LONDON Automotive chip manufacturer Melexis Microelectronic Integrated Systems NV (Ieper, Belgium) has argued that a drop in its sales that is expected to continue into 2009 is more to do with supply chain dynamics than consumer demand.
Melexis argues that a small drop in orders from car dealerships can produce a large effect further up the supply chain as all the stages seek to reduce inventory and exposure. Responding to the expectation of reduced sales in 2009 the company announced a cost-effiency program that will cut 10 percent of the work force.
Measuring the reduction of orders in terms of hiatus time, the amount of time delayed before any renewal of ordering is required to meet a lowered inventory target, Melexis argues that half-a-month at the car dealers has produced a month with different automotive suppliers and this in turn could result in up to three months of no orders at the automotive component suppliers. All of this would take place with no change in the number of cars sold to consumers.
Melexis then argued that car sales have held up remarkably well.
The total number of new passenger car registrations in 2008 in Europe slowed down 7.8 percent in comparison to 2007, Melexis said. In Germany, new passenger car registrations dropped by 1.8 percent only while in Belgium it increased by 2.1 percent. BMW and Renault worldwide sales for 2008 decreased by 4.3 percent and 4.2 percent, respectively, Mercedes-Benz was better with minus 2.3 percent versus the previous year, whereas Audi increased sales by 4.1 percent, the company said.
Melexis said it has already seen a 30 percent drop in sales, equivalent to a one month hiatus in a quarter, and that it expects the total effect to be as much as two months before starting to rebuild. Positive factors would come into play include the inevitable strengthening of the replacement cycle for vehicles the longer people delay, falling oil prices and the return of credit through government guarantees.
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