With the new car bubble peaking, and the world’s automakers having ramped up production across the globe after seeing Fed-driven signals that all is well and all is going to get better…

Click on picture to enlarge

…the slowdown in China already has many hitting the panic button (with production plunging, capacity utilization tumbling, and workweeks tumbling).

Click on picture to enlarge

With this week’s ‘exogenous’ diesel-defect ‘event’, the inventory-problem that US automakers are facing…

Click on picture to enlarge

…is nothing compared to the potentially catacylysmic wave of deflationary pricing (and deflationary lack of demand for raw materials) that VW faces with its record inventory.

Inventories of Finished Goods…

Click on picture to enlarge

Charts: Bloomberg

The last time inventories spiked on this scale… right into an ‘exogenous’ event… it ended very very badly!

Think we are exaggerating, think again… (via Reuters)

The Volkswagen emissions scandal has rocked Germany’s business and political establishment and analysts warn the crisis at the car maker could develop into the biggest threat to Europe’s largest economy.

Volkswagen is the biggest of Germany’s car makers and one of the country’s largest employers, with more than 270,000 jobs in its home country and even more working for suppliers.

Volkswagen Chief Executive Martin Winterkorn paid the price for the scandal over rigged emissions tests when he resigned on Wednesday and economists are now assessing its impact on a previously healthy economy.

“All of a sudden, Volkswagen has become a bigger downside risk for the German economy than the Greek debt crisis,” ING chief economist Carsten Brzeski told Reuters.

“If Volkswagen’s sales were to plunge in North America in the coming months, this would not only have an impact on the company, but on the German economy as a whole,” he added.

Volkswagen sold nearly 600,000 cars in the United States last year, around 6 percent of its 9.5 million global sales.

In 2014, roughly 775,000 people worked in the German automobile sector. This is nearly two percent of the whole workforce.

In addition, automobiles and car parts are Germany’s most successful export — the sector sold goods worth more than 200 billion euros ($225 billion) to customers abroad in 2014, accounting for nearly a fifth of total German exports.

“That’s why this scandal is not a trifle. The German economy has been hit at its core,” said Michael Huether, head of Germany’s IW economic institute.