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December proves to be worst month for automotive insolvencies

The annual rate of business insolvencies for the automotive industry in 2009 was a fraction lower than 2008, according to the latest Insolvency & Late Payment indices from Experian, the global information services company.

1.56% of automotive businesses became insolvent during 2009, compared to 1.66% in 2008. The busiest month for automotive insolvencies during 2009 was December, traditionally the most difficult month for automotive companies, when 0.15% of the business population became insolvent. This matched the rate seen in December 2008.

The financial strength of the automotive industry saw significant improvement throughout 2009. Automotive businesses saw their average financial strength score improve from 78.68 in January 2009 to 80.12 in December 2009. The financial strength score predicts the likelihood of a business failing in the next 12 months, with 100 being the least likely to default and 1 being the most likely.

Payment performance amongst automotive businesses, itself an indicator of business confidence, also improved throughout 2009. Despite December 2009 seeing a small increase in the time it in took automotive business to settle bills, up to 15.44 days beyond agreed terms from 15.03 in November 2009, payment performance in December was still 8.8% faster than in December 2008. The automotive industry continues to be among the quickest to settle bills, slower only than the agriculture/forestry/fishing, oil and servicing/repair sectors.

Mark Nuttall, general manager of Experian’s Automotive business, said: “Many factors have had an impact on the automotive industry throughout 2009, with the VAT reduction and scrappage scheme certainly creating interest and increasing the volume of people visiting forecourts and showrooms.

“2009 proved to be a volatile year for automotive businesses, and although the industry ended the year in a stronger position than it started, businesses are rightly cautious around the risks they are willing to take. The automotive industry understands the importance of risk management and it continues to be important for dealers to equip themselves with insight into the people they are doing business with, the people they employ and the history of the vehicles they are purchasing.”

 

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