be shutting its Uitenhage plant for the standard three-week period over December.
Some local manufacturers, though, have said that while product sales have taken a pounding, certain practises have ensured they are perhaps better equipped to deal with the situation affecting the industry.
Toyota SA's public relations manager Andile Dlamini said: "We are in the same boat as the other manufacturers and our initial forecast for 2008 has been realigned in line with the market condition. But based on the strength of our brand, Toyota is still the market leader."
Daimler South Africa's Mercedes-Benz employs a different strategy for the local production of its C-Class sedan and a different stock system has allowed it to avoid being saddled with high inventory stocks.
"Mercedes-Benz South Africa holds all the stock and dealers pull from us," explains product specialist Reandren Thulkanam.
"This means there is less risk to dealers and it allows us to be more hands-on."
Moreover, BMW SA notes it has over several years, in anticipation of fluctuation in global demand, introduced a flexible time model with a time-bank feature that allows employees to bank their overtime and redeem this during a slow production period.
"Instead of those workers being laid off unpaid, they would be able to take some time off, without impacting their employment status and earnings," said BMW SA automotive communications manager Benedict Maaga.
"Now that a major turn down in the global economy is upon us, the wisdom of that programme is beginning to bear fruit. We're (BMW SA) will not be cutting jobs," he added.
BMW, Toyota and Mercedes-Benz have said there is no immediate threat to their export contracts, either.
BMW SA assembles 3 Series sedan for both local and export markets.
"With the downturn in demand there is an impact on production volumes, which are determined by Germany, as they are linked to demand for our vehicles from markets such as Europe, USA and Asia. However, the export contract remains in place."
"The bulk of our local production is for export," says Toyota's Dlamini, "so that will keep us going. Lower consumer spending has not yet impacted production, but things may be different in 2009."
Toyota SA exports Corolla, Hilux and Fortuner.
On the other hand, Mercedes-Benz manufactures certain C-Class models in East London for both the local and American markets.
"This is a global phenomenon and we are not isolated. We will start reducing capacity, but a fair amount of money has been invested and there is no risk as far as losing the contract is concerned. We will plan accordingly as the situation changes," Thulkanam concluded.
Even Renault, that will manufacture locally for the first time in January 2009 when its Sandero hatchback goes into production at alliance partner Nissan's Rosslyn plant, remains upbeat about its plans to produce 20 000 units a year.
"We haven't changed our plans at all," said Alyson Strever, media communications manager for Renault South Africa.
"As a new product, demand should be high. We don't expect that to change with Sandero."
However, Nissan, which produces its NP200 and Hardbody NP300 models locally, announced on Wednesday that it would be cutting production at its Rosslyn facility.
The manufacturer has said there are no plans for "definitive operational changes", but that it would "conduct ongoing evaluation of market conditions with a view to aligning production output at its Rosslyn manufacturing plant with fluctuating consumer trends."
And while most local manufacturers are exuding relative calm, the locally-based Americans must be feeling a chill.
Ford Motor Company of Southern Africa and General Motors South Africa were both not at liberty to speculate on how Detroit's plea for funding may play itself out in South Africa, but it remains of great concern. With the exception of Chrysler who imports its entire line-up, Ford and GM both hold manufacturing contracts for local and export markets.
Ford's communications manager Rella Bernades admits that due to a drop-off in demand, staff at the manufacturer's engine plant at Struandale will be affected by the changes.
"We are in the process of finalising it (the staff cuts), but the exact number still has to be decided."
"We adjusted a lot of our production orders in the middle of the year, based on how we saw the balance of the year playing out and it has proven to be a wise decision," said Jacques Brent, Ford's sales and marketing director.
"In saying that, quarter four weakness is greater than what we forecast and we will once again be adjusting our pipelines as we move into the new year.
“But we have not lost any dealers due to reduced sales volumes and resultant profit issues," Brent concluded.
Similarly, General Motors' Denise van Huyssteen noted that 2008 has so far been taxing for the manufacturer, both on the sales and the manufacturing fronts.
"We've had a tough year. The overall market is down and we are down about 15%, even though our market share has increased.
"We decided at the beginning of the year that GMSA had to be more efficient and 1 000 jobs were voluntarily released, but there will be rebalancing of the lines and a longer shutdown than normal in December."
Van Huyssteen also noted that while the Hummer H3 formed part of GMSA's production schedule, it was hard to speculate on the future of the American brand that has often been branded as the poster child for conspicuous consumption.
The current economic environment's volatility makes it hard to predict just how things will turn out.
However, when speaking to sister publication Sake24, Econometrix economist Tony Twine said exports could come under fire.
"The motor industry, in terms of local demand, has been in a decline for two years. The ability to export has until now offered considerable relief," he says. "South African vehicle manufacturers, in terms of export, are just as exposed - if not more so - than their parent companies.
"South Africa is tied to global supply programmes. Should the head office have problems elsewhere, South Africa will be the last place it will look for supplies."
Among local manufacturers, though, there is definite consensus that the current situation will not continue unchecked, but when the turnaround is expected varies dramatically depending on whom you ask. However, local manufacturers all agree on one other thing; barring a dramatic shakeup in the industry, it is business as usual.