The coronavirus crisis could be more harmful to the auto industry than the Great Recession, according to John Casesa, a Wall Street investment banker and former Ford Motor Co. executive.
“We’re of the view this situation is fluid and dire, and probably worse than ’08-’09 for the auto industry,” Casesa, senior managing director at Guggenheim Partners, said Thursday in the first of a series of “Congress Conversations” with Automotive News Publisher Jason Stein.
“Lots of companies are just coming to the realization the recovery could be very slow, demand could be low for a long time … and if this shutdown extends to June, July or August, many companies will run out of cash,” said Casesa, who left Ford in December 2017 after three years as its group vice president of global strategy. “This seems a more chaotic, more volatile kind of crisis and will probably lead to a much more violent reordering of the industry.”
He expects some businesses will not survive.
“Many companies are going to be facing a liquidity crisis,” he said. “There are many in the supply base that are undercapitalized, some that have significant amount of debt, and so, like ’08-’09, I would expect there will be restructurings, business failures, bankruptcies and, effectively out of that, some consolidation — fewer companies doing the same thing.”
The industry would be wise to consider more regional partnerships, he said, continuing a trend that’s seen automakers, suppliers and tech companies link up in recent years to save money and work together on vehicle development and mobility services.
Casesa said the crisis also could halt development on new services that distract from the core business of building and selling profitable vehicles.
“I think the reality is companies will be faced with very hard decisions with limited resources,” he said. “They’ll have no choice but to reduce overall spending level and to reduce spending on new projects where the visibility of returns is not great.”