Congratulations to re-elected President Barack Obama. His return to the White House certainly means we can expect continuity of policies to keep the US consuming - and that can only be good for the lubricants industry.
Meanwhile, the UEIL Conference in Lisbon this year provided an excellent global economic overview. UK-based journalist and author, Hamish McRae, after observing that we are now (only) a third of the way through the post-crisis downturn, emphasised that the economy will get better. De-leveraging debt just takes time.
Interestingly, McRae picked up on birth rates as the underlying key to future prosperity. Having a youthful population is important: they spend more. As populations age they tend of spend less and save more, reducing GDP growth.
This phenomenon is ably illustrated by the Japanese experience over the last 20 years. The US is operating at above population renewal rates, whereas Japan and China are not; nor are Germany and Russia. Over the coming decades that should mean that the US will continue to be a major economic force, despite the general shift to the east.
The evolution of the Lubricant market, once again summarised by Fuch's Apu Gosalia, highlighted the GDP "minus 4% rule” - as mentioned in our recent OATS ChinaBulletin - and the fact that the US fell from 27% of global lubricants markets to just 20% in 2011. When extended drains, already typical in Europe, are fully implemented in the US, this figure will fall further. By contrast, AsiaPacific is now 52% and rising.
The talk of “the European Crisis” was almost overwhelming. The Portuguese lubricants market is being hammered by the Iberian downturn: down 30%. German manfacturing PMI in October fell to 46 from 47.4. The risk of a double-dip is a concern. Contrast with China's 7.5% pa growth, with PMI rising to 49.5 from 47.9, not forgetting the US at 2.4% and even the UK showing a one percent improvement.
Who would be a policymaker?
Across Europe the fall in cars sales and, eventually, production is having a serious impact. Finally, excess capacity is being tackled. Peugeot is laying off workers. Ford is shutting plants in UK and Belgium whilst moving production to Turkey (a high birth and growth rate country where costs are lower. Remarkably, Fiat is being supported by its investment in Chrysler. All of this activity must be undertaken as part of the de-leveraging process.
The EU and, of course, other governments, has to look after the Automotive sector as a prime generator of jobs. But, at the same time, it needs to ensure that the environmental elements being built into Cars 21 do not produce an unbalanced, uncompetitive industry, whilst also ensuring that warranty misuse does not restrict competition for lubricants or other components needed for car maintenance.
What is clear is there are no easy solutions. Previous excesses, wherever they have occurred in the world, eventually have to be paid for, either by slower growth, or default, or both!
As McRae commented, the solution is to be adaptable and use the immense strengths of European and American technology to maintain and build a better future.
At OATS we are seeking to do just that; building up a network of data providers to enable us to service customers all over the world with the latest web solutions.
As always, if you would like to comment on this, or anything else you have read in our monthly OATS Bulletin, please don't hesitate to contact us.
Sebastian Crawshaw
Chairman, OATS