The recent news from Bosch was colored in doom and gloom for the auto industry.
The world’s largest auto supplier just announced a 44 percent plunge in annual operating profits. Over the past year, it laid off 6,800 workers. And it isn’t expecting any sunshine soon. Bosch predicts that 2020 will mark the third straight year of global production declines, down 10 million units from 2017.
"It could well be that we have passed the peak of automotive production," warned CEO Volkmar Denner.
And although we may hear other negative news during this earnings season’s announcements, one company’s misfortunes rarely speak for an industry at large. Nor do short-term trends make for solid forecasts for ongoing health. Drill deeper into the numbers, and you won’t just find an industry on a steady, 20-year ascent. You’ll find conditions that welcome prosperity for the next decade and beyond.
Begin with the unique factors behind Bosch’s troubles. While the industry hustles toward electrification, much of Bosch’s revenues still come from internal combustion engine parts. It’s also the premier supplier for diesel engine components, in an age when automakers are phasing them out. In other words, Bosch, like many suppliers, is a bit like an energy company still too reliant on coal.
Then comes that alarming indicator: global production.