FocusAuto customer survey could bode ill for US petchems: sources

27 August 2013 18:49  [Source: ICIS news]

By Mark Yost

HOUSTON (ICIS)--A new survey of customer satisfaction among car buyers could be a bad sign for US petrochemical makers, sources said Tuesday.

According to the American Customer Satisfaction Index, a survey conducted by the University of Michigan Ross School of Business, customer satisfaction among new-car buyers has dropped 1.2% to an overall score of 83 out of 100. That is down from an overall score of 84 a year ago.

Customers are most unsatisfied with US-made cars, the survey said.

European manufacturers ranked first with a satisfaction score of 84.7, according to the survey, followed by Asian automakers with a score of 84.1, while US brands only scored an 82.

Among individual brands, Mercedes, Lexus and Toyota topped the list for customer satisfaction, while GMC and Cadillac tied for fourth and were the first American brands to appear on the list. Overall, Ford and Chrysler finished at 83, in the middle of the industry average. Dodge and Chevrolet came in last with scores of 79, just below Jeep, with a score of 80.

Those low scores are a bad omen for US petrochemical makers that supply materials such as acrylonitrile (ACN), acrylonitrile-butadiene-styrene (ABS) and nylon to the auto industry, sources said.

That is because there is a growing concern among automakers and petrochemical makers that the pent-up demand that has been driving US car sales to levels that have not been seen since 2007 is eventually going to wane. When it does, and car sales are harder to come by, these customer satisfaction scores will matter.

"We know that this demand isn't going to stay this high forever," one petrochemical source said. "In fact, we're not even sure it's going to last through the end of the year."

Indeed, automakers and petrochemical firms are worried that when this pent-up demand from the 2009 recession runs out, the market will not gradually slow down. Instead, it will plummet.

"Quite frankly, we're surprised that auto sales have done this well, this long," said one source who provides petrochemicals that go into plastic components for US automakers. "We've done well to manage it [demand] on the way up, but I'm not sure it'll be so easy to manage it on the way down. Because we think the drop will be sharp."

When that happens, the car buyers who are left will flock to brands with the best quality, sources speculated. And according to the recent survey, that is not US brands that buy their petrochemical-based plastics from US producers.

"The study certainly tells me that if US automakers are going to build future sales, they're going to have to do it by doing a better job of satisfying customers," one source said. "They're going to have to win over those customers who are buying foreign brands. And they're going to have to do it by making better automobiles."

The one positive to all this is that many foreign nameplates - Toyota, Honda, Mercedes, Subaru - now have manufacturing plants in the US. But sources said that many of these foreign plants still source parts from Japan and Germany, and merely assemble the cars here to take advantage of favourable tax breaks for US manufacturers. But some of them do use local - meaning US - suppliers for their parts.

But the lion's share of the auto manufacturing in the US is done by the so-called Big Three - Chrysler, Ford and GM - who get most of their petrochemical-based plastics from US producers. So when the downturn hits, and sources say it eventually will, the biggest impact will be felt among US petchems, sources said.

Petrochemicals that go into automotive include ACN, ABS, butadiene (BD), nylon, polycarbonate (PC) and styrene-butadiene rubber (SBR).

Some of the companies that provide petrochemicals to the auto industry include Ashland, Ascend Performance Materials, Bayer, BASF, ExxonMobil, Honeywell, INEOS, LyondellBasell, Pemex, Shell and TPC Group.

By: Mark Yost
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