Yes, it certainly is a challenging time for the auto industry. The automotive sector is clearly one of the hardest hit during this economic crisis, and PPG automotive coatings business has not been immune. Luckily, we have a global presence and a balanced portfolio of customers, so we aren't as hard hit as many other U.S.-based automotive suppliers. Plus, PPG has taken some very aggressive action to take out cost, including the closing of our Canadian coatings facility and some significant reductions in our workforce worldwide. As you know auto sales in the westernized economies have been falling since the middle of last year, and we have now seen a similar impact in Eastern Europe and Asia. We see China continuing to grow this year, but at a reduced rate.
PPG has taken aggressive action to cut our overhead costs to align ourselves with the new global reality for the next several years. But, at the same time, we are continuing to invest in the future, investing in new green technologies and new processes to reduce costs for PPG and for our customers. We will also continue to monitor the health of our supply base, since they have not been immune from this downturn either.
What is your outlook for continued growth in automotive segment in the coming years, and how will PPG play a role in helping that growth? What are your predictions for the automotive OEM coatings market in the short-, mid- and long-terms?
Although predictions are that auto sales will be down substantially this year, there will still be close to 60 million cars produced globally, all of which require paint. Although I am hopeful that we will see some recovery in 2010, we are managing our business as if that recovery won't happen until 2011. We do have the good fortune to be well positioned in regions of the world which are expected to experience higher growth, such as China, so PPG expects growth higher than most U.S. dependent automotive suppliers. Plus, we have developed new products, such as our AudioGuard acoustic coating, which increases our value and content per vehicle, providing us with new venues for growth.
What is PPG's growth strategy in the automotive OEM segment? Where is this growth being focused and what can we expect moving forward? What can we expect coming down the R&D pipeline from PPG?
PPG offers a complete range of coatings products and services to the automotive OEMs. Currently we are the only supplier with a full range of products and services that can offer a total system solution for OEM paint shop needs around the world. Going forward we will continue to support this strategy offering coatings products and services for both OEM and Tier 1 suppliers globally. Some areas of development for PPG include products that remove weight from the vehicle, such as lightweight sealers, and products that are focused on reducing steps in paint process, such as our new Zircobond pretreatment. You can expect to see some exciting new things from us in the next few years.
In addition to the bad economy, what are the other key trends and challenges manufacturers of automotive OEM coatings face now and in the years ahead?
There are many exciting changes occurring in the OEM coatings market. Our customers are very focused on cutting time and cost out of their processes, and PPG has developed new technologies and approaches to help them with this. One new method that our customers are increasingly using is the "compact process," or process that removes steps and layers from the coating system without reducing performance or functionality. We are also helping our customers continue to differentiate their products through new color technologies. Our key challenge is continuing to invest in these new process developments and products, while at the same time managing our development costs and resources.
Compact processes that remove time and cost from the coatings processes at the assembly plant are certainly a key trend. Another big area is "green" coatings for the emerging electric vehicle segment. Many of the new electric vehicle manufacturers want to be green all of the way through the process. PPG has several alternatives for these new OEMs including our P2Zero process, which is an all-powder topcoat, zero VOC system.
What technologies are driving the market now and what can we expect down the road in terms of automotive coatings technology?
Color is something that attracts consumers to a vehicle and differentiates a brand. So our customers are always looking for new clean, deep colors that show off the lines and design features of the car. PPG has developed a new line of Andaro pigments that are exciting to designers and give a deep, rich color. We also have some very interesting products in development at our research and development center. We are looking at topcoats that reflect heat, clear�coats that are self healing, interior coatings with new colors and texture, more durable electrocoat, existing products that use bio-based materials and new processes that reduce the footprint of a paint shop, just to name a few.
Auto sales slump persists as consumers stay scared
Industry analysts say when all the numbers are tallied, February sales could be worse than January's total of 656,976 light vehicles. That was the lowest monthly total since the industry sold 656,310 vehicles in December 1981, according to Autodata Corp. and Ward's AutoInfoBank.
Major automakers' U.S. sales continued their deep slump in February, putting the industry on track for its worst sales month in more than 27 years as huge rebates and low-interest financing failed to spur fearful consumers to make a major purchase.General Motors' sales tumbled 53% from a year earlier, while Ford's U.S. sales fell 48% and Chrysler's fell 44%. The major Japanese automakers fared only slightly better. Toyota Motor Corp.'s U.S. sales plunged 40 percent, while Honda Motor Co.'s sales dropped 38 percent and Nissan Motor Co.'s fell 37 percent.
The slide casts further doubt on the financial viability of GM and Chrysler, which need to sell cars and generate critical cash to supplement the $17.4 billion in government loans that are keeping them in business.
Automakers and analysts have been predicting sales will rebound in the second half of this year, but they are becoming less certain. Massive layoffs, the stock market decline and sliding home values are prompting people to hold on to their cars longer, while those who are buying are more often opting for a used car or truck.