Automotive News: More Auto Credit in 2011

December 16, 2010 by · Comments Off on Automotive News: More Auto Credit in 2011 

Figure on a slow and steady recovery in U.S. auto sales next year — a rise of about 10%, according to the consensus of analysts surveyed by Automotive News. But one outlier predicts a much bigger jump in 2011 and offers some compelling data to back it up.

The consensus is for 2011 volume of 12.7 million sales, a 10% increase if this year ends at 11.5 million units. All but one of the seven analysts predicted a market of 12.5 million to 12.9 million.

But Morgan Stanley says consumer creditworthiness is improving so rapidly that lenders are about to loosen credit dramatically — and that will rocket the market to 14 million units in 2011.

“The catalyst is credit availability — a bigger impediment to auto sales than tight inventories or low demand,” says Ravi Shanker, Morgan Stanley’s lead analyst for North America.

Morgan Stanley is far from other forecasters on 2011, but less so after that. In 2012, Morgan Stanley sees 15 million sales. IHS Automotive predicts 14.8 million, which is close to the others.

“Everybody gets to the same place,” Shanker says. “We just get there faster.”

Analysts simply don’t agree on whether auto sales will recover as fast as they fell. So far sales have not snapped back, and most analysts say we won’t get a V-shaped recovery. But Shanker thinks otherwise, citing Morgan Stanley proprietary indices of credit quality and availability.

“Credit quality and availability always move in lockstep, with availability trailing quality by three months,” he says. “Now credit quality is rising quickly and is near historic highs. Even a small change in lender attitude means more auto loans and more affordable terms.”

But too many fundamental economic factors are weak for one improvement to break the logjam, counters senior analyst George Magliano of IHS Automotive. Jobs, housing and credit are all huge drags on auto sales.

“There will be no massive surge in the short term,” he says.

Magliano says there could even be a first-half dip before sales improve in the second half.

Jesse Toprak, vice president of industry trends for, says this crisis is different from previous auto sales slumps and recoveries.

“This recovery has been slower than ones we have seen in other industries, and it will stay that way,” he says.

“The auto industry needs time to recover from a decade of overproducing and selling on the deal instead of the merits of the vehicle.”

Brightening a bit, Toprak says automakers have not reverted to overproducing and excessive incentives to grab market share because they have fresh memories of where they went too far.

Dan Montague, senior analyst at PricewaterhouseCoopers Automotive Institute, is the most pessimistic of those surveyed, forecasting a market of 12.5 million for 2011.

“We still have a good bit of downside risk, perhaps as low as 12 million,” he says. “I just don’t see an environment healthy enough to put the car buyer back in the game.”

Jeremy Anwyl, CEO of, says uncertainty over jobs, housing and the economic stability of Europe and emerging markets keeps prospective buyers on edge.

“None of these factors have any certainty,” he says. “It’s a lot of wild cards.”

Even the lower incentives being offered by automakers hurts unit sales because they effectively raise prices, Anwyl says. And lower volume doesn’t generate positive headlines, he adds.

“If there’s good news, confidence feeds on itself,” Anwyl says. “That’s why recoveries tend to be very steep. I’m not sure it’ll happen that way this time.”

Even if the analysts do not agree on the pace of the recovery, all expect higher sales next year.

TrueCar’s Toprak says three traditional factors — jobs, housing and consumer confidence — have been strongly linked to sales the past three years. But since January 2007, he says, the strongest predictor is the Dow Jones Industrial Average.

And the Dow has risen sharply since mid-September.

“It’s what you hear,” Toprak says. “It sets the public mood for consumption. If the Dow is up, it’s a green light for the consumer to buy.”

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September’s Automotive Sales Bode Well for ’11

October 11, 2010 by · Comments Off on September’s Automotive Sales Bode Well for ’11 

Although it’s not time for a celebration yet, the U.S. auto industry in September posted its best monthly wholesale sales rate in 13 months. The industry sold 959,049 light vehicles in September — a year-to-year jump of 29% — for a seasonally adjusted annual rate of 12.2 million, as calculated by the Automotive News Data Center.

Inventories last September were depleted in the aftermath of the federal government’s cash-for-clunkers incentive program, Automotive News reported.

Other than August 2009 when the clunkers program inflated the sales rate to 13.7 million, last month was the first since September of 2008 during which sales surpassed 12 million. The rate in September 2008 also was 12.2 million.

“It’s a solid month, another step in a stable, somewhat painful recovery,” said analyst Jesse Toprak of “This may be a healthier way to recover.”

George Pipas, Ford Motor Co.’s lead sales analyst, said September capped the fourth straight quarter of modest recovery in the pace of U.S. auto sales.

And modest improvement may be acceptable at this point, he said, in that it may keep industry players from falling back into the bad habits — overproduction and massive incentives — that led to disaster for so many companies when U.S. auto sales tanked.

“We’re happy with what we’re getting,” Pipas noted. “We’re not going to waste a lot of time wishing that things would go quicker.”

Looking at the big picture:

* Ford’s sales jumped 40% to 160,375 on strong sales of pickups and new models such as the Fiesta subcompact.

* General Motor’s sales rose 11% in September to 173,031, including its four discontinued brands. However, its core brands — Chevrolet, Buick, Cadillac and GMC — rose 22% while retail sales of those core brands jumped 39%.

* Chrysler Group posted the biggest year-over-year increase of any manufacturer for the month, rising 61% to 100,077.

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Asian Automakers to Dominate U.S. Market?

April 23, 2009 by · Comments Off on Asian Automakers to Dominate U.S. Market? 

While no one seems to know when the current economic recession will hit bottom and begin the slow bounce back, indications are that when it happens, it will be a vastly different landscape.

According to a report Wednesday (April 22) in Automotive News, Michael Robinet, vice president for global vehicle forecasts at CSM Worldwide, Detroit, Mich., said it will take three to four years for North American auto production to recover to pre-recession levels. And when it does, Detroit automakers will only be filling 45% of the total. As recently as 2000, the “Detroit 3” – General Motors Corp., Ford and Chrysler – produced more than 75% of all vehicles built in North America. 

The “Asian 4,” Toyota, Honda, Nissan and Hyundai, are seen as likely beneficiaries of the change in production from traditional domestic OEMs. 

Robinet’s comments were voiced during a meeting of the Detroit Regional Economic Partnership.

The executive also noted that the industry will downsize its offerings in order to meet federal fuel-economy requirements, with the strongest product segments forecast to be subcompacts, compacts and mid-sized vehicles. 

“We are going to start driving more appropriately sized vehicles,” he said.

While much of Robinet’s statements were directed at the North American market, he also noted that the current recession is having a worldwide impact. According to Robinet, automakers built vehicles at an annualized rate of 74 million units in January 2008; in January 2009, that rate fell 42%, to 43 million units. The dramatic decline has led to an industry capacity utilization rate of approximately 60%, far below the 80% to 85% rate Robinet said was required for automakers to operate profitably.

Nearly one-quarter of the way through the 2009 year, North American production (U.S., Canada, Mexico) has fared even worse. Through April 18, North American car and truck production totaled 2,237,575 units; through April 19, 2008, that year-to-date figure was 4,345,178 vehicles. Total U.S. production is down by more than 54%, 1,401,424 versus 3,051,203 units.

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Is V-8 Engine Headed for the Scrap Heap?

April 22, 2009 by · 1 Comment 

The V-8 engine, powerplant of choice for several generations of RVers and the public at large, may be going the way of leaded gasoline.
According to a report in Automotive News, a panel of experts speaking Tuesday (April 21) at the 2009 SAE World Congress believe that tightening emissions standards and volatile fuel prices could spell the end for a nearly century-old engine design that first piqued interest in a big way with the introduction of the Chevrolet overhead-valve V-8 in 1955.

At least one panelist, Mary Ann Wright, CEO of the Johnson Controls-Saft joint-venture battery company, referenced an April 17 ruling by the United States Environmental Protection Agency (EPA) that carbon dioxide emissions and other greenhouse gases endanger the public. The ruling is expected to lay the groundwork for further reductions in such emissions.
“You are going to see the discussion starting to shift to not only reducing fuel consumption but CO2,” Wright said.
As noted during the panel discussion, contemporary engine technology, combined with lighter-weight vehicles, improved vehicle aerodynamics and more efficient transmissions, would be able to effectively counteract the need for larger-displacement engines without adversely affecting acceleration and towing performance.

However, while speakers such as Don Kapp, Ford Motor Co.’s director of powertrain research and advanced engineering, extolled the virtues of such breakthrough technology as Ford’s EcoBoost – a twin-turbocharged 3.5-liter engine that produces 355 hp, about the same as a V-8 – no one apparently addressed the torque values of such designs. While V-8 engines are seldom used today in automobiles, they remain a cornerstone for light-truck sales due to the engine’s ability to create large amounts of torque – pulling power – at relatively low engine rpm. 
Developing technology wasn’t the only topic under discussion. According to Minoru Shinohara, a senior vice president at Nissan Motor Co., driver behavior is yet another factor in vehicle efficiency that needs to be addressed. Nissan is working on a number of in-car technologies aimed at improving feedback to the driver, including:

  • An accelerator pedal that pushes back slightly when speed is increased too much.
  • An Ecometer that keeps the driver informed about vehicle performance.
  • Carwings, a program that alerts drivers to traffic congestion along a computed route and selects alternative paths.

Other technologies presented included a chain-driven starter-alternator by supplier BorgWarner Inc. intended to eliminate fan belts. The company also is researching more efficient turbochargers and transmissions.
“Turbocharged engines offer 15% to 30% better fuel economy and as much as 20% reduction in CO2 emissions,” said Roger Wood, executive vice president of turbo and emissions systems for BorgWarner, in predicting that the use of turbochargers would grow by 135% by 2014. Meanwhile, Uwe Grebe, executive director for advanced engineering for General Motors Corp., suggested that smaller turbocharged engines could account for as much as 20% of the market by 2014. 
Ironically, Detroit automakers previously embraced turbocharging as a way of developing horsepower in smaller engines in the 1970s when Mideast oil embargos caused similar fuel cost spikes. But the technology was later abandoned in all but a few cases as fuel prices moderated.

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