From manufacturing and sales to lending, the auto industry is skidding on some rough spots. The question is whether or not it’s looking at the commercial real estate market, another industry that revolves around debt, in its rearview mirror. Just a few months ago, Ford announced it was putting $700 million into its manufacturing plant in Flat Rock, Michigan, and adding 700 jobs there. This week, however, the auto manufacturer said it would cut 10% of its salaried jobs in North America and Asia — over 1,400 positions, though factory jobs are currently unaffected — to boost its profits and its stock price. And it’s not just Ford.
Overall U.S. auto sales dropped 4.7% in April, marking the fourth consecutive month of slowed demand. In addition to Ford, Nissan, General Motors and Toyota also reported U.S. sales declines in April. At the same time, prospective auto consumers are facing tightened credit standards, with a May report from the Federal Reserve Bank of New York showing that drivers with low credit scores are having a harder time getting auto loans.
But the trend of tightening lending standards is not limited to the auto industry. A CrediFi analysis of a sample of public conduit/fusion commercial mortgage-backed securities from 2012 through Q1 2017 shows a significant drop in loan-to-value ratio in the first quarter of 2017, indicating that CMBS lenders, too, are tightening credit as their appetite for risk is shrinking.
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