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Automotive business failures halve in 2009

The automotive industry saw the rate of insolvencies drop by 53% from October 2008 to October 2009, according to the latest Insolvency Index from Experian, the global information services company.

With 43 automotive businesses going under in October, the insolvency rate for automotive businesses was 0.12% in October, half of October 2008’s three-year high of 0.26%.

In addition, Experian’s late payment data for October shows that the number of days that automotive businesses were paying their bills late fell to the lowest point since July 2008.

The health of the automotive industry, as measured by Experian’s financial strength score which predicts the likelihood of a business failing in the next 12 months, has also remained fairly stable (with one being the most likely to default and 100 being the least likely). Since October 2008 there has only been a minor increase from 79.03 to 79.94 in October this year.

Experian’s late payment data also shows a 7.54% year-on-year improvement in payment performance.

On average, automotive businesses paid 15.47 days beyond agreed terms in October 2009, down from 16.73 in October 2008.

Compared with other sectors, the automotive industry is the fourth fastest to settle bills, behind the agriculture/forestry/fishing, oil and servicing/repair sectors.

Mark Nuttall, general manager of Experian’s Automotive business, said: “Insolvencies are down in the automotive industry and the improvement in payment performance hints at renewed confidence.

“For the second month in a row, the automotive industry has been among the top four industries to pay their overdue bills within the least number of days beyond terms.

“With both the drop in insolvencies and days beyond terms decreasing, automotive businesses appear to have fared quite well in October. The financial strength of the industry has seen a small improvement, suggesting that we could see this stability continue into the next month. However, not all industries are faring as well as the automotive sector so it is vital that dealers continue to use business information to monitor the health of their customers and suppliers.”

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