US automakers face onslaught in 2008

After years of crisis, the big three United States automakers face another brutal year with demand expected to dip again due to an economic downturn threatening to snuff out 2007’s timid recovery.

The world’s major automakers will exhibit upcoming models and the concept cars of the future from Sunday as media previews kick off for the Detroit motor show. But the extravaganza comes amid gloomy predictions for the market.

“It’s pretty clear that demand in the US will decline during 2008,” said Bruce Clark, an analyst at Moody’s financial research group.

“At this point we are anticipating total retail shipments of about 15,7-million units. But actual shipment levels could be even lower depending on the overall state of the US economy.”

The three US manufacturers used to hold 95% of the market, but this has been chiseled to just over half as Asian firms seized 47% with Japan leading the charge, according to the firm Autodata.

Japanese giant Toyota for the first time passed Ford in the US auto sales rankings in 2007, taking second place behind General Motors (GM). Ford was pushed back into third place, with Chrysler in fourth.

European makers pose less of a general threat with about 7% of the US market, but hold an edge in sales of deluxe vehicles.

Restructuring by GM from 2005 and soon afterwards by Ford and Chrysler helped them begin closing the gap with the Japanese in terms of quality and productivity.

Each of them struck a pay deal with the major autoworkers union UAW — a key achievement which Clark said transformed the industry, helping them cut production costs to operate more competitively in the mid- to long-term.

The deal cleared the way for the three companies to cut nearly 100 000 jobs.

GM said last week it had met its aims for 2007 by stabilising its position in the market, while Ford reported having considerably reduced its net losses after record losses of $12,6-billion in 2006.

But challenges remain: GM reported net losses of $39-billion in the third quarter of 2007 and is fighting to put more fuel-efficient models in its show rooms.

Ford is reshuffling its product line to balance expensive models with larger numbers of popular cheap ones.

“The manufacturers are in very different places,” said JD Power analyst Tom Libby. “Ford is obviously struggling and needing to stabilise things. They have a couple of major introductions coming.”

Chrysler is in the biggest fix, analysts said, despite a boost to restructuring by the investment group Cerberus which bought it last year.

“Chrysler is in big trouble,” said John Wolkonowicz of Global Insight. “Chrysler needs to merge with somebody quickly.”

Clark said Chrysler’s focus on the North American market deprives it of possible relief by selling, as GM and Ford do, also in emerging markets such as China, India, Brazil and Russia.

He said it was dependent on mini-vans and four-wheel drive cars while demand was turning more towards more compact and fuel-efficient models due to soaring energy prices.

Oil prices and the general economic downturn in the United States could hit sales of even the most efficient models.

Investment bank Goldman Sachs lowered its forecast for vehicle sales in 2008 to 15-million, down from 16,3-million in 2007. Credit rating agency Standard and Poor’s predicted North American sales could hit a 10-year low this year. – AFP

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