World Economic

Hurt by high gasoline prices and further shredded by faltering credit markets, U.S. auto sales are going to get worse before they improve, an industry forecasting firm predicted Wednesday.

Global Insight, known for its auto industry research, said the depressed new-car sales in the United States won’t start to improve until 2010. In a webcast to reporters, clients and analysts, the firm also outlined out how the global credit crunch is squeezing auto markets in Asia, India, Europe and North America.

Indeed, U.S. credit market problems that deepened in recent weeks — coupled with dismal September auto sales — have spurred industry analysts, including Global Insight, to lower their vehicle sales predictions for this year.

"We’re starting to see sales rates that we haven’t seen since the early ’90s, late 1980s, and it’s going to get worse," said George Magliano, director of North American auto industry research, during the presentation.

Last week, Ford Motor Co., Toyota Motor Corp., Chrysler LLC and Nissan Motor Co. reported sales decreases in September of at least 30 percent, and General Motors Corp. said its sales fell 16 percent.

Those figures led Global Insight to revise its forecast for the year, Magliano said. The research firm predicts U.S. new-car sales to total 13.6 million this year, a 16 percent drop from the 16.1 million vehicles sold in 2007.

Crowe Chizek and Co. auto analyst Erich Merkle reduced his prediction in the last week to 13.5 million vehicles, close to Global Insight’s forecast, because of the growing problems in the U.S. credit markets.

And on Tuesday, Citi Investment Research analyst Itay Michaeli reduced his 2009 light-vehicle sales estimate to 13.7 million units from 14.4 million units, according to his research note.

Magliano predicted the economy will be particularly brutal next year, with sales dipping to 13.4 million vehicles, but Merkle anticipates a slight increase of about 100,000 vehicles from his 2008 estimate.

In the second half of 2009, Merkle predicted, the credit markets will start to free up and consumer confidence will increase faxless payday loans.

Global Insight’s Magliano, too, said he expects to see "the light at the end of the tunnel" economically by the end of next year and into 2010. By 2013, the industry will rally to the sales volume it had in 2006, and new-car sales are expected to hit about 17.5 million in 2015 or 2016, the forecasting firm said.

And although the credit crunch has walloped automakers, dealers and their buyers, Magliano said consumer lending standards in place now are better than those in 2005 and 2006.

Across the globe, the credit crisis’ impact on autos is playing out in different ways. In China, for example, vehicle buyers still typically pay with cash, instead of financing, said Tim Armstrong, Global Insight’s director for Asia and Middle East/Africa auto research. Although vehicle sales are slow in China, the decline is tied more closely to the global economic slowdown instead of the credit conditions.

But in India, about 75 percent of auto sales are financed, so there is some exposure to the credit crunch, Armstrong added.

Globally, new-car sales are expected to fall this year by 1 percent, or roughly 1.8 million vehicles, according to Global Insight. This would be the first decrease since 2001.

The firm said it already factored interest rate cuts, like the ones the Federal Reserve and other global banking authorities announced Wednesday, into its forecasts.

Nigel Griffiths, Global Insight’s group managing director of global forecasting, told analysts and reporters that the cuts were necessary but not enough.

Merkle agreed: "It’s not going to help in the near term. It’s a crisis of confidence" among lending institutions, at least in the short-run.

atablac@post-dispatch.com | 314-340-8140

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